February 27, 2009

“Say-on-Pay” is On! Corp Fin Updates Its CD&Is

As I blogged on Tuesday, the SEC’s first batch of “say-on-pay” guidance wasn’t very clear. Yesterday, Corp Fin issued these updated CD&Is, which adds two new CD&Is to the ones issued on Tuesday. The new CD&Is now make it clear that the SEC is following the timeline outlined in Senator Dodd’s letter – and therefore all TARP companies will be required to conduct a “say-on-pay” advisory vote if they didn’t file their preliminary proxy materials before February 18th.

This is huge. Over 400 companies will now be doing “say-on-pay” this year! For TARP companies that have filed preliminary (and definitive) proxy materials since February 17th, I imagine they are freaking out. Shoot, I imagine all TARP companies are freaking out even if they haven’t filed yet – since their proxy materials must be close to final. Back to the drawing board. Chaos reigns supreme…how will RiskMetrics’ ISS suddenly come up with 400 recommendations they didn’t expect? Their say-on-pay determinations are case-by-case and fairly complicated. We’re posting memos on this new development in our “Say-on-Pay” Practice Area on

Wednesday Webcast: “Say-on-Pay: A Primer for TARP Companies”

To say there still are a number of open issues in how to frame say-on-pay in proxy materials this year is an understatement. But our experts will do their best to help you during this newly scheduled webcast to be held on Wednesday: “Say-on-Pay: A Primer for TARP Companies.”

On the Fast Track! NYSE’s Rule 452 Amendment to Eliminate Broker Non-Votes

Yes, the Schapiro SEC is a “new” SEC. Yesterday, the NYSE filed a fourth amendment to its Rule 452 proposal (there was also a third amendment filed accidentally the same day) – regarding the elimination of broker nonvotes in director elections – after the last amendment languished for nearly two years.

The 3rd amendment states the proposed effective date would be one that applies to shareholder meetings held after January 1st, 2010. It has a contingency that if the NYSE’s proposal is not approved by the SEC by September 1st, the effective date is then delayed for at least four months after the SEC’s approval – but it would not fall within the first six months of a calendar year. And it’s my feeling that the SEC is ready to approve the NYSE’s proposal, based on recent comments from a number of Commissioners.

This means that companies would not have the benefit of broker nonvotes for next year’s (ie. 2010) proxy season. This is even a bigger development than the item above! A “sleeper” in the sea of regulatory reform as this could be the “last straw” that alters the power struggle between shareholders and boards. However, note this recent NY Times article that brokers may be voting broker nonvotes against management this year! We’ll be posting memos on the NYSE’s proposal in our “Broker Non-Vote” Practice Area.

NYSE Adopts Temporary Suspends $1 Closing Price/Extends Reduced Market Cap Listing Standards

As rumored a few days ago, the NYSE filed an immediately effective rule change with the SEC yesterday that:

– Suspends the $1 average closing price requirement (requirement is couched in terms of being below a buck for a consecutive 30-trading day period) until June 30th. This may provide relief for companies now in the 180-day compliance period following notification of a $1 closing price deficiency.

– Extends existing temporary reduction of the $25 million average market capitalization requirement to $15 million (which was set to expire on April 22rd) to June 30th

– Broc Romanek