October 7, 2009

The Skinny on Split Voting

Helping you to gear up for a difficult proxy season, I have decided to start a weekly proxy solicitor podcast series. Each week, a new podcast with cover a hot topic that you may well face soon – with practical guidance from a proxy solicitor to help you navigate troubled waters. Here is our first installment in the series:

In this podcast, Scott Winter of Innisfree provides some insight into how to handle split voting (i.e., voting for nominees from opposing proxy cards in a contest) and its intersection with the 14a-4 bona fide nominee rule, including:

– What is split voting?
– How often do we see split voting?
– How do shareholders actually split their votes?
– Are there any ways we could make changes to the system which would make split voting easier?

Venture Capital: Facing a Changing World

We have posted the transcript for our recent webcast: “Venture Capital: Facing a Changing World.”

As noted in the WSJ Law Blog, well-known venture capital lawyer Craig Johnson has passed away. Craig was the found of the Venture Law Group in the early ’90s, and more recently founded the Virtual Law Partners. A true pioneer.

Verifying Pay Amounts: A Company’s Special Use of Experts

With the SEC’s proposal to enhance disclosures regarding the use of consultants when setting CEO pay levels, I thought it was worth noting this blog from Mark Borges’ “Proxy Disclosure Blog” from a few months ago (Mark’s daily blogs are so good that I could be re-blogging all of them):

Universal Corporation, the global tobacco merchant, provides a very thorough presentation of its executive compensation program in its proxy statement, which it filed earlier today. One item in particular caught my attention as I read the company’s Compensation Discussion and Analysis (which begins at page 20).

In the discussion of its compensation committee’s engagement of experts and other advisors to assist it in the discharge of its duties, the company includes the following paragraph:

“During fiscal year 2009, the Compensation Committee also retained our independent auditor, Ernst & Young LLP, whom we refer to as Ernst & Young, to review management’s calculation of performance measures and the amount of the annual incentive awards to be paid to our executive officers in order to report to the Compensation Committee whether such calculations were accurate and properly prepared. Ernst & Young’s role was limited to a review of management’s calculations, and did not involve an audit of the calculations or any components used in the calculations. Ernst & Young presented their report to the Compensation Committee, but did not attend any other Compensation Committee meetings.”

Given the increased attention on incentive compensation arrangements, and the concerns about “erroneous” calculations forming the basis of award payouts (especially as reflected in the TARP executive compensation standards), it shouldn’t come as a surprise that compensation committees have begun to independently verify performance metrics before making bonus awards. While I expect that several companies already do this, Universal’s disclosure is the first time I’ve seen it expressly addressed in the CD&A.

Coming Very Soon: 2010 Executive Compensation Disclosure Treatise and Reporting Guide: Now that we have seen the SEC’s proposals and Treasury’s legislation – that will force you to radically change your executive compensation disclosures and practices before next proxy season – we are wrapping up the ’10 version of Lynn, Borges & Romanek’s “Executive Compensation Disclosure Treatise and Reporting Guide,” which we will deliver to subscribers later on in October.

To obtain this hard-copy ’10 Treatise when its printed in October (as well as get online access to the ’09 version right now on, as well as the valuable quarterly “Proxy Disclosure Updates”), you need to try a no-risk trial to the Lynn, Borges & Romanek’s “Executive Compensation Annual Service” now.

– Broc Romanek