TheCorporateCounsel.net

January 14, 2008

Now Publicly Available: SEC’s Executive Compensation Comments and Responses

For the subset of the 350 companies that were both reviewed by Corp Fin as part of the executive compensation review project and have received one of these “all clear” letters from the Staff, you will soon find your comment letter and response posted on the SEC’s website. It looks like the Staff hung pretty close to the timeline of “45 days since the Staff started informing companies that they were clear,” which is earliest that the Staff can post letters/responses pursuant to its own policy (which was confirmed in the Staff’s Report on executive pay).

I just took a cursory swing through the SEC’s database over the weekend and found these:

– Allstate – comment letter and response

– Bristol Myers – comment letter and response

– Berkshire Hathaway – comment letter and response

– Travelers Companies – comment letter and response

There’s a few more out there and we’ve posted a more comprehensive list on CompensationStandards.com in a new “SEC Comments” Practice Area. Hopefully, somebody can prove me wrong – but it’s quite challenging to run searches on the SEC’s comment letter database – as well as the third-party providers’ databases – to find these letters. The good ole boolean-type searches don’t seem to work for these particular batch of letters…

Why the Blogosphere is Putting the “Hurt” on Mainstream Media

As everyone knows, mainstream media is in trouble, particularly daily newspapers. For example, the Washington Post has reduced its staff to such a degree that the “Business” section regularly runs a list of product recalls on its front page (and a majority of the Post’s revenue stream now comes from its Kaplan Training enterprise; not its newspaper).

Here is a case in point why bloggers with greater knowledge in their niche can outdo the mainstream journalists. In this article from Saturday’s Post, the reporter tries to make a story out of a fairly bland comment issued by Corp Fin last August asking how Berkshire Hathaway handles director nominations submitted by shareholders (comment letter and response are linked to above; note the article is written by a Bloomberg reporter, reaffirming how scantily the Post is devoting resources to business).

Here an excerpt from the article, which is entitled “Berkshire Hathaway to Formalize Director Nomination Procedure”:

“The nominating committee does not have a formal policy by which shareholders may recommend director candidates,” the SEC wrote in a letter to Hamburg dated Aug. 21. “Please state why it has no such policy, as required. Hamburg responded that company policy “will provide that Board of Director candidates recommended by shareholders will be evaluated using the same criteria as are applied to all other candidates.” Hamburg didn’t return a call seeking comment. A subsequent SEC letter to Hamburg, dated Nov. 27, said its review of Berkshire was complete, with no further comments.

A few years ago, the SEC added Item 7(d)(2) of Schedule 14A to require companies to disclose in their proxy statements if they have a “nominating or similar committee” and “whether the committee will consider nominees recommended by security holders” and, if so, “describe the procedures to be followed by security holders in submitting such recommendations.” Apparently, Berkshire Hathaway forgot to include a description of their procedures in their proxy statement. From their response, it seems like the company will simply codify their existing procedures in a policy. These procedures – that all candidates are considered based on their qualifications – are pretty much the same as 99% of Corporate America.

These typical procedures are the backdrop of the ongoing extensive battle over proxy access. Very few companies receive nominations from shareholders (and I mean very few) because it’s unlikely that their candidates will have the skill sets that boards are looking for – and of course, because they haven’t gone through the board’s recruiting process that often takes as long as six months. Most shareholders realize its a futile exercise and don’t bother to submit nominations.

So the fact that Berkshire Hathaway will add this disclosure to their proxy statement is not really news at all. Rather, my opinion is that it’s a reporter’s lack of understanding about how the Corp Fin comment process works. Not surprising since it would be hard for an industry outsider to know…

The Latest on Fairness Opinions

We have posted the transcript from our recent DealLawyers.com webcast: “The Latest on Fairness Opinions.”

– Broc Romanek