August 22, 2005

The Odds on 404 Relief for Small Business Issuers

Late last week, one member asked: “How about some commentary about the likelihood and timing of Section 404 relief for smaller issuers?” One thing immediately sprung to mind – was I being followed to my regular poker game? This is a 20-year old game that my Dad also plays in, so it’s not part of the latest poker craze. So I suppose that is enough to qualify me as some sort of oddsmaker – so here goes nothing:

Based on the latest resolution from the SEC’s Advisory Committee on Smaller Public Companies – which recommends that 404 compliance for non-accelerated filers should be delayed until mid-2007 – I would say it is fairly likely that the SEC will push back the 404 compliance date for small business issuers.

The odds are enhanced even more given that new SEC Chair Cox recognizes that some counterbalancing of SOX-related directives is now necessary (as it nearly always is after broad reforms) and that COSO might miss its target date to issue internal control standards applicable to small businesses. To put some numbers on it for Vegas purposes – let’s call it 3-to-1 in favor of a delay happening.

Majority Voting: Two More Companies Amend Their Governance Guidelines

Following up on the three items that I blogged about Friday regarding majority vote governance guidelines, two additional companies have recently adopted similar policies to Pfizer and Office Depot. ADP amended their bylaws rather than its corporate governance guidelines – and Circuit City’s standard is along the lines of Office Depot’s version (which I call a “quasi-majority vote” standard for the reasons that I set forth on Friday).

– Circuit City’s corporate governance guideline: “Any Director nominee in an uncontested election for whom greater than 50% of the outstanding shares are ‘withheld’ from his or her election shall tender his or her resignation for consideration by the Nominating and Governance Committee. The Nominating and Governance Committee shall recommend to the Board the action to be taken with respect to such resignation.” Here is the related press release.

– ADP’s bylaw amendment: “The directors shall be elected by the vote of the majority of the shares represented in person or by proxy at any meeting for the election of directors at which a quorum is present, provided that if the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting.” Here is the related Form 8-K.

Forget About Moving that Cheese

Went to a dinner party yesterday and saw one of my old law school friends who works in-house at a local public company. He just came back from a week-long strategic retreat for the company’s managers over on the West Coast. In the leadership training arena these days, apparently “moving my cheese” is “out” and “teachable point of views” are “in.”

Call me a naysayer but I think those retreats tend to be a waste of company resources – like falling backwards into the arms of my colleagues is going to turn a company around. Puh-leese. And in some cases, it can actually backfire. Last one I went to helped me realize that maybe it wasn’t such a bad idea to get a new job. Hmmm, so maybe they are a good idea after all!