January 20, 2006

Wow! Intel Adopts Majority Standard

On the heels of recommendations from the ABA Director Voting Task Force’s preliminary report, which I blogged about yesterday, comes an announcement from Intel that it has amended its bylaws to adopt a majority vote standard, which includes a director resignation provision to address hold-overs. This excerpt from Intel’s related press release – and Form 8-K – explains how the holdover provision works:

“Under the laws of Delaware, where Intel is incorporated, if an incumbent director is not elected, that director continues to serve as a “holdover director” until the director’s successor is duly elected and qualified. To address this potential outcome, the board has also adopted a director resignation policy in the company’s bylaws. If an incumbent director is not elected by a majority of the votes cast, the director shall offer his or her resignation to the board. The Corporate Governance and Nominating Committee would then make a recommendation to the board on whether to accept or reject the resignation, or whether other action should be taken. The board will publicly disclose its decision and the rationale behind it within 90 days of the certification of the election results.”

This is quite a development that bears watching, particularly since investors are said to be quite unhappy with the ABA’s preliminary report recommendations. If you haven’t been watching the developments in this area so far, it bears pointing out that Intel’s approach differs significantly from the so-called “plurality plus” approach of Pfizer and a few dozen other companies that have adopted director resignation provisions in their corporate goverance guidelines – because those guidelines operate under a plurality voting standard. We have added Intel to our “Chart: Companies w/ Majority Vote Governance Guidelines.”

Change in the NASD’s WKSI Exemption Policy

In various forums, the NASD Staff previously confirmed that the NASD would not require the filing of a registration statement on behalf of a WKSI, unless the offering was subject to the NASD’s conflict-of-interest rule (Rule 2720). Now, the NASD appears to have changed that policy exemption.

For more information on this change, set forth below is an explanation from an e-mail sent yesterday by the ABA’s NASD Corporate Financing Rules Subcommittee. The email reflects a conversation that two members of the Subcommittee had recently with the Staff of the NASD Corporate Financing Department and General Counsel’s Office:

“The NASD’s new position is that if a registered offering by a WKSI cannot rely on an exemption from NASD filing currently in NASD Rule 2710(b)(7), the offering must be filed with the NASD for review. The most relevant exemptions are for: (1) offerings of any security by an issuer with an outstanding issue of investment grade rated unsecured non-convertible debt/preferred securities with an original term of at least four years (except if an IPO); (2) shelf offerings on Forms S-3 or F-3 (under standards before October 21, 1992); (3) shelf offerings by Canadian issuers on Form F-10 (as of June 21, 1991); and (4) offerings of investment grade debt.”

New French Whistleblower Process and Related EU-SOX Compliance

Thanks to Mark Schreiber of Edwards Angell Palmer & Dodge and Raphael Dana of Soulier for these documents that you need for complying with French whistleblowing laws that are translated into English: CNIL Single Authorization and Decision; CNIL Introduction to Single Authorization; and CNIL Forms for Single Authorization. These are posted in our “Whistleblowers” Practice Area.

In this podcast, Mark and Raphael discuss the latest developments with the French CNIL’s just published online single authorization program. This is where the real work for US companies complying with SOX in EU now starts. The new CNIL single authorization process is the first of the simplified compliance processes in Europe – and the European Commission Article 29 Working Group has begun to endorse this model on a pan-European basis, meaning other EU countries will likely follow suit. The podcast discussion includes:

– How can companies now comply with the new single authorization and final CNIL guidelines on whistleblower schemes in France?
– What exactly is the new CNIL online compliance process, what are the underlying company requirements, how long does it take, and what strategic choices do US and other companies need to make to qualify?
– How is this new process consistent with SOX and does the SEC agree?
– What does the new CNIL authorization process mean for complying with whistleblower laws in other European countries?