December 12, 2005

Corp Fin Posts Updated “Current Accounting Issues” Outline

On Friday, Corp Fin posted an updated Current Accounting and Disclosure Issues Outline. I believe this outline was last updated in March and then before that, last December as I blogged about back then.

No More Shareholder Proposals? Is That Possible?

Friday’s NY Times ran this article that laid out a proposed framework by Vice Chancellor Strine that would result in the elimination of shareholder proposals across the board. VC Strine himself doesn’t endorse this framework; he just proposes it as food for thought.

The framework goes like this: state laws are changed to allow contested elections of directors – outside of the takeover context – every three years. If insurgents, who would appear on the ballots sent out by management, received 35% of the vote, they would get some of their expenses reimbursed as well as have the chance to win the election. In exchange, shareholders would lose the power to be able to submit nonbinding resolutions to companies.

Although interesting, I believe the reality is that it would be very hard for companies and shareholders to come to a meeting of the minds on this. Whenever reform of 14a-8 is proposed by the SEC – which happens once per decade on average – a huge battle erupts. There simply is too much history behind the shareholder proposal rule to eliminate it entirely.

No Big Surprise: Corporate CEOs Lacking Public Confidence

The “lack of confidence” tone of this article from the NY Times on Friday is consistent with a letter recently sent to the SEC by a number of American, Canadian and European investors. Below is a quote from that letter that reflects why executive compensation is the #1 hot button for shareholders these days:

“Sixty companies in the bottom decile of the Russell 3000 lost $769 billion in market value and $475 billion in economic value over the five years ended in 2004, while paying their top five executive officers more than $12 billion.”

SEC’s Hedge Fund Rules in Peril?

According to news reports, pointed questions from two of the three paneled judges in the US Court of Appeals for DC over whether the SEC had the appropriate authority to regulate hedge funds indicate that a majority of the panel might vote to overturn the new rules that take effect in February.

Personally, I have no opinion as to whether the SEC overstepped their bounds – but I wouldn’t be surprised if the next spate of monumental frauds will be somehow interwined with the hedge fund industry. Anyone remember Long-Term Capital almost bringing the market to its knees?