We have posted the survey results regarding director recruitment and training trends, repeated below:
1. When your company recruits new directors, do you conduct a background check on the candidates:
– Yes – 82.4%
– No – 17.6%
2. If you answered “yes” to #1, does your company:
– Use a third-party to conduct the background check (e.g. private investigator) – 76.9%
– Use internal resources to conduct the background check – 38.5%
3. If you answered “yes” to #1, does your company:
– Check the background of the candidate’s professional life – 100%
– Check the background of the candidate’s personal life – 69.2%
4. If you answered “yes” to #1, has your company ever decided not to nominate a director based on the results of a background check:
– Yes – 0%
– No – 100%
5. Does your company require Audit Committee members to complete ongoing training to stay current with GAAP and PCAOB standards for financial reporting and internal controls:
– Yes – 6.3%
– No – 93.7%
Recently, I blogged about a slew of Corp Fin rulemakings that have been delayed under the SEC’s “Dodd-Frank Implementation Timeline.” Given that we are at the end of April and a few rulemakings slotted to be adopted before now have not happened, the SEC recently adjusted the timeline to move them to the “May-July” bucket. This includes these three rulemakings:
– §926: Propose rules disqualifying the offer or sale of securities in certain exempt offerings by certain felons and others similarly situated
– §951: Adopt rules regarding disclosure by institutional investment managers of votes on executive compensation
– §922: Adopt rules to implement a Whistleblower Incentives & Protection Program
On Wednesday, the SEC proposed rules that would remove references to credit ratings in several rules under the ’34 Act. Here’s the press release – and here’s the proposing release.
More on our “Proxy Season Blog”
With the proxy season in full swing, we are posting new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. 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. Here are some of the latest entries:
– A Look Ahead at Peak Meeting Dates
– Adjournment and Circulation of Proxy Cards
– Annual Meeting Survey Results: Part I
– ISS’s “25th Anniversary Book”
– The Aging of US Corporate Boards
Why Do Surfers Have Published Etiquette Rules, But Not the Rest of Us?
The explosion in social media these days is evident by any number of ways. One obvious way are the usage statistics themselves – check out these stats. Another is reading the amazing things that companies and investors are doing, mostly courtesy of Dominic Jones’ “IR Web Report” (eg. “Surprise as investor relations YouTube video goes viral”). For me, a sure sign is the high volume of panels on the topic that I have been kindly invited to over the next few months.
But even if you never envision yourself as a blogger or conversing via Twitter, you can’t ignore that your clients are. To best understand how fast the use of social media by public companies – and investors – has grown, I encourage you to read Dominic’s blog entitled “Social media investor relations reaches tipping point” and then tune in on Tuesday for our webcast – “Tackling Social Media Issues” – during which the panel (including the SEC’s Corp Fin Chief Counsel Tom Kim) will discuss a myriad of issues that likely will catch you off guard, including:
– Can a tweet make information public for purposes of Reg FD?
– Who is a “senior official” or company representative for Reg FD purposes when it comes to social media?
– Have companies implemented the SEC’s web disclosure guidance? How? Or why not?
– How have companies made inadvertent premature disclosure through their own website leaks (or leaks through third-parties)?
– How has social media been used for annual meetings? By third-parties soliciting?
– Are e-Forums being used? And how?
– Are there issues if a company is selectively tweeting only positive news?
– How about if companies are tweeting their own earnings guidance over and over again?
– Can tweeting about products & services raise securities law issues?
– What issues can social media pose for ’33 Act offerings? How about for pre-IPO companies?
I’m not sure how we will cover so much in the span of an hour, but you can see how many issues there are to consider. I rarely talk up a webcast so much before it happens – and I am biased since social media is near and dear to me (follow me on Twitter) – but I do believe this is a groundbreaking program. Tune in and find out. Note the new time of the program of 12:00 – 1:00 pm eastern.
Book Review: Social Marketing to the Business Customer
Recently, I wrapped up one of the first books of its kind – “Social Marketing to the Business Customer” – courtesy of one of the authors, Eric Schwartzman. For law firms and others that covet other professionals as clients, this is a good resource to understand how vital social media is to your future – and how best to leverage that opportunity. Using social media certainly requires a different approach than what firms have been accustomed to in the past since it requires you to be part of the “conversation.” Red tape is a hazard here.
The book contains nice examples of how companies have used social media to reach out to their clients (and potential clients) in ways that were always dreamed about, but not realized until now. And it has a great section on how to overcome internal objections to embracing this future (particularly helpful for law firms, who are notorious to be among the last to embrace new technology to their advantage). I’ll be blogging more in this area as I wind my way through my speaking gigs over the next few months…
Study: Rate of CEO Turnover
Recently, Equilar issued this study on CEO turnover in the S&P 1500. A few key findings:
– 381 companies in the S&P 1500 changed CEOs once from 2007 to 2009; 33 changed CEOs twice or more.
– Three-quarters of incoming CEOs were internal hires, while a quarter came from outside the firm.
– Women are gaining ground as executives: 17 outgoing male CEOs were replaced by women.
Last July, Corp Fin Director Meredith Cross announced the creation of three new offices in the Division. Then in December, the heads of these new offices were selected, but the offices were not fully staffed due to budget concerns. Now that the SEC’s budget finally has been set for the year, Corp Fin recently begun to fill in these new offices by promoting Staffers from other groups as follows:
1. Office of Capital Market Trends – Special Counsels Damon Colbert, John Harrington and Andy Schoeffler; Analyst David Walz
2. Office of Structured Finance – Senior Special Counsel Rolaine Bancroft and Special Counsels David Beaning, Robert Errett and Jay Knight
3. Financial Services II, AD12 – Accounting Branch Chief Kevin Vaughn; Special Counsels Sebastian Gomez Abero and Michael Seaman; Attorneys Eric Envall and Celia Soehner; Accountants Angela Connell, Yolanda Crittendon, Brittany Ebbertt, Rebekah Lindsey, Lindsay McCord and Staci Shannon
Yesterday, Navigant Consulting filed this Form 8-K to report that it became the 9th company to fail to gain majority support for its say-on-pay, with only 45% voting in favor. Ted Allen’s blog provides some analysis.
Transcript: “What the Top Compensation Consultants Are NOW Telling Compensation Committees”
We have posted the transcript for the CompensationStandards.com webcast: Transcript: “What the Top Compensation Consultants Are NOW Telling Compensation Committees.”
Probably the most interesting development that happened while I was on vaca last week was the one noted by Mike Melbinger in his blog on CompensationStandards.com. Mike blogged about how some of the first companies to fail to receive majority support on their SOP have been sued (as well as their compensation committee members and even their compensation consultants) in shareholder derivative suits. Not only have the early failures of this proxy season been sued, but two of the companies that failed last year were sued (one case has been settled and one is still pending). We have begun to collect the pleadings from these cases for CompensationStandards.com’s “Say-on-Pay” Practice Area.
With the ante continuing to go up, take advantage of the early bird discount now for our pair of conferences – “The Say-on-Pay Workshop: 8th Annual Executive Compensation Conference” and the “6th Annual Proxy Disclosure Conference” (here’s the agendas) – which will be held on November 1st-2nd in San Francisco and via video webcast. Register now to obtain a 25% Early Bird Discount!
Delaware Chancellor Chandler Retires
In his “Delaware Corporate & Commercial Litigation” Blog, Francis Pileggi notes that Delaware Chancellor William Chandler has retired before the completion of his term and explains the process by which a replacement will be chosen. Francis also notes the importance of not having a full bench of five members of the Delaware Court of Chancery.
AFL-CIO Launches 2011 “Executive PayWatch”
Last week, as ISS’s Ted Allen notes in this blog, the AFL-CIO began a campaign to urge shareholders to vote on say-on-pay. The blog is repeated below:
The AFL-CIO has launched the 2011 version of its Executive PayWatch Web site and is urging investors to help rein in CEO pay by participating in the advisory votes on compensation that all large and mid-cap companies will hold this year. “Although non-binding, it’s the first time that shareholders have had this opportunity,” Richard Trumka, president of the AFL-CIO, said at a press conference on Tuesday. The labor federation is analzying corporate pay disclosures and plans to vote against the compensation practices at some companies, but hasn’t publicly identified those firms. An AFL-CIO affiliate, the American Federation of State, County, and Municipal Employees, has launched a “vote no” campaign against the pay practices at Pfizer and Johnson & Johnson.
The PayWatch site features a searchable database that includes CEO pay information from 299 S&P 500 companies that have filed proxy materials. According to the labor federation, the average 2010 compensation at those firms was $11.4 million, up 23 percent from 2009. On average, these pay packages included $3.8 million in stock awards, $2.4 million in stock options, $2.4 million in non-equity incentive plan compensation, $1.2 million in pension and deferred compensation, $1.1 million in salary, a $251,413 bonus, and $215,911 in other compensation. Trumka said the average total compensation for S&P 500 CEOs is now about 343 times that of the average American worker, up from 42 times in 1980. “We believe that executive pay has gotten out of whack,” he said.
AFL-CIO officials also expressed concern that House Republicans had introduced legislation to repeal another Dodd-Frank Act provision that would require companies to disclose the ratio between the total compensation received by the CEO and the median pay received by the firm’s employees. Corporate advocates have denounced this provision, arguing that it would be extremely costly to collect this data, and that the foreign and part-time employees should be excluded from this calculation. Trumka denounced this attempt to “water down” Dodd-Frank and said this pay ratio disclosure “would have a profound impact” and prod boards to set compensation based on a company’s own organizational needs, rather than based on the pay at other companies.
The SEC has not yet proposed rules to implement this provision but plans to do later during the second half of the year. The AFL-CIO is urging the commission to require companies to include both their foreign and part-time workers in the pay ratio calculations. The AFL-CIO’s Paywatch site specifically criticized the pay practices of six companies: Occidental Petroleum, Hewlett-Packard, Reynolds American, Rite Aid, Abercrombie & Fitch, and PulteGroup.
Last week, Stanley Black & Decker filed this Form 8-K to report that it became the seventh company to fail to gain majority support for its say-on-pay, with only 39% voting in favor. Not only did shareholders reject the company’s SOP, they also came down hard on the board – two directors had 49% withheld. Cooley’s Amy Muecke analyzes why the company failed in this memo.
Then on Friday – in a midst of a flurry of filings on a day when the markets were closed – Umpqua Holdings Corporation filed this Form 8-K to report it became the eighth failed say-on-pay with only 35% voting in support. Umpqua’s Form 8-K is unique in that it chose to include a narrative on why it believed it failed (ie. ISS recommended against the company and the company disagrees with ISS’s analysis).
In his “Proxy Disclosure Blog,” Mark Borges gives us the latest say-when-on-pay stats: with 2177 companies filing their proxies, 43% triennial; 4% biennial; 51% annual; and 4% no recommendation.
Dodd-Frank: The SEC’s Internal Controls Study for Smaller Companies
On Friday, the SEC released an internal controls study mandated by Section 989G(b) of Dodd-Frank regarding the impact of Section 404(b) of Sarbanes-Oxley on smaller reporting companies (those with a public float between $75 and $250 million). The study didn’t find that these smaller companies have unique characteristics that would provide sufficient reasons for differentiating them from accelerated filers as a whole – so it didn’t recommend Section 404(b) relief for them. The study also found that internal controls costs have been going down.
Last week, as noted in this CFO.com article, the FASB and IASB will extend “by a few additional months” their target date for completing their four highest-priority joint convergence projects.
Scenes from Spring Break
Here are a few random videos from my vacation last week. This first one is from UC-Berkeley campus, where group of students sang The Who’s “Behind Blue Eyes” a cappella style:
This one is from the Santa Cruz Boardwalk and features “Ask the Brain”:
In a sign that the SEC is continuing to consider the implementation of International Financial Reporting Standards, the SEC just announced a roundtable on July 7th for the purpose of discussing topics such as investor understanding of IFRS and the impact on smaller public companies and on the regulatory environment of incorporating IFRS. The roundtable is expected to involve three panels representing investors, smaller public companies, and regulators.
While on the topic of roundtables, the SEC also announced plans to hold a two-day roundtable jointly with the CFTC on May 2nd and 3rd to discuss the schedule for implementing final rules for swaps and security-based swaps under the Dodd-Frank Act.
A Strongly-Worded Defense of Dodd-Frank Act Implementation
In a speech earlier this week, Deputy Treasury Secretary Neil Wolin defended the Dodd-Frank Act and its implementation, taking on various criticisms of the law point by point. While the speech had no title, perhaps its theme is best described as “How Quickly They Forget.” Specifically with regard to the pace of reform under Dodd-Frank, Wolin addressed the critics by stating:
After the Dodd-Frank Act was signed into law last summer, many in Washington and in the financial services industry said that the legislation lacked details, and that the uncertainty of the shape of final regulations made it difficult for businesses to plan for the future. They called for clarity, and they wanted it fast. We said that regulators would move quickly but carefully to implement the legislation. We said that we would seek public input. We said it’s critical to get the details right. Recently, some of these very same critics – those who previously demanded clarity as quickly as possible – are saying that we’re moving too quickly. They now suggest that too many details are coming too fast. They say that regulators aren’t setting aside sufficient time to study the issues and make the right decisions, and that businesses won’t have time to adjust to the new regulations. Our response to them remains the same. Regulators have been and are moving quickly but carefully to implement this legislation. We continue to seek public input. And of course, it remains critical to get the details right. Although there may be reasonable debate about the substance of Dodd-Frank implementation work, there is no question that regulators have been implementing the statute in a careful, considered, and serious manner.
SEC and CFTC’s Joint Study on Mandating Algorithmic Descriptions for Derivatives
Meanwhile, the Dodd-Frank implementation effort marches on. Recently, the SEC and CFTC delivered to Congress a joint study on the “the feasibility of requiring the derivatives industry to adopt standardized computer-readable algorithmic descriptions which may be used to describe complex and standardized financial derivatives” as required under Section 719(b) of Dodd-Frank. As noted in this press release, the joint study concludes that current technology is capable of representing derivatives using a common set of computer-readable descriptions – and that these descriptions are precise enough to use both for the calculation of net exposures and to serve as part or all of a binding legal contract.
With articles appearing now in local papers about Say-on-Pay (here is a representative Baltimore Sun article from over the past weekend), it now seems that the Dodd-Frank mandated Say-on-Pay votes have finally seeped into the public consciousness. It is no surprise then that the SEC’s Office of Investor Education and Advocacy has just put out this slick Investor Bulletin on Say-on-Pay and Say-on-Golden Parachute votes. The purpose of the bulletin appears to be to explain, in neutral, plain terms, what the Say-on-Pay, Say-on-Frequency and Say-on-Golden Parachute votes are all about and why they are turning up in proxy statements this year. Unlike last year’s Investor Bulletin New Shareholder Voting Rules for the 2010 Proxy Season (dealing with the change to NYSE Rule 452 for the election of directors), it doesn’t appear that the SEC or the Staff is encouraging that this Say-on-Pay Investor Bulletin be expressly referenced in proxy statements.
Keep in mind that the Say-on-Golden Parachute voting and disclosure requirements are effective for initial filings made on or after this coming Monday, April 25th. To date, it appears that very few companies have opted to get the “advance” advisory approval of golden parachute compensation by including the Golden Parachute Compensation table and related disclosures in the annual meeting proxy statement so that it is subject to the Say-on-Pay vote. I have only counted five so far, but let me know if you have come across more than that.
Occidental Petroleum to Participate in First “Fifth Analyst Call”
As expected, Say-on-Pay has focused a great deal of attention on the engagement process this year, as companies explore new ways to have an effective dialogue with shareholders regarding corporate governance and executive compensation issues. According to this Dow Jones Financial News article, a group of investors led by F&C Asset Management and Railpen Investors is advocating the use of the “fifth analyst call” as a means for accomplishing effective engagement. The “fifth analyst call” is intended to supplement the four quarterly analyst calls with a call that is focused exclusively on corporate governance matters. The idea is that the call will occur between when the proxy statement is filed and the date of the annual meeting, so that the discussion can be about the corporate governance matters and executive compensation disclosed in the proxy statement.
The article notes that Occidental Petroleum has said that the company’s lead independent director and the chair of the executive compensation and human resources committee will participate in the first such “fifth analyst call,” which is scheduled to take place on April 26th. It remains to be seen whether others will follow Occidental Petroleum in adopting this approach.
For more on the “fifth analyst call” concept, check out this entry by Karen Kane of Karen Kane Consulting on The Mentor Blog.
Understanding Matrixx Initiatives
In this podcast, my colleagues Erik Olson and Stephen Thau of Morrison & Foerster talk about the recent Supreme Court case, Matrixx Initiatives v. Siracusano:
– What is the background of the case?
– What was the Supreme Court’s holding?
– What does this mean for companies going forward?
At the “Dialogue with the Director” session at last week’s ABA Spring Meeting in Boston, Corp Fin Director Meredith Cross indicated that the Staff plans to withdraw Regulation S-K Compliance and Disclosure Interpretation Question 116.08, which was issued last month to say that Instruction 3 to Item 401(a) of Regulation S-K only applied in the case of proxy statements, such that Item 401(a) and Item 401(e) disclosures about a director whose term would not continue past the annual meeting would need to be provided directly in Part III of Form 10-K or incorporated by reference into Part III from the proxy statement in order to satisfy the Form 10-K disclosure requirements. Going forward, the Staff’s position will be that biographical information for a non-continuing director need not be included in a proxy statement incorporated by reference into Part III of Form 10-K (in reliance on Instruction 3 to Item 401(a)), however an issuer that is including the Part III information directly in the Form 10-K (and thus does not have the benefit of Instruction 3 to Item 401(a)) would have to include the Item 401(a) and (e) information about the non-continuing director in the Form 10-K. Revised Regulation S-K C&DIs are expected out soon.
FINRA to Re-propose Rules on Broker-Dealer Participation in Private Placements
Also at last week’s ABA Spring Meeting in Boston, FINRA representatives announced that the FINRA Board of Governors had approved a re-proposal of the recent proposal to expand Rule 5122 to govern all private placements in which a member firm participates. As this Morrison & Foerster memo notes:
The most critical proposed revisions for participation of broker-dealers in offerings of unaffiliated entities are:
– Eliminating the provision that 85% of the proceeds (i) be used for the business purposes disclosed in the offering document, and (ii) not be used to pay offering costs, commissions or other compensation to participating broker-dealers and their associated persons;
– Requiring disclosure of use of proceeds;
– Changing the date of filing of the private placement memorandum (“PPM”) to 15 days after either commencement or first offer (not first sale), in order to avoid affecting the capital formation process;
– Creating a new Rule 5123 to address participation of broker-dealers in offerings by unaffiliated entities, thereby leaving the provisions of current Rule 5122 in place (including the 85% use of proceeds provision) for participation in offerings by affiliated entities;
– Retaining the expanded definition of “participation” (from Rule 5110(f)(5)); and
– Possibly adding an exemption for M&A transactions.
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. 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. Here are some of the latest entries:
– More on “Are Auditors Becoming Irrelevant?”
– Enlightened Companies: Step Up and Co-opt the Fifth Analyst Call
-101 Suggestions for Corporate Law Students
– Study: The Latest IPO Trends
– A Governance Interview with Microsoft’s John Seethoff
Last week, the Supreme Court of Canada held a two-day hearing on the constitutionality of a federal Securities Act that was initially proposed back in May 2010. The Act would establish the Canadian Securities Regulatory Authority, which would oversee the regulation and enforcement of uniform federal securities laws in Canada. As anyone who has worked on a Canadian offering well knows, to this day Canada still works under a complex provincial system of securities regulation.
The Court of Appeals of both Alberta and Quebec ruled that the federal Securities Act was outside of the jurisdiction of the Canadian federal government, thus bumping the case up to the Supreme Court. Several provinces made submissions to oppose the legislation, including New Brunswick, Manitoba, British Columbia and Saskatchewan.
Following the hearings on April 13th and 14th, the Supreme Court reserved its decision. You can follow the proceedings on this Stikeman Elliott Canadian Securities Law Blog.
DOL OIG Issues Report on Proxy Voting by Pension Funds
The Office of Inspector General-Office of Audit of the U.S. Department of Labor recently issued its report entitled “Proxy-Voting May Not be Solely for the Economic Benefit of Retirement Plans,” which was prompted by continuing concerns about whether pension plans comply with the Employee Benefits Security Administration (EBSA) requirement that fiduciaries vote solely for the plan’s economic interests and that named fiduciaries periodically monitor proxy voting decisions made by third parties. This report follows a 2004 Government Accountability Office (GAO) study, which raised concerns about legal challenges created by ERISA and DOL statutory authority in ensuring that the requirement of “proxy-voting solely for economic interest” is carried out. Without adequate monitoring or enforcement of the proxy-voting requirements, the concern is that fiduciaries are using plan assets to support or pursue proxy proposals for personal, social, legislative, regulatory or public policy agendas which have no clear connection to increasing the value of investments for the benefit of plan participants.
The DOL OIG noted that the EBSA doesn’t have adequate assurances that fiduciaries or third parties voted proxies solely for the economic benefit of plans, and that the EBSA has dedicated few resources to the enforcement of the requirement. The report recommends that: (1) ERISA be amended to give the Secretary of Labor the authority to assess monetary penalties against fiduciaries that don’t comply with the proxy voting requirements; (2) the proxy-voting requirements be amended to require documented support for fiduciary monitoring of the economic benefit of voting decisions; and (3) the EBSA include proxy-vote monitoring in enforcement investigations. The Assistant Secretary for the EBSA did not agree to implement any of the OIG recommendations.
Mailed: March-April Issue of The Corporate Counsel
The March-April Issue of The Corporate Counsel includes pieces on:
– Today’s Marketplace for Securities of Pre-Public Companies
– Mary Schapiro’s April 6 Letter to Congress
– The Big Banks’ Loss Contingency Disclosure Approach–Will it Satisfy the SEC (and FASB)? – What if it Doesn’t?
– Capital Raising Methods Currently in Vogue–Chart
– Exhibit 5 Opinions in Shelfs–Staff Project
– Foreign Private Offering by U.S. Issuers?
– Backdating Stock Option Exercises–Mercury CFO’s Conviction
– Charter or Bylaw Forum Selection for Derivative Action
– A Few IFRS Convergence Thoughts from OCA Head
– Disclosure of Political Contributions
Act Now: Get this issue rushed to you by trying a No-Risk Trial today.
Last week, this WSJ article reported how Rep. Darrell Issa had sent this 17-page letter to the SEC on March 24th regarding small business capital formation, particularly in the pre-IPO context. That set off a barrage of news coverage. Last week, SEC Chair Schapiro responded with this 26-page letter, indicating that she has ordered a review of all the rules affecting capital formation for small companies and is reconsidering current restrictions on communications in IPOs. Learn more in the March-April issue of The Corporate Counsel that is being dropped in the mail today.
Small Company Capital Formation Act of 2011: Regulation A Revival?
On March 14th, Representative David Schweikert (R-AZ) introduced the Small Company Capital Formation Act of 2011 in the U.S. House of Representatives. The bill seeks to increase the offering threshold from $5 million to $50 million for public offerings of smaller companies exempt from registration under the Securities Act pursuant to Regulation A. The bill also will require the SEC to review the threshold every two years.
Activists Target Companies With Market Caps Over $50 Billion
From this memo by Marty Lipton of Wachtell Lipton:
In a speech to the Council of Institutional Investors last week, Nelson Peltz, one of the most successful of the activist investors, said the recent changes in corporate governance would enable him to make investments in the heretofore “untouchables”–companies with market capitalizations over $50 billion. Mr. Peltz noted that the new governance rules give activists more tools with which to pressure companies, noting that larger companies provide bigger profit opportunities than smaller companies.
Activist investors with significant records of success will be able to use the new governance rules to convince institutional investors, like the members of the Council of Institutional Investors, to join them in pressuring companies to change their business strategies to those advocated by the activists, whether or not they are in the best interests of the long-term success of the companies and their long-term investors.
There has been a notable increase in hostile takeover and activist investor activity this year. If the present favorable market conditions for this activity continue, there will be a further increase. There is also little doubt that Mr. Peltz’s prediction that the targets will be among the largest companies is also correct. All companies, even the very largest, should have up-to-date plans for dealing with activists and strategies to avoid inviting the notice of activists.
Heading Out for Spring Break!
I’m headed out for a week off – Spring Break ’11, doing the college campus tour thing with my oldest son. Reminds me of my youth, working in Fort Lauderdale for a spring break season after I graduated college. That’s back when Lauderdale was popular for spring break. Remember Spuds McKenzie?