Monthly Archives: January 2008

January 31, 2008

SEC’s Filing Fee Lockbox Agent Changes – Effective Monday!

There is nothing worse than having your registration statement bounced by EDGAR because of an unpaid filing fee (I think the correct term is being put into “fee suspense” or something like that). Unfortunately, that is what could happen to you if you mail or wire a filing fee to the old Mellon Bank account after this Friday.

Earlier this month, the SEC put out a notice that the lockbox financial agent is changing, and now this week the agency published final rules implementing the changes. Effective Monday, February 4th, U.S. Bank will take over as the lockbox agent, so all checks and wires need to be sent to U.S. Bank beginning on Monday. The SEC states that no payments should be submitted to Mellon Bank after tomorrow.

The SEC’s notice provides the specifics on how to wire fees to U.S. Bank. The most critical data for getting your fee through to the lockbox are the SEC’s account number at U.S. Bank and the SEC-assigned account number, identified as the CIK number. Payments may still be made by a certified or bank cashiers check as well, and the notice provides the new U.S. Bank addresses for mail or courier delivery of checks.

The final rules eliminate the option of making payments in cash or personal check – I wonder how many fees have actually been paid with a briefcase full of cash?

Corp Fin Releases New Smaller Company Compliance Guides

The Staff recently posted two new “small entity compliance guides” to explain the new smaller reporting company disclosure system that replaces Regulation S-B and the expanded eligibility for primary offerings by smaller companies on Form S-3. The Staff prepared these guides under the mandate of Section 212 of the Small Business Regulatory Enforcement Fairness Act, and they admonish that the guides are not to serve as a substitute for reading the actual rules.

In the guide entitled “Changeover to the SEC’s New Smaller Reporting Company System by Small Business Issuers and Non-Accelerated Filer Companies,” the Staff explains the smaller reporting company system generally, as well as the transition provisions for small business issuers and companies that are new to the smaller reporting company system. The guide includes some examples, charts and FAQs to explain the requirements.

The guide entitled “Eligibility of Smaller Companies to Use Form S-3 or F-3 for Primary Securities Offerings” outlines the new S-3 primary eligibility requirements for companies with less than a $75 million public float. This guide is more bare-bones, perhaps because the adopting release already included a number of detailed examples of the calculations involved.

The Staff also posted a small entity compliance guide for Rule 14-8(i)(8) earlier this month. This guide explains 14a-8 very generally and then talks about the amendment to (i)(8) to permit exclusion of access proposals.

All in all, it looks like these guides (particularly the smaller reporting company guide) can be useful resources. Unlike the Section 404 compliance guide, these latest guides weren’t accompanied by a catchy slogan like “it doesn’t have to be a chore.” Personally, I would have gone with something like “Form S-3: Not Just for the Big Dogs Anymore”

January-February Issue: Deal Lawyers Print Newsletter

This January-February issue includes articles on:

– Fairness Opinions after Revised NASD Rule 2290: Models & Analysis
– Navigating a Loan-to-Own Transaction: 11 Steps
– Practical Guidelines for Special Committees
– Perspectives from an Industry Insider: Understanding Activist Hedge Funds
– M&A Implications of New Changes to Rules 144 & 145

As all subscriptions are on a calendar year basis, it is time for you to renew your subscription. If you are missing these critical issues, try a 2008 no-risk trial to get a non-blurred version of this issue for free.

– Dave Lynn

January 30, 2008

How to Attend Today’s “Rule 144” Conference

Many of you have registered for the big webconference – “New Rule 144: Everything You Need to Know – And Do NOW” – which will be video webcast today starting at noon eastern (video archive will be available starting tomorrow).

Remember you need to register to attend; members of get a discount – but the Conference is not automatically part of the site’s membership. It’s not too late to register, even if the Conference has started since everything will be archived.

Here are instructions on how to attend the Conference:

1. Ensure you have the proper “Player”: To watch the Conference, you will need either the Windows Media Player or the Flash Player (which works for a Mac); RealPlayer will not work for this Conference. You can download a free player if you need to.

2. Determine whether CLE credit is available in your state: This Conference is accredited for CLE in 15 states – here is the list of CLE states. CLE credit will not be available for states that are not on this list.

3. If you seek CLE credit, you will need to input your contact information in our “Online CLE Tracker”: To comply with certain state bar requirements, we have built a system whereby those in states where this webcast is accredited and want to earn CLE will need to click through a series of periodic prompts (i.e. about every 15-20 minutes) to prove they sat through the webcast. When you go to the webconference, you will see a link in a red box to go to the “Online CLE Tracker.”

4. Print out the Course Materials: You should print off these “Course Materials,” including this printable set of model documents.

5. Attend today starting at noon eastern: If you intend to attend live today, the Conference starts at 12:00 noon eastern time. Here is the Conference Agenda, which has the schedule of panels (remember that all panels will be archived and you can watch them afterwards).

To attend, go to the home page of and – and click on the large link at the top with the Conference title and input your ID and password when prompted. If you have questions, please email our HQ at

Part II: “The Latest Developments: Your Upcoming Proxy Disclosures —What You Need to Do Now!

Last week, you heard primarily from Corp Fin’s Michael Reedich about the Staff’s expectations for this proxy season (audio archive available now). Catch Part II of this webconference tomorrow and hear from the experts – Dave Lynn, Mark Borges, Alan Dye and Ron Mueller – about how to meet the Staff’s expectations in “The Latest Developments: Your Upcoming Proxy Disclosures—What You Need to Do Now!

Over 50 Executive Compensation Comment Letters: Our Updated List

In the “SEC Comments” Practice Area on, we continue to update our list of links to the SEC’s executive compensation comment letters and responses.

We have now posted 50 comment letters and responses (some companies have more than one letter and response available). During last week’s webcast, Staffer Mike Reedich noted that about 70% of the 350 companies that received comment letters had received a second comment letter – so my guess is that the number of letters being posted to the SEC’s site will continue to trickle rather than flood.

By the way, these letters and responses were the inspiration for an article in yesterday’s WSJ entitled “SEC Unhappy With Answers on Executive Pay.” It still strikes me as odd whenever the mainstream media writes a piece about the SEC comment process…

House’s Severance Hearing Postponed

Perhaps because Countrywide CEO Anthony Mozilo agreed to forego the $37.5 million in cash severance and other benefits that he stood to receive if the company’s acquisition by Bank of America is completed, the hearing before the House Oversight and Government Reform Committee on severance packages – originally scheduled for next week – has been postponed until Thursday, February 28th.

– Broc Romanek

January 29, 2008

Sound Disclosure Practices for Annual Reports

I heard Professor Bob Howell do his thing a few weeks back and he is quite the entertainer. In this podcast, the Professor explains how to best approach drafting disclosure for proxy materials, including:

– What are desired practices for MD&A?
– How should companies draft their risk factors?
– What is the best way that companies can get their message across in the “letter to shareholders” in the annual report?
– How should companies be disclosing “economic (e.g. cash) performance”?

More 10-K Practice Pointers

We had a nice response to our recent competition: “The Main Event: Vote for Your Favorite 10-K Practice Pointers.” My good friend Doug Chia of Johnson & Johnson now chimes in with his own – “tongue in cheek” – set of pointers:

1. Start with a blank sheet of paper – Uh, yeah, OK. No one ever does this. It’s just something SEC staffers like to say because it sounds good in theory. I guess they have visions of us sitting down with our CEOs, CFOs, GCs and Controllers at off-site locations with nothing on the agenda except for brainstorming about what story we want to tell this year. But in reality, unlike Richard Nelson Bolles, the author of “What Color Is Your Parachute,” none of us has time to completely re-write our disclosures every year. Our senior officers’ calendars are too packed to get everyone to be in the same room for more than 10 minutes (particularly if they know lawyers will be in the room). That’s not what they are getting paid those “Holy Cow” numbers to do. Plus, none of us in the in-house world are paid enough to put ourselves through that exercise every year!

2. Consider filing under XBRL – Again, not something many of us are going to do unless we’re forced to, but I thought I’d throw it in to receive “brownie” points from Chairman Cox in case he reads this!

3. Start early – Ha! Another one that sounds good, but no one ever does it. It’s just like the papers we were assigned to write in high school and college–we started doing all of the research and writing the papers the night before the due date (and after “Late Night with David Letterman”). I guess life would be too boring without last minute fire drills.

8. Analysis, analysis, analysis – As they say in New Jersey, “Puh-leeze!” Ever notice that the words “analysis” and “analyst” start with the letters A-N-A-L.

5. “All” means all – NOT! All means everything you are required to disclosed based on the rules. Anything over and above that is just voluntary stuff that could potentially lead to a post on one of those blogs like whose only real goal is to embarrass you and your executives, or worse, could get you fired!

265. Don’t use generic risk factors that don’t apply to your company’s business – Are you kidding me? If risk factors constitute your insurance policy, as we are all so fond of saying, and it only costs whatever the printer charges for your document to be a couple of pages longer, throw in the kitchen sink! Too many risk factors can’t possibly get you in trouble. No one ever got sued for having too many risk fators.

7. Check the numbering on your exhibits list – Seriously, misnumbering is a tell-tale sign of sloppy lawyering! (Note the misnumbering of this list!)

Jan-Feb Issue of The Corporate Counsel

We recently mailed the Jan-Feb issue of The Corporate Counsel. For those that haven’t tried a no-risk trial, here is a blurred version of the issue so you can get a sense of it. This issue includes analysis of:

– The Commission’s Useful Integration (Rule 152, etc.) Guidance in August’s Reg D Proposing Release
– Yet Another Statutory Basis for a Reg D Offering: Section 28
– This Year, Preliminary Proxy Filing Can Lead to Real-Time Review of 402/404 Disclosures
– S-K Item 404(a) Follow-Up—More on Which In-Laws are Related Persons
– Audit Committee Involvement in Drafting the CD&A—Why Pile On?
– “Proxy Access”
– Bebchuk Shareholder Proposal Follow-Up
– Google’s TSOs—S-3 Registration Rather Than S-8—Follow-Up
– Stoneridge!@#$%
– Enforcement Staff Busy Advising Backdaters and Others When Investigation Has Closed
– Bulletin Board Companies Left Out of S-3 Expansion
– Cheap Stock—IPO Disclosure Overkill
– Management Blogs—Reg FD Dissemination?
– 8-K Amendment Coming to Clarify that 4.02 Reporting Cannot Be (Buried) in 10-Q/K
– FASB Re-Examining FAS 5 Disclosure Criteria—Eventual Impact on the Audit Letter Process
– Fixed 1934 Act Fees?
– Annual Salary Survey
– New Staff 144 Positions on Gifts and Pledges by Affiliates—and Blockbuster Position On Hedging

– Broc Romanek

January 28, 2008 Leverages the Web: The Future is Now

Recently, the SEC posted the adopting release for its e-forum rulemaking. Even though most of this rulemaking essentially codified what was arguably already permissible under the proxy rules, I believe this rulemaking will spur the investor community to start leveraging the Web more.

During last week’s proxy season webcast, Pat McGurn talked about this topic as well (audio archive and transcript are available now). Although not an e-forum example per se, I pointed out to illustrate the point of how one shareholder can easily get its views known on a shoestring budget (this particular shareholder’s beef relates to omitting the shareholder’s name from certain communications with other shareholders and not properly reporting election results). This site is quite elementary: the shareholder simply has posted a chronological list of any documents related to his agitation at Alaska Air. Note this statement on the left side of the site’s home page: “We’ve Proven Anyone Can Conduct a Proxy Contest…How About You??”

Practice Tip: provides us with a reminder that anything we write these days could surprise you and wind up online. The site contains several letters written by Alaska Air’s law firm (here is an example). Ignore the Web at your own peril!

Pay-for-Performance Disclosure: Transcript from Proxy Season Webcast

We have posted the transcript from last week’s popular webcast with RiskMetrics’ Pat McGurn: “Forecast for 2008 Proxy Season: Wild and Woolly.”

Here is a notable excerpt from Pat’s remarks regarding disclosure of pay-for-performance targets (which dovetails the extensive conversation about this topic with SEC Staffer Mike Reedich and others during last Wednesday’s webcast on

“If issuers want to stay out of trouble this year, there are a couple of quick ways to do it. The first one on the CD&A side has to do with what I call the “can’t discern alignment” issue. The fact that many companies in 2007 omitted the targets and the hurdles under their performance-based pay programs. I don’t think there is anything that’s going to get you into trouble with investors faster this year than continuing to use stealth over those targets and hurdles.

I think obviously the SEC has now set a bar for confidential treatment of those numbers and that information going forward. But I think it’s something that shareholders are going to judge on their own as well, and if there is one big flash point issue this year, it is going to be on “pay-for-performance” and whether there is enough information for shareholders to figure out how high the bar has been set in the CD&A this year.”

Alan Dye: Keeping Yourself Out of the Section 16 ‘Hot Water’

For members of or the NASPP, tune into tomorrow’s webcast – “Alan Dye: Keeping Yourself Out of the Section 16 ‘Hot Water’” – to hear Alan Dye give us guidance on all the latest developments in the Section 16 area. This always is one of the most popular webcasts around. Try a no-risk trial to catch this 90-minute program.

Microfinance in Africa

A friend of mine recently launched a microfinance initiative in Buyobo, Uganda, and arranged for a Ugandan charity called FDNC to provide follow up visits to her borrowers. FDNC provides all sorts of health, education and training outreach to women and children in rural villages. FDNC receives funding from a USA charity called Hope for Uganda Students (HUGS).

Now, Parade magazine is holding a charity-giving challenge and will give $50,000 to the 4 USA charities that generate the most new donors by January 31st – and the top 50 will receive $1,000. So my friend is trying to get at least 50 new donors for HUGS during the next three days. You only have to give $10 – the important thing is how many people give – not how much they give. So please go to this web site and donate $10.

– Broc Romanek

January 25, 2008

Next Wednesday’s “Rule 144 Conference”: Things to Do in Advance

Many of you have registered for the upcoming webconference – “New Rule 144: Everything You Need to Know – And Do NOW” – which will be video webcast on Wednesday, January 30th (video archive will be available starting the following day).

Here are instructions to attend the Conference:

1. Test your access now: To watch the Conference, you will need either the Windows Media Player or the Flash Player (which works for a Mac); RealPlayer will not work for this Conference. To test your access, please go to: “Test Your Ability to Access Webconference.”

2. Determine whether CLE credit is available in your state: We expect this Conference to be accredited for CLE in about 15 states – here is the list of CLE states. CLE credit will not be available for states that are not on this list.

3. If you seek CLE credit, you will need to input your contact information in our “Online CLE Tracker”: To comply with certain state bar requirements, we have built a system whereby those in states where this webcast is accredited and want to earn CLE will need to click through a series of periodic prompts (i.e. about every 15-20 minutes) to prove they sat through the webcast. Soon, we will have this “Online CLE Tracker” up and you can input your information in advance of the Conference if you wish.

4. Print out the Course Materials: You can now access these “Course Materials,” including this printable set of model documents. [We just tweaked a few of the rep letters to add a representation about shell companies – so if you already printed out a set of our model documents, you may want to print them out again.]

5. Attend on Wednesday, January 30th starting at noon eastern: If you intend to attend live on Wednesday, the Conference starts at 12:00 noon eastern time (this is earlier than originally announced as the Conference is now longer). Here is the Conference Agenda, which has the schedule of panels (remember that all panels will be archived and you can watch them afterwards).

To attend, go to the home page of and – and click on the large link at the top with the Conference title and input your ID and password when prompted. If you have questions, please email our HQ at

Podcast: Impact of Stoneridge

In this podcast, Lisa Wood of Foley Hoag discusses the recent US Supreme Court decision regarding aiding & abetting in Stoneridge Investment Partners v. Scientific-Atlanta, including:

– What did the Supreme Court decide in Stoneridge?
– What does this mean for aiding & abetting allegations going forward?
– What should companies and other market participants do to protect themselves in the wake of Stoneridge?

The Stoneridge Memo Phenomenon

I don’t know why it struck me, but the force and speed by which law firms sent their memos out last week – in the wake of the US Supreme Court’s Stoneridge decision – was truly amazing. So far, we have posted over 40 of these memos, with the bulk of them being drafted within 48 hours of the decision being rendered. So below is a question I ask you:

Opinion Polls & Market Research

– Broc Romanek

January 24, 2008

Smaller Companies: How Your 10-K Changes This Proxy Season

Catch today’s webcast – “Smaller Companies: How Your 10-K Changes This Proxy Season” – to hear Dave Lynn, John Jenkins and Harry Pangas discuss how to prepare your Form 10-K this proxy season, with a focus on what changes you need to make this year due to the SEC’s new rules and regulations for smaller companies.

Unlike our other webcasts, this one was taped in advance so you can listen to it at anytime (and there will be no transcript). And you will also want to review these “Course Materials,” which consist of practice pointers that the panelists put together. Some good stuff!

Finally, Dave has put together the latest installment of our challenge to you: “Pro or Troll #4: New Smaller Reporting Companies Rules.”

Head’s Up for Smaller Companies: Read the Actual Rule Text

A member recently alerted us to a possible glitch in the SEC’s adopting release for smaller company regulatory relief and simplification. In the release, the SEC stated that Item 407 of Regulation S-K was being amended to provide that “smaller reporting companies are: “… Not required to provide an Audit Committee Report until the first annual report after their initial registration statement is filed with the Commission and becomes effective.”

However, the actual amendments to Item 407 don’t refer to the Audit Committee Report – instead, they refer to disclosure regarding the Audit Committee Financial Expert. I think the actual amendments are correct since the intent of the rules is to provide that the disclosure regarding Financial Experts required by Item 407(d)(5) will not be required for a smaller reporting company in its 1st annual report following the effective date of its first registration statement. Smaller reporting companies will be required to provide Audit Committee Reports.

Practice Tip: For both the SEC’s adopting and proposing releases, don’t forget to read the rule text near the end of the releases rather than rely on the narrative description of them in the forepart. After all, the rule text is what we all have to live by, long after the adopting release is mostly forgotten…

News from San Diego: Recap of Corp Fin Efforts

Yesterday, Corp Fin Director John White delivered this speech at the Northwestern Conference in San Diego. It provides a recap of all the SEC’s ongoing efforts. In two weeks, get some expert perspectives from outside the SEC on what the Staff is up to (and has been doing recently) in our webcast: “The ‘Former’ SEC Staff Speaks.”

I hear that Staffer Shelley Parratt had an interesting panel in which she said there have been a lot of questions about how companies can find out which AD group (ie. industry group in Corp Fin’s “operations”) they are in. There is information on the Corp Fin web page – but it can be confusing so the Staff plans to make it easier to use. Don’t forget our handy “Corp Fin Organization Chart.”

– Broc Romanek

January 23, 2008

Course Materials Now Available: Rule 144 Conference

With our blockbuster Conference only a week away – “New Rule 144: Everything You Need to Know – And Do NOW” – we have posted our Course Materials so that you can print them out in advance. If you have registered for the Conference, please use your ID and password to access these “Course Materials,” including this printable set of model documents. (Note you need to register for the Conference to access these Materials; members of receive a discounted rate, but the Conference is separate from membership.)

In addition to a “Comprehensive Rule 144 Outline,” nifty charts and useful analysis, the Course Materials include these model documents:

– Model Memorandum to Directors and Executive Officers
– Seller’s Representation Letter #1 – Sales by Affiliate of Reporting Company
– Seller’s Representation Letter #2 – Sales by Affiliate of Non-Reporting Company
– Seller’s Representation Letter #3 – Sales of Restricted Securities by a Non-Affiliate
– Standard Broker’s Representation Letter for Affiliates: “We Will Comply” Letter
– Legend Removal Representation Letter #4.a – to Broker
– Legend Removal Representation Letter #4.b – to Issuer and Transfer Agent
– Legend Removal Broker’s Cover Letter #5 – to Transfer Agent and Issuer
– Broker Instruction/Representation Form
– Letter: Reminder of SEC Restrictions and Company Policy (can be stapled to stock certificate, etc.)

The Course Materials alone are worth the rate of this Conference. You will need all of these documents starting February 15th, when new Rule 144 becomes effective.

New Rule 12h-6: Deregistration Stats So Far

Last week, Corp Fin Director John White gave this speech at PLI’s Annual European conference, which provides a solid recap of the SEC’s international efforts in the corporate finance area. (Chairman Cox also recently delivered this speech entitled “International Business — An SEC Perspective.”)

In his speech, John notes that 100 companies have filed to withdraw from U.S. registration under the SEC’s new deregistration rules during 2007 (which doesn’t include 25 that had previously deregistered under the older exit rules but filed a Form 15F to gain the benefit of new Rule 12h-6). The 100 FPIs represent just under 9% of all FPIs as of the beginning of 2007 and 53% are from the European Union.

It is notable that during 2007, more than 75 new foreign private issuers registered securities in the US. So perhaps it’s too early to tell what the long-term impact of new Rule 12h-6 will be…

Probable Cause for Car Search: No Broker-Dealer License

I’ve heard of getting into trouble driving with a driver’s license – but driving with a broker-dealer license? Keith Bishop notes: I thought that this recent California case was interesting for several reasons:

1. The Court of Appeal found that the police had probable cause that the defendant was selling securities without a broker-dealer license and could lawfully search the defendant’s vehicle in connection with his arrest.

2. The appellate court upheld a burglary conviction based on the fact that the defendant entered the victim’s home to solicit an investment.

3. The court ruled that violation of California’s broker-dealer registration requirement (Cal. Corp. Code Sec. 25210) is a general intent crime. Thus, guilty knowledge is not an element of the crime. (For example, the defendant does not have to know that he or she is selling securities.) However, the defendant’s good faith believe that he or she is not required to be licensed is an affirmative defense.

4. It should be noted that the defendants’ failure to disclose that they lacked a B-D license also supported criminal convictions for selling securities by false statements or omissions (Cal. Corp. Code Sec. 25401).

– Broc Romanek

January 22, 2008

The Latest Developments: Your Upcoming Proxy Disclosures—What You Need to Do Now!

On tomorrow, join Dave, Mark Borges, Ron Mueller, Alan Dye – and SEC Staffer Mike Reedich from Corp Fin’s Exec Comp Task Force – for the first part in a two-part webconference: “The Latest Developments: Your Upcoming Proxy Disclosures—What You Need to Do Now!”

Among the important topics that will require up-to-the-minute guidance, the Conference will cover:

– What are the SEC Staff’s latest positions from their recent waves of comment letters – and upcoming Staff Report – such as the Staff’s new expectations for the CD&A, including specific suggestions and examples
– How to overcome the unexpected challenges from the Staff’s comment letters
– What are examples of what companies intend to change in this year’s proxy disclosures
– How to analyze and disclose perks, including how to determine whether something is a “perk”

Upcoming House Hearing on Severance Pay

Rep. Henry Waxman (D-Cal.) has asked Charles Prince, Stanley O’Neal, and Angelo Mozilo to testify at a February 7th hearing on severance pay (here are the letters sent to the executives and other requests for testimony). Until recently, Mr. Prince was the CEO of Citigroup and Mr. O’Neal was the CEO of Merrill Lynch; each took home around $40 million and $161 million, respectively, after being forced to retire after their firms suffered heavy losses from mortgage investments. Mr. Mozilo is the CEO of Countrywide Financial, who is expected to receive a $115 million payout if a planned buyout by Bank of America is completed.

According to RiskMetrics: “You should plan to address how [your severance package] aligns with the interests of … shareholders and whether this level of compensation is justified in light of your company’s recent performance and its role in the national mortgage crisis,” Waxman wrote in his letter to the three executives.

On Jan. 17, Waxman’s committee sent out another round of letters–this time to current employees of the three companies, requesting documents and testimony on the process used to decide on severance packages for O’Neal, Prince, and Mozilo. Waxman called on John Thain, Merrill Lynch’s new CEO; Vikram Pandit, the new CEO of Citigroup; and Mozilo himself, who still serves as CEO at least until the Bank of America takeover, to submit to the committee copies of all documents related to drafting the severance agreements at each company – including the names of outside consultants hired to help the board’s compensation committee draft the agreements. The executives will have until Jan. 25 to submit the documents to the oversight committee, the letter states.

Three additional letters, also sent on Jan. 17, went to the respective chairmen of each company’s compensation committee. Harley Snyder of Countrywide, John Finnegan of Merrill Lynch, and Richard Parsons of Citigroup were asked to appear at the Feb. 7 hearing committee hearing to address how the executives’ severance pay was determined, and “on what basis [the] [b]oard of [d]irectors decided to approve [the] pay package,” Waxman wrote.

Survey Results: Compensation Committees and Compensation Consultants

Speaking of Rep. Waxman, given his keen interest in compensation consultant conflicts, it’s a good time to report the survey results from our most recent Quick Survey, repeated below:

1. Does your compensation committee:

– have a policy that it will not employ any compensation consultants who perform services for management – 16.1%
– not have such a policy, but does not intend to employ any of the same compensation consultants as management – 51.6%
– employ some (or all) of the same compensation consultants used by management – 32.3%

2. In practice, how does your compensation committee go about hiring an expert for making recommendations regarding CEO compensation?

– Management offers up a consultant to the compensation committee that it finds acceptable, subject to committee approval – 44.3%
– Compensation committee left completely on its own to find and hire whatever consultant it wants – 50.8%
– Compensation committee has not hired an expert for setting CEO compensation – 4.9%

3. Assume the company already is using consultant A for general compensation advisory purposes, will your compensation committee:

– Use the same consultant to help set executive compensation – 36.1%
– Use a different consultant to help set executive compensation – 37.7%
– Too early to tell what the compensation committee will do going forward – 26.2%

4. Regarding compensation committee charters, the committee has:

– A charter that states that the compensation committee will be the sole entity in the company to hire compensation consultants specifically related to CEO compensation – 59.0%
– A charter that states that both the compensation committee and management have the authority to hire compensation consultants specifically related to CEO compensation – 18.0%
– A charter that does not address who hires compensation consultants – 23.0%

My Ten Cents on Consultant Conflicts: I think Rep. Waxman’s interest in conflicts is somewhat unfounded. My experience is that the relatively few board advisors on CEO pay within big consulting firms really are walled off from the much larger departments doing more general HR work. There are more important processes broken in the CEO pay area that are more worthy of attention, such as the severance pay area for which Rep. Waxman has called this hearing on…

– Broc Romanek

January 21, 2008

Third Company Adopts “Say on Pay”

With a hat tip to RiskMetrics, the New York City Comptroller’s office announced in this press release that Par Pharmaceuticals has agreed to adopt an annual shareholder advisory vote on executive pay. In October, a non-binding proposal received 56.8% support at the company’s annual meeting.

Par Pharmaceuticals is the 3rd company to agree to an annual advisory vote on executive pay. On, we are maintaining a list of those companies that have agreed to adopt some form of “say on pay” in the “Advisory Shareholder Vote/Say on Pay” Practice Area.

Deadhead Flights and Incremental Costs

In the “Q&A Forum,” Dave just posted this answer in response to a query about what is the latest thinking about the inclusion of deadhead flights in calculating the incremental cost of personal use of corporate aircraft:

“I think perhaps the most significant development on including deadhead flight costs was John White’s discussion of the issue in his September 6, 2006 “Principles Matter” speech. It was there that he said “[i]n my view, if a deadhead flight leg causes a company to incur incremental costs, those must be included in the calculation of the perk’s value.”

Even with those comments out there, in the 2007 proxy season we saw that few companies disclosed that deadhead flights have been included in the incremental cost calculation. As we noted in the November-December 2007 issue of The Corporate Executive, the inclusion of deadhead costs could increase the reported incremental cost number by as much as two to four times the amount disclosed.

Brink Dickerson of Troutman Sanders did a great presentation on Airplane Perks at our “4th Annual Executive Compensation Conference” back in October. His presentation and materials are archived on, which includes a survey of airplane perks disclosures at many companies. You can also see the “best practice” model disclosure regarding airplane perks in the January-February 2008 issue of The Corporate Executive, where we recommend that deadhead costs and the loss of corporate tax deductions should be factored into the incremental cost calculation.”

Don’t forget to tune into the two-part webconference – “The Latest Developments: Your Upcoming Proxy Disclosures —What You Need to Do Now!” – that kicks off this Wednesday on!

Course Materials: Forecast for 2008 Proxy Season: Wild and Woolly

Catch Pat McGurn of RiskMetrics tomorrow on our webcast – “Forecast for 2008 Proxy Season: Wild and Woolly” – to hear all the latest on the proxy season, including:

– What will be the hot topics for investors in 2008? How do they differ from what was hot this year?
– What changes in governance policies should companies now consider as broker votes may well be gone in 2009?
– What new positions were taken by RiskMetrics in their upcoming 2008 voting guidelines?

Pat always puts together some great course materials – and this year is no exception – please print out these course materials before you listen.

– Broc Romanek

January 18, 2008

The IR Department as Bloggers: Welcome to the 21st Century!

Last week, I was on the road in the Midwest to speak to a few groups about a variety of topics. These topics generally related to what I call the inevitable convergence of a number of disciplines. Before you know it, I believe the IR and corporate governance departments will merge within companies – with disclosure lawyers also becoming a part of that combination. Don’t forget: with the SEC’s e-proxy rulemaking a year ago, the government explicitly recognized that many shareholders will look to corporate websites for information about their investments. I believe many of us will have to develop skill sets that we currently don’t have.

One of these skill sets is broadening our “journalistic eye” and joining the “conversation” that is happening online. I know many of you will chuckle if I predicted that at least 50% of the folks reading this blog will one day be bloggers – but I really feel that’s not too outrageous a statement. (More on all this high-minded theory some other day.)

A case in point is the new “Dell Shares” blog, where members of Dell’s IR department take turns blogging about IR issues. Very interesting and Dell is to be applauded. Taking a page from Sun Microsystems and other tech companies, Dell has a number of employees blogging (and even discussion forums on their site). Here is the popular “Direct2Dell” Blog, which focuses on the company’s products and services (and is available in Spanish, Chinese and Norwegian).

My pet peeve with Dell Shares is the disclaimer that Dell’s IR department forces us to click-through to get to its blog. As I commented on Dell Shares, I find it ironic that the IR department forces us to click through a disclaimer when the other Dell blogs don’t have such a disclaimer – given that Dell’s IR department likely is much more sensitive to what they should or shouldn’t be blogging than others within the company. Don’t let that stubborn lawyer voice within you place unnecessary obstacles to allowing yourself or others to be a part of the growing worldwide “conversation.”

The NYSE’s Annual Letter to Listed Companies

Yesterday, the NYSE sent its annual letter to listed companies to remind them of their of annual compliance requirements (there is a separate letter for foreign private issuers). The letter mentions that the NYSE’s proposed corporate governance rule changes are still pending before the SEC and they continue to discuss them with the Staff.

The NYSE also updated its “2008 Notification of Record and Stockholder Meeting Dates,” which listed companies should use to notify the NYSE of their record and meeting dates.

The FASB Codifies GAAP!

Wouldn’t it be cool if the FASB codified GAAP? Impossible? No, it’s being done (and I imagine it has to be done if the SEC’s XBRL taxonomy project is to be accurate). On Wednesday, the FASB issued this press release to launch the one-year verification phase of the FASB Accounting Standards CodificationTM (Codification).

During the verification period, constituents are encouraged to use the online Codification Research System to research accounting issues and provide feedback on whether the Codification content accurately reflects existing GAAP. The Codification content is not yet approved as authoritative so take it with a grain of salt. And you have to register as a user to try it out (even though its free).

– Broc Romanek