December 13, 2007

Model CD&A Disclosure: Stock Ownership Requirements

As Broc noted in the blog last week, we posted an Advance Copy of our January-February 2008 Issue of The Corporate Executive to provide timely guidance for those currently drafting their CD&As. While many of the topics addressed in this issue relate to specific areas of concern raised by the Staff in its executive compensation review program, some of the model disclosures deal with areas where more analysis is necessary in your proxy statement even if not raised in the Staff’s review.

One of these areas is the discussion and analysis of stock ownership requirements, where compensation consultants are now expressing concerns that companies need to reassess their ownership guidelines because they are now too low, often dating back to a time when the value of equity grants was not as high and most equity awards were in the form of stock options. Our model disclosure highlights how a company might describe the compensation committee’s analysis (and adjustment) of the company’s stock ownership requirements.

Here is where you can access this Advance Copy now (you will need to renew for ’08 to receive it). Note that we will be mailing this issue to ’08 subscribers early in January. Feel free to let me or Broc know if you have any thoughts on the model disclosures in the Advance Copy. If you are not yet a subscriber, we encourage you to take advantage of a no-risk trial, which will give you immediate access to this important issue.

Changed Rule 144: Effective February 15th – Practical Guidance Coming

Yesterday, the SEC posted a conforming version of its Rule 144 adopting release to match what was just published in the Federal Register. Since the release has now been published, the effective date for the new rule is February 15th. The revised holding periods and other amendments are applicable to securities acquired before or after February 15th.

And since the new rule takes effect further out than expected, we have bumped back the date of our webconference – “New Rule 144: Everything You Need to Know – And Do NOW” – to Wednesday, January 30th. The conference will be archived in case that date doesn’t work for you.

Jesse Brill, Bob Barron and Alan Dye are busy working on the Key Conference Materials, which will provide the specific procedures, new memos, legends, representation letters, etc. that you will need to protect yourself. Some members have posted questions about the rule changes in our “Rule 144 Q&A Forum” and those will be answered during the conference.

Act Now: Protect your company (and your key executives and clients) and take advantage of reduced rates for those of you that use the and The Corporate Counsel by registering online or via this order form.

Yet Another SOX 404 Delay in the Works

In testimony before the House Committee on Small Business yesterday, Chairman Cox stated that he intends to propose that the SEC authorize a further one-year delay in implementation of the Section 404(b) audit requirement for non-accelerated filers. Without the delay, those issuers would have to comply with the audit requirement for fiscal years ending after December 15, 2008. Cox said that the delay is necessary so the Staff of the Office of Economic Analysis can complete a survey of the costs and benefits associated with implementing Section 404 requirements, which is expected to consist of a web-based survey and in-depth interviews with a subset of issuers.

I suspect that no delay for management’s assessment is warranted now that issuers have this “Section 404 Guide for Small Business.” The very happy people on the cover of this guide don’t seem to have a care in the world. They have obviously embraced the SEC’s new slogan for 404: “It doesn’t have to be a chore.”

– Dave Lynn