TheCorporateCounsel.net

September 29, 2006

Dealing with Gifts to Directors

With more attention being paid to director compensation – and in light of the SEC’s revised requirements for disclosure of director compensation – boards should be re-examining all director perks that previously seemed harmless and determine whether their disclosure is worth the perk. As part of this re-evaluation, companies should ensure their disclosure controls & procedures capture all gifts provided to directors.

As I mentioned at our Conference a few weeks ago, companies should consider adopting a policy regarding gift-giving to directors to assist those responsible for collecting perk data and drafting the proxy disclosures perform their job. Of course, this policy can be fairly simple if the company’s policy is that directors are not permitted to receive any gifts over a de minimus value – as some governance experts believe that there aren’t any sound reasons for directors to receive gifts from people outside the company or even within the company (unless they receive something of insignificant value, such as a token gift at a dinner).

And companies are acting to rein in perks: Mark Borges recently noted in his blog that Molex’s proxy statement disclosed that the compensation committee had recently adopted a perquisite pre-approval policy. Under this policy, certain (unspecified) perquisites and maximum amounts for such perquisites have been pre-approved by the compensation committee. And, the committee must separately approve any perks not specifically included in the policy or amounts that exceed the maximum amounts in the policy.

I just posted three questions (and answers) you should consider regarding director gifts in the “Directors Compensation” Practice Areas of CompensationStandards.com and TheCorporateCounsel.net. The questions are:

Who should have the authority to give gifts to directors (from either outside or inside the company)?

What should be addressed in a director gift policy?

How should gift giving to directors be tracked?

The Latest on Internal Controls Testing

In this podcast, Ben Termini of BDO Seidman’s Risk Advisory Services Group describes the latest trends in internal controls testing, including:

– How can businesses reduce the number of controls tested on a daily basis (by as much as 60 percent without impacting effectiveness)?
– What daily controls are considered “key” controls?
– How does the more focused scope of daily control testing affect monthly, quarterly and annual testing?
– What are entity level controls? And why are they so critical to an effective internal audit program?
– What are general computer controls – and why are they imperative to ensuring efficient automated controls?
– How does the size of a company impact controls? Does “one size fit all”?

Motion to Win!

A little Friday fun, I am told that this is a real pleading that was filed! Reminds me of some of the handwritten notes I would see from disgruntled investors when I worked at the SEC …