Just when you thought that the Shareholder Bill of Rights Act was the only thing to worry about on the federalized corporate governance front, along comes the “Shareholder Empowerment Act of 2009.” Last Friday, Congressman Gary Peters (D-MI) announced that he had introduced the legislation, which is intended to “expand shareholder rights and give investors a greater voice in overseeing the companies they own.”
This bill is even more wide-ranging than the Shareholder Bill of Rights legislation. The bill would amend the Securities Exchange Act of 1934 to provide:
1. Mandatory majority voting for directors – The SEC would direct the exchanges to adopt listing standards providing that a director nominee in an uncontested election must receive votes in favor from a majority of shareholders, and any nominee running unopposed for re-election would be forced to resign if he or she failed to receive a majority vote.
2. Proxy access – The SEC would be required to adopt rules, applicable beginning with shareholder meetings occurring after January 1, 2010, that would require issuers to “identify and provide security holders with an opportunity to vote on candidates for the board of directors who have been nominated by holders (sic) in the aggregate at least 1 percent of the issuer’s voting securities for at least 2 years prior to a record date established by the issuer for a meeting of security holders.” The SEC’s rules adopted under this provision would specify the information to be provided and would only be applicable when less than a majority is nominated.
3. Uninstructed Broker Votes in Uncontested Elections – This provision would direct the SEC to adopt rules providing that a broker will not be allowed to vote securities in an uncontested election if the beneficial owner has not provided specific instructions. The rule would apply for meetings held on or after January 1, 2010.
4. Independent Chairman – This provision of the bill would require the SEC to direct the exchanges to adopt listing standards mandating that issuers split the Chairman and CEO roles. Further, issuers would be required to provide that, to the extent possible and consistent with the issuer’s status as a public company, the Chairman is independent (under specified standards) and has not previously served as an executive officer.
5. Shareholder Approval of Executive Compensation – This provision would give shareholders an annual, non-binding advisory vote on the compensation packages of senior executives.
6. Independent Compensation Advisers – Under this provision, the SEC would be directed to adopt rules requiring that if a board or compensation committee retains an individual advisor or advisory firm in conjunction with negotiating employment contracts or compensation agreements with the issuer’s executives, the individual adviser and his or her firm must be independent, as prescribed in the bill.
7. Clawbacks of Unearned Pay – The SEC would direct the exchanges to adopt listing standards requiring issuers to have a policy for reviewing unearned bonus payments, incentive payments or equity payments awarded due to “fraud, financial results that require restatement, or some other cause.” The policy would need to require recovery or cancellation of any unearned payments “to the extent it is feasible and practical to do so.”
8. No Severance Agreements for Poor Performance – The SEC would direct the exchanges to adopt listing standards prohibiting the board or compensation committee from entering into agreements providing for severance payments for executives terminated for poor performance.
9. Disclosure of Performance Targets – The SEC would need to adopt rules requiring disclosure of specific performance targets used in compensation plans. In the course of this rulemaking, the SEC would need to “consider methods to improve disclosure in situations when it is claimed that disclosure would result in competitive harm to the issuer.” These methods might include required disclosure of past experience with similar targets, disclosure of inconsistencies between compensation targets and targets set in other contexts, and mandated confidential treatment requests.
There will no doubt be more legislative proposals of this kind. While the bills may not ultimately be adopted as proposed, they will continue to add issues to the debate over what sorts of governance reforms should go forward, and put pressure on the SEC to act with respect to its numerous outstanding rule proposals and contemplated rule proposals. Hat tip to Ted Allen’s RiskMetrics Group Risk & Governance Blog for highlighting this legislation.
How to Plan for CEO (and Other Senior Manager) Succession
Tune into tomorrow’s webcast – How to Plan for CEO (and Other Senior Manager) Succession – to hear Amy Goodman of Gibson Dunn; Holly Gregory of Weil Gotshal; Mark Van Clieaf of MVC Associates; and Mark Nadler of Oliver Wyman Delta talk about one of the most important – but yet the least understood – of governance areas out there.
The launch of the FASB Accounting Standards Codification is fast approaching on July 1, 2009. The Codification, which will serve as the single source of authoritative, non-government US GAAP, will be effective for interim and annual periods ending after September 15, 2009. Once the Codification is launched, all existing accounting standard documents are superseded, and all other accounting literature not included in the Codification will be considered “nonauthoritative.” For more information, you can check out FASB’s upcoming webcast about the Codification on June 22nd.
Yesterday, the FASB announced that it had issued Statement No. 166, Accounting for Transfers of Financial Assets (which serves and an amendment to FASB Statement No. 140) and Statement No. 167, Amendments to FASB Interpretation No. 46(R). In its announcement, the FASB notes that these standards will change the way issuers account for securitizations and special-purpose entities, and will impact financial institution balance sheets beginning in 2010. It was further noted that the impact of the standards was factored in by banking regulators in the course of conducting their recent “stress tests.”
For some time now, we have been waiting to see if the SEC would bring any insider trading actions involving the use of Rule 10b5-1 plans. Ever since the SEC Enforcement Staff first mentioned concerns with potential abuses of Rule 10b5-1 plans back in 2007, much has been made of how to avoid invalidating a Rule 10b5-1 defense (for comprehensive coverage of these issues, see our “Rule 10b5-1” Practice Area). Now, we have the SEC’s complaint against Countrywide’s former CEO Angelo Mozilo and others as a first of its kind SEC case questioning trades made under Rule 10b5-1 trading plans.
The SEC’s complaint in the Countrywide case alleges that Mozilo and two co-defendants misled investors about the problems that the mortgage lender faced, with contemporaneous e-mails painting a picture of significant internal concern over the company’s lending practices, while at the same time the company was portraying a rosy picture to the investment world. In this regard, SEC Enforcement Director Robert Khuzami, waxing poetic, called the situation “a tale of two companies” in the SEC’s press release announcing the action.
In the complaint, the SEC notes that Mozilo entered into four Rule 10b5-1 sales plans in late 2006, in each case while he was in possession of material non-public information about the mounting credit risk that Countrywide faced and the expected problems with the Countrywide-originated loans. With respect to his October 2006 sales plan, for instance, the SEC alleges that Mozilo established the plan one day before sending an e-mail to his co-defendants stating “we are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales.” Over the course of the next 12 months, Mozilo exercised over 5 million options and sold the underlying shares pursuant to the Rule 10b5-1 plans, resulting in proceeds of over $139 million.
The Mozilo complaint for the most part focuses on one of the most fundamental elements for a successful Rule 10b5-1 defense – that the person entering into the plan must not be in possession of material non-public information at the time of entering into, or amending, the plan. I still get the question from time to time of whether a person can enter into a plan while in possession of material non-public information so long as trading does not commence until after the information is made public, which obviously can never work.
It will probably be some time before this case makes it to trial. It remains to be seen whether the Mozilo case is just one isolated incident of allegations involving Rule 10b5-1 plans, or whether more of its type are on the way. In any event, I think that the threat of the SEC cracking down on Rule 10b5-1 plans has in all likelihood cleaned up most abuses in this area (if there were any to start with).
In this entry from the D&O Diary blog, Kevin LaCroix provides a great explanation of why it is appropriate for Bank of America to be advancing Mozilo’s defense expenses.
Academic Research on Hedging Transactions and Abnormal Returns
As Mike Melbinger recently noted in his CompensationStandards.com blog, a recent academic study has highlighted a potential relationship between executives entering into prepaid variable forward contracts and a drop in their company’s stock price. (The study is discussed in this WSJ article). This research could potentially raise the SEC’s attention concerning these types of transactions, similar to the way that research on well-timed Rule 10b5-1 plans originally garnered the SEC’s attention on those plans. While it doesn’t seem that prepaid variable forwards have been as popular as they once were, they still offer an alternative for executives to diversify and monetize a portion of their stock holdings.
The Administration’s Regulatory Reform Proposals Expected This Week
In this Washington Post piece appearing today, Timothy Geithner and Lawrence Summers lay out the Administration’s plans for financial reform. The piece discusses how the Administration’s proposals will address five key problems. Among the solutions, Geithner and Summers indicate that the plan will call for “harmonizing the regulation of futures and securities, and for more robust safeguards of payment and settlement systems and strong oversight of ‘over the counter’ derivatives. All derivatives contracts will be subject to regulation, all derivatives dealers subject to supervision, and regulators will be empowered to enforce rules against manipulation and abuse.”
The WSJ also reports today that announcement of “the most sweeping reorganization of financial-market supervision since the 1930s” is expected this Wednesday. [It seems that in this phase of the financial crisis and its aftermath, Wednesday is the new Sunday. It used to be last Fall that we would wait until Sunday evening before Asian markets opened to find out what major calamity had been averted or precipitated. Now, major announcements seem to be happening on Wednesdays, which takes away some of the drama but is perhaps a good sign.]
From the WSJ report, the only agency on the chopping block is the Office of Thrift Supervision – otherwise, financial regulatory authority is expected to be reallocated so as to avoid gaps in regulation. As many have expected, the Federal Reserve will garner more power under the Administration’s proposal, overseeing the largest of financial institutions with enhanced authority.
It remains to be seen how quickly Congress will act on these proposals – healthcare seems to be taking center stage away from the financial crisis as signs of normalcy on the economic front have begun to emerge.
Deal Protection: The Latest Developments in an Economic Tsunami
We have posted the transcript from our recent DealLawyers.com webcast: “Deal Protection: The Latest Developments in an Economic Tsunami.”
There is no doubt that the SEC has a laser-like focus on its investor protection mission these days. Recently, the SEC announced that it will be getting some help from a newly-established investor advisory committee. Commissioner Aguilar will serve as the Commission’s “sponsor” of the Committee, and it will be made up mostly of institutional investors and representatives of individual investor organizations.
The SEC said that the Advisory Committee’s main goals will be providing:
– advice to the Commission on areas of concern to investors;
– investors’ views on “current, non-enforcement, regulatory issues;” and
– information and recommendations to the Commission regarding regulatory programs.
The SEC is free to set up these sorts of advisory committees under the Federal Advisory Committee Act (5 U.S.C. App. 2 §§ 1-16), if it can be determined that the establishment of the advisory committee is in the public interest. An advisory committee can be established (15 days after the publication of a notice in the Federal Register) by filing a charter for the committee with the Senate Committee on Banking, Housing, and Urban Affairs and with the House Committee on Financial Services. A copy of the charter is also filed with the SEC Chairman, furnished to the Library of Congress, placed in the Public Reference Room at the SEC, and posted on the SEC’s site.
The charter for the committee must provide that the duties of the committee are to be solely advisory, and specify the time frame during which the committee will operate. The charter also provides that the SEC alone will make any determinations of action to be taken and policy to be expressed with respect to matters within the SEC’s authority that are recommended by the committee.
The advisory committee approach can be a useful way for the SEC to obtain a more detailed understanding of matters without expending scarce Staff resources. In my view, they seem to work best when they operate relatively independently and their specific agenda is not more or less directed by the SEC.
– What are the provisions of the Shareholder Bill of Rights Act?
– Are any provisions of the bill not seen before in other similar bills?
– What are the odds of passage of the bill?
– What are the implications of the bill, if passed?
The Spoofed E-mail Caper
It seems like the last thing the SEC needs right now is some bizarre story of a mysterious, highly critical e-mail sent to its leadership and the press, but that is just what happened earlier this week in the strange case of the “spoofed” e-mail account. As noted in this WSJ article (see also this Bloomberg and Washington Post coverage), the four page e-mail appeared to be sent from an enforcement attorney’s e-mail account, and it was addressed to Chairman Schapiro, a number of other SEC officials and several reporters covering the SEC. The e-mail attacked the performance of Chairman Schapiro and SEC Inspector General David Kotz, and railed against a number of things at the agency, including the performance review process. The original story from the apparent sender was that her Blackberry was stolen, but it later turned out that the e-mail was sent from outside of the SEC’s network where someone had “spoofed” her e-mail address. (I know all about “spoofing,” having received about fifty Canadian pharmacy e-mails a day from myself over the past couple of years.)
From the description of the e-mail and the excerpts that have been reported, it sounds like the e-mail came from a very angry Staffer (or ex-Staffer). I can think of several crazy e-mail stories from my days at the SEC, but by and large those involved self-inflicted e-mail gaffes. Of course back in the good old days, I recall that these sorts of loose-cannon Staffer activities were carried out on pilfered letterhead, rather than by e-mail. No matter how it is done, it is really unbelievable that someone would go to such lengths to vent their frustration – they should really get another hobby.
Yesterday marked a significant day in the ongoing involvement of the US government in executive compensation, as Treasury Secretary Geithner outlined a series of broad-based principles that companies – particularly financial institutions – should consider in connection with the design and implementation of their executive compensation programs. Secretary Geithner’s statements followed a meeting involving SEC Chairman Schapiro, Federal Reserve Governor Dan Tarullo and several compensation experts.
The principles that Secretary Geithner outlined yesterday should come as no surprise to those who have been reading our publications over the last several years. The principles draw on best practices that we have seen developing in the marketplace over time, and for the most part can be universally applied. (Nothing in Geithner’s comments seemed to indicate that the guidance was limited strictly to financial institutions, but banks will see these standards in more concrete terms as they are worked into the supervisory process of bank regulators.)
Here are the principles:
1. Compensation plans should properly measure and reward performance – Incentive compensation plans should be tied to performance in the sense of long-term value creation, which could be accomplished by using a wide range of internal and external metrics (and not just the company’s stock price), including metrics that distinguish the company’s performance from its peers.
2. Compensation should be structured to account for the time horizon of risk – Continuing the theme of aligning pay with long-term value creation, the principles encourage conditioning compensation on longer-term performance and thereby obviating the need for specific clawbacks, while encouraging the holding of equity awards for longer periods.
3. Compensation practices should be aligned with sound risk management – As we have heard repeatedly since the financial crisis, compensation committees are encouraged to conduct and publish risk assessments of compensation plans in order to “ensure that they do not encourage imprudent risk taking.”
4. Golden parachutes and supplemental retirement packages should be reevaluated – Companies should reexamine the extent to which golden parachutes and supplemental retirement packages are aligned with shareholder interests, whether they incentive performance and whether they result in value to executives even when shareholders lose value.
5. Promotion of transparency and accountability in the compensation-setting process – Citing the lack of independence of compensation committees and the lack of clarity in disclosures (including the lack of a true “walkaway” number for top executives), two legislative initiatives are proposed.
The first legislative initiative outlined yesterday is a push for an advisory vote on executive compensation, which goes beyond the previously introduced legislation and the pending Shareholder Bill of Rights, in that it would require a vote on executive compensation as disclosed in the proxy statement (including the CD&A and the compensation tables) and a vote targeting the compensation reported for each of the named executive officers. Similar to the prior proposals, a non-binding vote on golden parachutes would also be required in merger proxies.
The second legislative initiative coming out of the announcement is a new framework for compensation committees that would be analogous to the audit committee provisions of the Sarbanes-Oxley Act. Under SEC-mandated listing standards, the compensation committee members would be subject to the higher independence standards applicable to audit committee members, the compensation committee would get resources to hire and oversee its own advisors and independence standards would be prescribed for outside compensations consultants and outside counsel. This initiative comes as somewhat of a surprise to me, because while compensation consultant conflicts have been a concern, I have not heard much in the post-Sarbanes-Oxley era about concerns that compensation committees lack sufficient independence.
Chairman Schapiro also released a statement yesterday, reiterating the rulemaking efforts under consideration on executive pay and corporate governance. Proposals are expected on these in the next several weeks. Not to be outdone, Congressman Barney Frank issued a statement, generally supporting Secretary Geithner’s principles (except for the compensation committee proposal), but also indicating that Congress should go further and “adopt legislation that mandates that the SEC adopt appropriate rules that embody these principles.”
Treasury Issues Much-Anticipated Rules Implementing TARP Exec Comp Restrictions
We also saw the Treasury announce that it had finally published interim final rules implementing the executive compensation provisions from the Recovery Act. The lack of guidance had created difficulties for financial institutions participating in the TARP program, since they were not sure what to do with their compensation programs in the absence of greater clarity in how the legislation was to be applied.
The rules implement and expand on the Recovery Act provisions. Some new provisions that go beyond the statutory requirements include:
– Prohibiting tax gross-ups to senior executive officers and the 20 next most highly compensated employees;
– Requiring additional disclosure (to the Treasury and the principal regulator) of perquisites in excess of $25,000 for employees subject to the bonus restrictions, including a narrative description of, and justification for, the perquisites.
– Requiring a disclosure (to the Treasury and the principal regulator) of the use of compensation consultants, including a discussion of any non-compensation services performed and the use of “benchmarking” procedures.
It is Here: The SEC Publishes the Shareholder Access Release
Last night, the SEC posted the shareholder access release. The release comes in at 250 pages with 181 specific comment requests (with many of those including multiple questions), so there will be lots to comment on. The release includes an extensive discussion of the background and rationale for shareholder access, as well as a cool chart outlining the proposed Rule 14a-11 deadlines. I’ll cover more on some of the specifics in the proposals over the next couple of days.
When the SEC’s proposing release finally becomes available – it’s already been three weeks since the open Commission meeting and still no release! – the hunt will be “on” to start writing comment letters and meet the 60-day deadline since the SEC will need to act fairly shortly after the deadline if they truly want something effective before the beginning of the next proxy season. Here are some resources that already have identified issues that will undoubtedly be featured in numerous comment letters:
– JW Verret on the Conglomerate blog regarding bylaw complications and on the DealLawyers.com blog regarding Chinese Menu ballot concerns
Obama Requires Federal Agencies to Review Preemption Policies
In a bizarre coincidence, at the same time that the “state law vs. federal law” debate will rage in the proxy access context, President Obama has sent a memo to all federal agencies asking that they review all of their regulations aimed at preempting state laws issued during the past ten years in an effort to determine whether the preemption is justified – and ensure that statements of preemption be included in future rulemakings only when there is a sufficient legal basis.
A Member’s Thoughts: North Dakota Reincorporation
During the SEC’s open Commission meeting on proxy access, the North Dakota Publicly Traded Corporations Act was mentioned quite a bit. I have blogged before that the first company – American Railcar Industries – has proposed reincorporating from Delaware to North Dakota.
Recently, a member sent me this note: “Shareholders have submitted their own proposals at more than a dozen companies. It appears that in every case, the proponent has been an individual, mostly John Chevedden (Continental Airlines, Southwest Airlines, and Lowes). Many of these companies have not yet had their annual meetings. At those meetings already concluded, there has been only minimal support for these proposals. It will be interesting to the results at American Railcar’s meeting on June 10th where the proposal has the board of director’s approval.”
When Will the SEC’s Proxy Access Proposing Release Be Posted?
Who knows? A proposing release typically is posted anywhere between a few days and two weeks after the related open Commission meeting. Now that we are three weeks from the proxy access meeting, I believe we are approaching record “still waiting” territory. Give us your anonymous opinion as to when you think the release will become available:
In his “Proxy Disclosure Blog” last night, Mark does a great job of summarizing the recent news that Treasury may finally issue its executive compensation guidance this week – and that it may apply to all financial institutions, not just TARP participants. Mark also raises some good questions, such as whether the new “pay czar” will be responsible for interpreting ARRA guidance or whether it will be Treasury or someone else. Chaos reigns supreme.
PCAOB Chair Olson Resigns
Yesterday, the PCAOB announced that its Chair – Mark Olson – resigned for personal reasons, effective July 31st. Mr. Olson has been in the job nearly three years and was the PCAOB’s 2nd Chair. He didn’t mention whether he had any concrete plans for the future. This CFO.com article recaps Mark’s PCAOB tenure.
I imagine he’s glad to avoid being at the PCAOB when the US Supreme Court decides the regulator’s fate this October. This NY Times article notes that the SEC will need to fill three of the five PCAOB Board slots in the coming months. I wonder who would agree to take a job on the Board now given that the future of the PCAOB is uncertain.
Introducing “The Mentor Blog”
We recently launched a new blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Launching this blog was something I’ve been mulling over for quite some time, well before the financial meltdown led to so many scrambling for new jobs (and careers). Now that the transformation of the legal profession, the corporate secretary and IR worlds – and more – is in full swing, the time is “now” to help foster the conversation that hopefully will lead you to better manage your career. The goals of this blog are threefold:
– Provide practice pointers in the area of career development, regardless of the stage of your career
– Provide guidance on how to use technologies to make you more efficient and market yourself
– Provide guidance to newbies on basic areas of the law
As with our other blogs, this is a community blog. Contributions are welcome and encouraged from each and every one of you! Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog (just like you can accomplish that functionality for this blog). Here are topics covered in the blog so far:
– Networking with Your Legal Recruiter
– A Guide to Public Company Auditing
– Do Your Corporate Policies Consider Social Media?
Below is some important reading that has recently been brought to our attention that we commend to each of you. It shows that this country has some pretty amazing leaders:
1. Pepsi’s CEO Indra Nooyi, who was educated in India and then the Yale Business School, recently gave these impressive remarks about corporate values (you can watch Ms. Nooyi deliver them on this video).
2. JPMorgan’s CEO Jamie Dimon annual letter to shareholders is a “must” read, particularly starting on page 13. Note what Mr. Dimon says about compensation: “It also is clear that excessive, poorly designed and short-term oriented compensation practices added to the problem by rewarding a lot of bad behavior.” And see the steps he has taken at JPMorgan (at pg 26). When I saw the bullet about no special severance provisions, I remembered that he had a huge severance provision in his contract when he went from BankOne to JPMorgan in 2004. Well, I did a little research and sure enough, it turns out that he voluntarily gave it up in ’06 without any fanfare.
3. Roger Martin, Dean of the Rotman School of Management at Toronto puts a fresh lens on compensation and metrics in “Undermining Staying Power: The Role of Unhelpful Management Theories.” His important observations recently were summarized in this Financial Times article.
4. Finally, one of this year’s best media articles is this one entitled “The Executive Pay System is Broken” by Alistair Barr of MarketWatch. It explores possible solutions to fix executive pay and answers why it’s important to do so…
By the way, on the right side of the CompensationStandards.com home page, we still maintain a group of complimentary videos of prominent leaders speaking out about excessive pay under the caption of “Respected Leaders Speak Out for Responsible Practices.” We just posted an extended video (i.e. 6 mins) of when Jesse Brill spoke out on how to fix pay practices recently on “The Today Show.”
Protecting Non-Qualified Deferred Compensation: Why is it Suddenly an Issue?
On his “Melbinger’s Compensation Blog” on CompensationStandards.com, Mike Melbinger has been blogging a series about how Section 409A intersects with bankruptcy filings and causes a number of problems. Check it out.
May-June Issue of The Corporate Counsel
We just published the May-June issue of The Corporate Counsel. This issue includes pieces on:
– SEC Guidance on Shell Companies
– Augmenting the Schedule 13D/G Disclosure Requirements—Enhanced Advance Notice Bylaws
– Filing Form 10-Q With Non-Reviewed Financials—Impact on S-3/8 Eligibility
– Earnings Release and 10-Q Filing on Same Day—Impact on 8-K Item 2.02
– Merger Lock-Ups and Written Consents—Staff Iterates/Firms Up Its Position on Pre-Proxy Solicitation
– Voluntary Filer CDIs
– Staff Review Update
– The Staff’s Nine-Month IPO Dormancy “Rule”—Some Relief in Today’s Market
– Even if IFRS Roadmap Adopted, Don’t Expect Voluntary Early Switching to IFRS
– NSMIA Blue Sky Pre-Emption—Litigation Update
– Some Reverse Engineering of the Facebook and WorleyParsons RSU No-Action Letters
As noted in this WSJ article, the SEC intends to roll out new proposals to change its executive compensation disclosure rules sometime in early July. Mark Borges did a great job of recapping what the proposals will likely look like in his blog.
With the SEC’s goal to have its rule changes effective before next proxy season – combined with the real likelihood of say-on-pay legislation and the loss of broker nonvotes for director elections – our the “4th Annual Proxy Disclosure Conference” (whose pricing is combined with the “6th Annual Executive Compensation Conference”) will be more important than ever.
These Conferences will be held at the San Francisco Hilton and via Live Nationwide Video Webcast on November 9-10th; here is the agenda. And many also attend the NASPP Annual Conference that follows directly thereafter – the full Conference program was justed posted. Take advantage of reduced rates that will expire on June 26th by registering now.
Check out this article from yesterday’s Washington Post regarding SEC Chair Schapiro’s first days in office and the challenges she faced.
Survey Results: Governance Trends for IPO Companies
David Westenberg of WilmerHale sent over some IPO governance trend stats, uncovered during research for his upcoming PLI book, “IPOs: A Practical Guide to Going Public.” Here is the data based on his review of all US IPOs by operating companies (i.e., excluding SPACs, REITs, etc.) in 2007 and 2008 (total sample size was about 185 companies; 93% of companies were incorporated in Delaware):
1. Number of Executive Officers:
– Median – six
– 25% Percentile – five
– 75% Percentile – seven
2. Percentage of IPO companies that identified “key” employees beyond executive officers – 15%
3. Separation of Chair and CEO:
– Separate Chair and CEO – 52%
– Same Chair and CEO – 48% (of these, 8% appointed a lead director)
4. Compensation Consultants – Percentage of IPO companies that disclosed use of compensation consultant – 24%
5. Number of Directors:
– Median – seven
– 25% Percentile – six
– 75% Percentile – eight
– 50% of IPO companies had more than one employee-director.
6. Takeover Defenses:
– Classified board – 60%
– Supermajority voting requirements to approve mergers or change corporate charter and by laws – 53%
– Prohibition of stockholders’ right to act by written consent – 69%
– Limitation of stockholders’ ability to call special meetings – 74%
– Advance notice provisions – 80%
– Section 203 of the Delaware corporation statute* (chose not to opt out) – 90%
– Blank check preferred stock – 76%
– Stockholder rights plan (“poison pill”) – 6%
FASB Issues FAS No. 165 re: Subsequent Events
Last week, the FASB issued FAS No. 165, “Subsequent Events.” FAS 165 is effective for interim and annual periods ending after June 15th – and is intended to establish general standards of accounting for (and disclosure of) events that occur after the balance sheet date – but before financial statements are issued or are available to be issued.
Members will be excited to know that we have moved the video archives – and more importantly, the critical course materials, including lots of sample letters, instructions and memos – from our popular conference “Rule 144: Everything You Need to Know – And Do NOW” to our “Rule 144″ Practice Area. Previously, this content was just available to those that paid for the Conference.
As always, we continue to post useful sample documents, either in the relevant Practice Area or in our “Sample Documents” Portal. For example, we just posted this updated chart comparing NYSE and Nasdaq listing requirements.
Latest on Mark-to-Market Accounting
In this podcast, Steve Henning of Marks, Paneth & Shron discusses the latest on mark-to-market accounting, including:
– What is mark-to-market accounting and what is the impact?
– Is mark-to-market subject to flexibility?
– Where do regulators find themselves in the debate?
Thanks to the many members who have sent me the link to this YouTube sensation in which a Southwest flight attendant amuses the company’s annual meeting audience with a disclaimer about non-gaap in the form of rap:
Just because we haven’t been blogging much about the SEC’s pursuit of Mark Cuban on insider trading charges doesn’t mean we’re not interested. It’s just that insider trading is not a big focus for Corp Fin-types like us. Plus, Mark Astarita of SECLaw.com is covering the saga quite well, such as his latest blog about how Mark Cuban has turned around and sued the SEC for violating the Freedom of Information Act.
NBA fans know Cuban well as the prolific owner of the Dallas Mavericks, a guy not afraid to get fined by the league due to being quite outspoken. He’s unlike any other sports owner – he’s extremely active with fans and with the team. Cuban is an entrepreneur, having made billions during the Internet boom and he’s always trying new endeavors – his latest being innovative distribution of films and a failed ShareSleuth.com (which was covering stock fraud stories before it went under). As you might expect from such a personality, Cuban regularly blogs, including this stab at the SEC.
By the way, a loyal Dallas fan noted that I confused sports teams because it was none other than Terrell Owens, formerly of the Cowboys, who famously told the media and fans to “get your popcorn ready.” When I wrote my title for this blog, I completely forgot that T.O. said that…
SEC vs. Cuban: Now Comes the Weird Part…
As noted way back when this story first broke, a complicated aspect of the Cuban case is the strange involvement of a SEC Enforcement Staffer who hadn’t been working on the investigation into Cuban’s alleged insider trading – but yet felt compelled to send emails to Cuban about various aspects of his life while the case was being put together. This eventually led to Cuban responding to this rogue Staffer via email, copying then-SEC Chair Chris Cox.
Yesterday, the WSJ ran this article noting that the Staffer may be subject to discipline. For those that are alumni of the SEC (or any government agency for that matter), memories of former rogue colleagues must surely come to mind. I can think of more than a few. Those curious experiences truly are one of the beauties of working for the Gov…
SEC Approves NYSE’s Reduced Listing Standards Requirements on Pilot Basis
On Monday, the SEC posted an order approving the NYSE’s proposed changes to its listing standards that reduced its $75 million stockholders’ equity and market cap requirements to a $50 million/$50 million standard. These changes are on a pilot program basis through October 31 – and became effective on May 12th.
Companies that are below compliance with the $75 million standard – but above the $50 million Pilot Program standard will be deemed to have returned to compliance. This will be welcome news to those companies that were “below compliance” but are working on remediation plans.