August 25, 2009

Just Mailed: The July-August Issue of The Corporate Executive

We just sent out the July-August 2009 issue of The Corporate Executive, along with a Special Supplement. This issue is devoted to in-depth analysis and practical guidance on the SEC’s proposed changes to the executive compensation disclosure rules. The issue includes:

– The SEC’s Proposed Changes – And their Effects
– The Relationship of Compensation and Risk
– A Broader Scope to the CD&A (But Only When Material)
– Revisiting Equity Award Disclosure – Some Welcome Relief
– A Troublesome Result – And a Fix
– Compensation Consultant Disclosure: An Interim Step?
– Other Important Areas Where Comment is Solicited – And Our Comments
– Walk-Away Disclosure and Analysis – A Heads Up
– Are You Recognizing Too Much Expense for Your ESPP?
– Limits Reduce Employee Returns
– Accounting Considerations
– Proxy Disclosure Updates – Full Walkaway Model CD&A
– Treasury’s Mark Iwry to Speak at 6th Annual Executive Compensation Conference

Subscribing to The Corporate Executive is now more important than ever, particularly given all of the changes contemplated with executive compensation and SEC disclosure requirements. In recognition of the need we are serving this year (and in view of the tight economic times), we are extending a special offer for new subscribers which will enable anyone to receive The Corporate Executive at no risk. If you sign up now for 2010, you can get the July-August 2009 issue on a complimentary basis and the rest of 2009 for free.

FASB Deliberates on Loss Contingencies

Last week, the FASB took up its controversial 2008 proposed changes to the standards regarding disclosure of loss contingencies. As Edith Orenstein notes in FEI Financial Reporting Blog, the August 19 meeting focused on litigation contingencies, with other types of loss contingencies to be taken up at a later meeting. The Board didn’t rule out an effective date by the end of this year, however it appears that the possibility is pretty remote. Here are highlights of the deliberations from the FEI Financial Reporting Blog:

Disclosure objective: The board agreed on the following disclosure object for loss contingencies: An entity shall disclose qualitative and quantitative information about the loss contingency to enable a financial statement user to understand the nature of the contingency and its potential timing and magnitude.

Disclosure principles: The board agreed on three broad principles for loss contingencies:

1. Disclosures about litigation contingencies should focus on the contentions of the parties, rather than predictions about the future outcome.

2. Disclosures about a contingency should be more robust as the likelihood and magnitude of loss increase and as the contingency progresses toward resolution.

3. Disclosures should provide a summary of information that is publicly available about a case and indicate where users can obtain more information.

Quantitative disclosure requirements: The board directed the staff to develop an approach that would focus on disclosure of non-privileged quantitative information that would be relevant to making an estimate of the potential loss, for consideration by the Board at a future meeting.

Reasonably possible equals more than remote: The board decided to maintain the existing requirement to disclose asserted claims and assessments whose likelihood of loss is at least reasonably possible and to clarify that at least reasonably possible and more than remote have the same meaning.

Disclosure of certain remote contingencies: The board agreed that certain remote loss contingencies should be disclosed, and the board directed the staff to develop possible approaches for discussion at a future meeting.

Unasserted claims: The board agreed to maintain existing threshold requirements for unasserted claims and assessments and agreed to enhance the existing interpretive guidance about the threshold.

Recoveries, indemnifications, and settlement negotiations. The board agreed that:

  • entities should not consider the possibility of recoveries from insurance or indemnification arrangements when assessing whether a contingency should be disclosed.
  • to require disclosure about possible recoveries from insurance and other sources if and to the extent that the information has been provided to the plaintiff in discovery.
  • not to require entities to disclose information about settlement negotiations.

Secondary Liability Legislation: Does it Have Legs?

At the end of July, Senator Arlen Spector (D-PA) introduced a bill that would amend the Exchange Act to permit private civil actions against secondary actors for securities fraud, seeking to override the Supreme Court’s rulings in Central Bank and Stoneridge. The legislation would provide that anyone who knowingly or recklessly provides “substantial assistance” to a primary violator will be deemed to have violated the statute to the same extent. Given the current environment, there is at least some chance that this kind of legislation might get support, although at this point it may be too soon to tell.

– Dave Lynn