Monthly Archives: July 2011

July 15, 2011

Final Tally of the Proxy Season: 40 Failed Say-on-Pay Votes

Last month, Premiere Global Services became the 40th company to file a Form 8-K reflecting a failure to get majority support for it’s say-on-pay agenda item (47%). A list of the Form 8-Ks of these companies is in’s “Say-on-Pay” Practice Area (bearing in mind that totals for three of these companies are somewhat in dispute). 40 failures is less than 2% of all companies that had say-on-pay on their ballot this season.

So what does this all mean? On the one hand, the relatively low percentage of companies failing has led commentators to label say-on-pay as insignificant as a force for needed change, such as this blog by Bob Monks and this one from Paul Hodgson. On the other hand, many corporate advisors are holding up this season’s results as evidence that more change in pay practices is not necessary.

My take is that it’s too early to tell what it means (including what level of “against” votes is a red flag that some pay practices are problematic – clearly, there are levels below a majority that should give boards pause). I believe this year was a test year as many institutional investors weren’t prepared for the massive undertaking that a true look at pay packages for their portfolio companies entails. In addition, we didn’t see much in the way of grass roots movements – surprising in this social media age. The potential for potent and inexpensive campaigning online against a company’s say-on-pay vote will continue to loom. Five years from now – particularly when say-on-pay then applies to the numerous small companies that have a temporary bye right now – we’ll have a better sense of what say-on-pay really means.

To be honest, 40 failures is many more than I expected. That should be clear from the poll I posted on this blog back in January asking y’all to guess how many failures there would be. In hindsight, the choices I offered in the poll revealed how low I thought the numbers would be. I offered choices of 0 failures (which garnered 1% of votes); 1-2 failures (1%); 3-4 failures (3%); 5-10 failures (18%); and More than 10 failures (75%). I should have broadened the choices – and I will next year.

I’m still mystified that most directors appeared to be unsupportive of say-of-pay before Dodd-Frank mandated it. So many of them are now resting easy, having shareholders bless their pay packages with flying colors. As I blogged a few years back, these boards now have a likely shield from liability and from reputational attack. I could always understand why board advisors didn’t like say-on-pay – it’s a lot more work with no additional resources during an already busy proxy season – but I never understood why directors would be against it. But maybe they saw those say-on-pay lawsuits coming…

CEOs: When Too Many Luxury Homes Becomes a Hassle

If you follow me on Twitter, you know I fell off my chair reading this recent article in “Chief Executive” magazine that essentially provides guidance for CEOs buying that 3rd or 4th luxury home. The CEO featured in the article is the head of a private family-owned company but it’s still quite a brazen piece of journalism.

For those that argue that all the corporate jet trips to these far-flung homes are somehow for business purposes, there is no hint of that in the piece. In fact, the CEO in the article complains that his second biggest problem is that he works too much to get to these extra residences (although the article notes he gets to Martha’s Vineyard every weekend in the summer). His biggest problem? “He owns too many homes, likening his passion for collecting top-tier getaways to the way other people collect paintings.”

The Latest Compensation Disclosures: A Proxy Season Post-Mortem

We have posted the transcript for our recent webcast: “The Latest Compensation Disclosures: A Proxy Season Post-Mortem.”

– Broc Romanek

July 14, 2011

The Financial Printer Diaries: Tales of an Era Gone By – Part 1

A few months ago, I blogged a “Farewell to Bowne” and posted a poll about “your favorite financial printer moment.” In response to the poll, 69% responded that free food was their favorite (no surprise!); 41% said tedious arguments over commas and periods; 19% said brushing up on proofing; 5% said good facetime with partners and 10% said sleeping in the bathroom.

In addition, I received many emails with specific memories, some of which are repeated below – please keep them coming and I will only blog them if you give me permission:

– My favorite memory is an experience done a hundred times melded into one memory: the clearing of the blue line, just before printing the final prospectus (you know, when nobody is left at the printer other than a couple of lawyers and accountants with sometimes a guest appearance by the junior analyst from the investment bank to make sure their name is spelled correctly on the cover of the 424). Ah, peace.

– My favorite story involves the hubris of a first-year associate from a large, very prestigious firm that shall go unnamed, in the early-ish days of constant cell phone use. This was about a decade ago, in mid-2000 or so, and it was dinnertime after the deal ended and I was having a brief meal before heading home, and he was having a few beers with a colleague before heading out, and we overheard him calling the front desk on his cellphone from the lunchroom and attempting to order a car, and totally confounding the front desk since he wasn’t walking a few doors down to ask for the car or calling on the printer’s phone, but using his cell phone. And he was a little tipsy. In the end, it devolved down to a “do you know who I am” moment on his part, after which he stated very loudly “I am a ____ associate”, as if it was time for whoever was on the other line at the front desk to bow down to him and call that car – fast. That was an iconic moment, a classic “I don’t want to be that entitled person” story.

– I spent many long hours at Bowne of Dallas, which had nice cushy chairs, a huge projection TV and free Pac Man and Ms Pac Man game tables (now that gives you the timeframe). Good BBQ for meals, too.

– I sure have a lot of good memories of lawyers, accountants and bankers working nights shoulder-to-shoulder at the printers in the ’70’s and 80’s. In Cleveland, our printer was originally known as The Judson Brooks Company, which was later acquired by Bowne. We all knew some of the owners and most of the staff like family. They had a couple of cots separated by curtains in the back where you could catch a few hours’ shut-eye before leaving for the dawn flight to DC with the SEC filing package. We did the red-lining on the plane. Many the nights I called my wife to let her know I would be working late and spending the night at “The Judson Hilton.”

– Going to the printer was one on the best things about being a securities lawyer. Unlike everyone else in the world, financial printers loved lawyers and would do most anything to make them happy. I love you.

More on “An Emerging Hot Topic? Whether to Disclose Voting Result Percentages”

Last year, I blogged about grumblings that the SEC’s adoption of the requirement of a Form 8-K to be filed to disclose voting results didn’t go far enough because it only requires the disclosure of somewhat meaningless raw voting data and not the percentages themselves. In that blog, I weighed in that perhaps the SEC’s omission was wise because there was so much confusion about how to count percentages.

Since then I have blogged about the troubles some companies (and their advisors) have had with figuring out how to determine whether an agenda item has passed. This obviously is not good and it’s only a matter of time before some of these close votes wind up in court. Care must be taken to complying with the complexity of laws involved. Now that the votes are more important than ever, it’s probably time for the SEC to tweak the Item 5.07 requirements and require a percentage, as this should help force companies into being more careful with their count. It is doable – see how IBM has done just that again this year in their Form 8-K

Deals: The Latest Delaware Developments

We have posted the transcript for the recent webcast: “Deals: The Latest Delaware Developments.”

– Broc Romanek

July 13, 2011

Welcome to Marty Dunn!

We are excited to announce that Marty Dunn has just come aboard as Editor of our print newsletter, The Corporate Counsel. Marty joins our esteemed team of Editors: David Lynn, Alan Dye and Mike Gettelman. As many of you know, Marty spent 20 years at the SEC, most recently as Deputy Director and former Acting Director of the Division of Corporation Finance; Marty is now a partner at O’Melveny & Myers. We are looking forward to Marty bringing a new dimension to each issue of The Corporate Counsel with his unique insider’s perspective and his ability to apply practical guidance to situations that you grapple with every day.

Marty worked on the May-June issue of The Corporate Counsel that was just mailed. This issue analyzes these topics:

– Reaching Out for Say-on-Pay Approval: Additional Soliciting Material this Proxy Season
– Reporting Shareholder Meeting Voting Results – Form 10-Q/K Reporting
– Phrasing Management’s Say-on-Pay Proposal on the Proxy Card
– Shareholder’s Withdrawal of 14a-8 Proposal After Proxy Statement is Mailed – Impacts?
– Beware of HSR Filing Requirements That Can Apply to Equity Compensation of Executives
– More on Choice of Forum – Shareholder Approval
– Former Director Disclosure in the 10-K?
– Eliminating a Form 11-K Obligation
– Legislative Action on Exchange Act Registration Thresholds
– More Legislative Action – Regulation A+?

Act Now: Get the “Rest of 2011 for Free” when you try a ’12 No-Risk Trial now.

ISS’s 2011-2012 Policy Survey

Perhaps a little earlier than in prior years, ISS recently released its 2011-2012 Policy Survey. Responses and comments are due by August 3rd. Although it’s only a survey, the questions, responses and comments serve as the basis for ISS’s policy formulation process. As noted by an anonymous inhouse member yesterday on our “Proxy Season Blog, ” some companies are looking at this survey closely – and it’s likely that more will be submitting comments compared to prior years due to say-on-pay and a greater interest in providing input these days…

Webcast: “Key Disclosure Policies: The Dangers of Standing Pat”

Tune in tomorrow for the webcast – “Key Disclosure Policies: The Dangers of Standing Pat” – to hear Stacey Gear of Primerica, Isobel Jones of Del Monte Foods, Dave Lynn of and Morrison & Foerster, Jane Whitt Sellers of McGuireWoods and Bill Tolbert of Jenner & Block provide practical guidance about revisiting your corporate disclosure policies as well as your disclosure training program for officers, employees and directors.

– Broc Romanek

July 12, 2011

The 8th Say-on-Pay Lawsuit

Last week, the 7th company that failed to garner majority support for their say-on-pay was sued – Cincinnati Bell in a federal district court in Ohio (here’s the complaint). For reasons I’m not sure of myself, I count this as the 8th say-on-pay related lawsuit even though this one didn’t involved a failed SOP. We continue to post pleadings from these cases in’s “Say-on-Pay” Practice Area.

SEC Filings: What is the Difference Between a “Schedule” and a “Form”?

As noted in this article, Warren Buffett recently filed his latest Form 13F to disclose his latest portfolio holdings and the Form notes that some information has been omitted since its confidential. This 1998 form letter from the SEC gives some indication of the standards required for 13F filers to receive confidential treatment.

I know these Form 13F filings are closely followed by some investors, particularly those filed by Warren’s Berkshire Hathaway. But for me, it raised this esoteric securities law question in my mind: Why does the SEC call some of its forms a “Form” and others a “Schedule”?

It seems odd that investment managers are required to file a “Form 13-F” and not a “Schedule 13-F” – particularly since Schedules 13D and13G are required to be filed by shareholders once they cross a certain percentage of ownership in a company. All of these filings are made by shareholders to report holdings – why don’t their filings have the same “label”?

I don’t know the answer. At first, I thought that the difference would be based on the language used in the statute that creates the obligation. That could be the distinction, but I’m not sure. Looking at Section 13(f)(1) of the ’34 Act, the SEC has been delegated to create a Form 13-F filing obligation under this language: “…shall file reports with the Commission in such form…” In comparison, Section 13(d)(1) and Section 13(g)(1) creates the filing obligation of a “statement.”

So although there is no mention of “Form” or “Schedule” in the statute, a distinction may exist because the statute requires that a “report” be filed under 13(f) – and that a “statement” be filed under 13(d) and (g). If someone out there knows if this is a distinction that matters, please fill me in. I struck out with my research (even Louie Loss) and asking old-time’ish colleagues. Maybe the difference comes down to some sort of authority or Administrative Procedures Act king of thing? Dunno.

From the perspective of the SEC’s rulemaking process, I understand that the main difference between a Form and a Schedule is that a Schedule is usually codified as part of the Code of Federal Regulations – whereas with a Form, only the description is codified as part of the CFR (as the Form is maintained separately and doesn’t appear in the CFR). That’s a nice tidbit but it still doesn’t explain how we got here in the first place. Not that this difference matters one iota in real life but it seems like good food for thought for securities law purists…

Webcast: “Understanding the Private Company Trading Markets”

Tune in tomorrow for the webcast – “Understanding the Private Company Trading Markets” – to hear Annemarie Tierney of SecondMarket, Dave Lynn of and Morrison & Foerster, Sharon Hendricks of Gunderson Dettmer and Kim Kovacs of OptionEase discuss the current environment for secondary sales in private companies like Facebook, and what policies and record-keeping procedures companies considering these programs should adopt to ensure compliance with the securities laws.

One of the most interest things going on (besides the liquidity aspect of all this and the related impact on equity compensation) is the emergence of new businesses building on top of the secondary trading markets. For example, there are equity research firms who are commencing research on private companies – and data companies who are mining through Delaware filings to reverse engineer private companies’ cap structures. This is a fundamental shift in the world in which private companies operate, including their expectations of confidentiality. There are also endless technical issues beyond the obvious ones, including how these new markets affect the various definitions of “public trading market” used under tax and securities laws (280G, 409A, Reg S) and how this can impact private company valuations. Tune in to learn more…

– Broc Romanek

July 11, 2011

Corp Fin Issues 8 New CDIs and a WKSI Waiver Statement

On Friday, Corp Fin issued 8 new Compliance & Disclosure Interpretations (and withdrew one), as well as issued this statement that provides a framework about how WKSIs can seek waivers of ineligible issuer status (three new no-action letters were recently decided under this framework). The new CDIs are:

Section 107. Form 12b-25 – New Question 107.02
Section 121A. Item 5.07 of Form 8-K – New Question 121A.03
Section 121A. Item 5.07 of Form 8-K – New Question 121A.04
Section 116. Item 401 of Reg S-K – New Question 116.10
Section 117. Item 402(a) of Reg S-K – New Question 117.07
Section 118. Item 402(b) of Reg S-K – New Question 118.08
Section 119. Item 402(c) of Reg S-K – New Question 119.28
Section 108. CD&A – New Question 108.01

In her “100 F Street Blog,” Vanessa Schoenthaler briefly describes these new CDIs. And in the May-June issue of The Corporate Counsel that was mailed last week, some of these new positions are analyzed more fully – get the “Rest of 2011 for Free” when you try a ’12 No-Risk Trial now.

Kudos to FINRA for Strengthening Revolving Door Rules

From Suzanne Rothwell: Recently, FINRA submitted a rule filing to the SEC that amends its Code of Procedure to prohibit a former officer of FINRA for a period of one year after termination of FINRA employment from appearing on behalf of a client before any FINRA hearing related forum or testifying as an expert witness in a FINRA forum.

FINRA asked that the filing be treated as immediately effective and, therefore, the new requirements are already effective although not yet published by the SEC. This is continued progress in enhancing the ethical standards for attorneys serving as officers of FINRA and helps to avoid any untoward appearance of wrongdoing or undue influence by a former attorney officer. FINRA points out in its rule filing that the ABA’s Model Rules of Professional Conduct includes provisions that would prevent a lawyer who has represented FINRA in an case from subsequently representing the respondent in the case.

Webcast: “Top IP Pitfalls in Deals: How to Avoid Them”

Tune in tomorrow for the webcast – “Top IP Pitfalls in Deals: How to Avoid Them” – to hear Karen Butcher of Morgan Lewis, Jose Estevez of Skadden Arps and Ryan Schneider of Troutman Sanders to hear the latest regarding how to spot and resolve intellectual property issues when doing a deal.

– Broc Romanek

July 8, 2011

Social Media, Social Media, Social Media

For those not enamoured with social media, you probably are sick of hearing the phrase. But it’s something that really is here to stay – President Obama’s Twitter Town Meeting this week should seal the deal if there were any doubters about Twitter’s staying power – and it will continue to dramatically upend how we share information. Developments are happening so fast that I could devote this daily blog solely to the topic – but I will limit myself to occasional bouts of social medianess instead. Here are a handful of interesting blogs that you should check out:

Dominic Jone’s “Stats show PR wires less effective than company web channels”

Reuter’s “Morgan Stanley OKs Broker Use of Social Media”

Q4’s “PGi’s iMeet Platform Enables More Personal and Engaging Conversations With Investors

PGI’s “Getting Social with Investor Relations”

“Jive Talking”: More Dancing Videos!

Following up on the videos that I recently posted in this blog, here’s the Minneapolis chapter of the Society of Corporate Secretaries doing some “jive talking” after I did a panel regarding the proxy season followed by a standalone presentation on social media (thanks to Marty Rosenbaum for blogging about my appearance). These Minneapolis folks can really boogie:

And here is a video from the Society’s Annual Conference held in Colorado a few weeks ago during the plenary session:

And I would be remiss if I didn’t share this picture of me with my good friend Neal Smith of CSC in his snazzy jacket during the Conference’s opening reception:

neal 2.JPG

– Broc Romanek

July 7, 2011

Shareholder Proposals: The Rise of Rebuttals to Company’s Statements in Opposition

Until this year, I think it was fairly rare that a shareholder proponent would bother to file something with the SEC to disagree with a company’s Statement in Opposition to the shareholder proposal. These Statements in Opposition are disclosed in a company’s proxy statement directly after the 500-word-or-less proposal and are governed by Rule 14a-8(m).

Under that rule, the company must provide a copy of its Statement at least 30 calendar days before definitive proxy materials are filed (or a 5-day timeframe if the SEC Staff requires the proponent to revise its own proposal under a no-action response). Once a proponent sees the company’s Statement, it can contest what it says if it feels its materially false and misleading with the SEC Staff.

In the alternative, the proponent can just “go public” with how it feels about the company’s Statement if it first files a Notice of Exempt Solicitation under Rule 14a-6(g) – the information in this Notice can then serve as the proponent’s formal rebuttal (technically, the proponent doesn’t have to file this Notice unless they cross the $5 million ownership threshold of Rule14a-6(g). For the larger institutions, you can assume that to be the case, but necessarily for the smaller ones – thus, not all of these responses get filed with the SEC).

With the ability for proponents to easily publicize their views on the Web, it seems that proponents are now more willing to publicize their displeasure about how a company comments on their proposal by filing a Notice of Exempt Solicitation with the SEC rather than just complaining to the Corp Fin Staff. For example, As You Sow filed this Notice of Exempt Solicitation recently relating to a fracking proposal submitted to Exxon Mobil. And here’s another one filed by As You Sow rebutting First Energy’s Statement in Opposition. And here is one from the Detroit Province of the Society of Jesus sent to OM Group. Hat tip to Simon Billenness for pointing this trend out and Keir Gumbs for being the legal beagle!

Study: A Ten-Year Comparison of Restatements

In a recent study, Audit Analytics looked back over ten years of restatements and, among other things, found the following:

– The quantity of restatement and non-reliance disclosures peaked in 2006 with 1795 disclosures.

– Each of the three years thereafter experienced a decline in the number of disclosures with 683 restatements in 2009.

– After three years of decline, financial restatements experienced an uptick in quantity in 2010, largely due to non-accelerated filers, but the severity remained low.

– In 2010, the number of restatements disclosed by accelerated filers decreased.

We have posted the study in our “Restatements” Practice Area.

Managing Foreign Subsidiaries

In this podcast, Kevin Penzien of Citco Corporate Services explains how companies manage the complexities of multiple foreign subsidiaries, including:

– Why should foreign subsidiaries be a priority for the corporate secretary? Don’t they have bigger fish to fry?
– Why not just hire local outside counsel to assist with foreign subsidiaries?
– Which foreign markets are particularly hot among your clients? And which jurisdictions are most difficult for US multinationals to manage legal entities?
– What are the typical foreign subsidiary implications in M&A transactions?

– Broc Romanek

July 6, 2011

Broadridge’s ’11 Proxy Season Statistics

Always interesting, Broadridge has released its annual report regarding how the proxy season fared from its unique perspective. Here are a few gems I pulled from the report:

– 362 billion shares were processed this proxy season, a 12 billion shares increase over last season.

– Number of shares voted increased by over 8 billion shares – 94.7% of shares voted were done so electronically.

– Percentage of shares voted edged up, primarily due to increased use of ProxyEdge (83.6% of all shares voted through Broadridge) and continuing increase in Internet voting.

– Quorum increased to 83.5% from 83.4%, on average.

– 100,000 shareholders used mobile phone voting, with 30% of those voting for the 1st time.

Here are Broadridge’s e-proxy stats as of the end of 2010 – and here is a report with the proxy season stats for ’08-10.

How to Handle XBRL’s Last Phase-In

With mandatory XBRL now in effect for all companies, there is a bit of a whirlwind of folks asking questions regarding XBRL. Jill Radloff has two useful blogs – “Correcting Errors in XBRL Filings” and “XBRL Grace Periods” – and I also recommend the resources in our “XBRL” Practice Area.

In this podcast, Dan Roberts of raas-XBRL analyzes Year 3 implementation issues related to the SEC’s phase-in of mandatory XBRL, including:

– What phase of XBRL recently took effect?
– What implementation issues are smaller companies facing now?
– What can smaller companies do to overcome these issues?
– How does raas-XBRL help clients overcome these issues?

Dodd-Frank: 4th Rulemaking Progress Report

Here is the 4th progress report from Davis Polk regarding all of the various agencies engaged in Dodd-Frank rulemaking.

– Broc Romanek

July 5, 2011

Corp Fin Updates Financial Reporting Manual (Again)

On Friday, Corp Fin updated its Financial Reporting Manual for issues related to subsidiary guarantor financial statements, ICFR reporting requirements for newly public companies, reporting requirements in a reverse recapitalization, as well as other changes. The good news is that Corp Fin has added a new summary of changes that comprise the current update at the beginning of the Manual. Last revised in April (and December and October before that), Corp Fin has been updating the Manual much more frequently than in the past, deciding to do so a little bit at a time rather than major rewrites as in the past.

SEC Announces IFRS Roundtable’s Agenda

The SEC has announced the panelists and agenda for its IFRS Roundtable to be held this Thursday, July 7th.

Last week, the SEC delegated authority to the Enforcement Director to disclose information that could reasonably be expected to reveal a whistleblower’s identity if the disclosure wouldn’t result in a loss of confidentiality.

Our July Eminders is Posted!

We have posted the July issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

– Broc Romanek