January 12, 2006

Alan Beller to Leave Corp Fin

Yesterday, Alan Beller, the SEC’s Director of the Division of Corporation Finance, announced that he will be leaving the Staff to rejoin the private sector in February. Alan has had quite a run in his four years, as he has overseen a truly remarkable – and record – amount of rulemaking and other activity during his tenure. I don’t think that many others could have shouldered such a heavy load in such a relatively short period of time (anyone recall when 2-3 rulemakings a year was the norm!).

In fact, Alan isn’t just Corp Fin’s Director; he also serves as Senior Counselor to the Commission and has been integral in shaping policies and rulemakings beyond the Corp Fin rulemaking adopted on his watch. He certainly deserves the glowing praise in this press release.

My First Visit to the SEC’s New HQ

On Tuesday afternoon, I made my first visit inside the SEC’s new headquarters as part of a semi-annual meeting between senior Corp Fin Staffers and the Securities Law Committee of the Society of Corporate Secretaries & Governance Professionals. In fact, we were the last outside group to meet with Alan before his lame duck status was announced.

Some quick thoughts on the new headquarters:

– When you first walk in, you notice right away that the building is much more roomy and bright (and adajcent to Union Station, which has a nice eatery in its basement). I didn’t make it to the visitor’s waiting lounge and the fancy plasma TVs – useful information for those dedicated to watching Oprah.

– When you get your visitor badge, your photo will now be taken and displayed on the badge (so don’t forget to “clean up nice” before you visit).

– The meeting rooms downstairs aren’t the greatest, as they don’t feel as roomy as the old HQ. Low ceilings perhaps? The official Commission meeting room is arranged “auditorium style” with widescreen monitors on the side walls.

– The Staff’s offices are quite nice, as any new building should be. The office walls are too thin – and the hallways disturbingly quiet. Some offices look across a courtyard into other offices, making binoculars the new premium office furniture. Not too many Staffers have to share offices anymore.

– Apparently, it is tougher to meet fellow Staffers, partly since the Staff has grown in size (albeit a hiring freeze continues due to budgetary issues) – and partly because each floor contains a mix of members from the various Divisions. This might sound a little silly to an outsider, but it does make a difference when you can’t assume everyone you pass in the hall is a fellow Division member. Maybe we need a shrink to explain why this is so, but I believe that is true for any organization.

Call me an old softie (or just an old-timer), but I will always miss the building at 450 Fifth St…

Corp Fin Takes a Position on Majority Vote Proposals and “Substantial Implementation”

Keir Gumbs of Covington & Burling notes: “Last week, the SEC staff rejected Hewlett-Packard’s argument that its majority voting policy “substantially implemented” a shareholder proposal seeking to establish a majority vote standard for the election of directors. The proposal at issue was submitted by the United Brotherhood of Carpenters Pension Fund, who requested that the company’s board of directors “initiate the appropriate process” to amend Hewlett-Packard’s governance documents to provide that director nominees be elected by the affirmative vote of the majority of votes cast.

Under Hewlett-Packard’s majority voting policy, a director who received a greater number of votes withheld from his or her election than votes “for” such election was required to tender his or her resignation to Hewlett-Packard’s Nominating and Corporate Governance Committee. The SEC Staff rejected Hewlett-Packard argument that this policy compared favorably with the proposal.

Although the Staff’s letter does not go into particular detail, a conservative reading of this no-action letter suggests that a company would have to adopt a bylaw amendment – or obtain shareholder approval of a charter amendment – in order to substantially implement a majority vote shareholder proposal under Rule 14a-8(i)(10).”

I think that one upshot of this development may be that companies that are still mulling over whether to adopt a majority vote resignation guideline might now be less likely to do so. But don’t forget ISS – if you adopt a guideline that conforms with ISS’ policy, they will recommend against the shareholder proposal – so there is still that carrot. We continue to list the companies that have adopted such guidelines in our “Chart: Companies w/ Majority Vote Governance Guidelines.”