Here are a few pics from the NIRI conference. This first one is a pic of a monitor set up in the hallway, which displayed graphics created by Marketwired of how many folks were tweeting at the conference during any given hour. Data visualization baby! A lot of people did tweet – sometimes at a clip of several hundred per hour. In fact, it was not uncommon to see folks holding up their phones and taking pictures of the panel or PowerPoint and then tweeting them. Never seen that before – but I joined the party and even took a pic of the audience and tweeted it while I was speaking:
Here is a cool give-away – Say-on-Pay T-shirt – from Laurel Hill:
The conference registration desk featured Randall, the Honey Badger. My wife said “we need that” but it wasn’t a give-away unfortunately:
In the exhibit hall, Wells Fargo went all out:
And the best for last, the after-party hosted by LiquidNet (invitation only – need a wristband):
From Lynn Turner: This is a fascinating – and startling – presentation made recently to students at the New School University in NY. Bevis Longstreth is a former SEC Commissioner, a successful investor, and former partner of Debevoise & Plimpton. The presentation notes that if current reserves of fossil fuels held on the balance sheets of oil, gas and mining companies are burned, the world simply cannot survive the global warming as we understand it today. Yet if those reserves are not allowed to be burned, the market capitalization of these companies – currently $4 trillion – will decline 40-60% with sharp losses to investors. It poses the question, what if anything, is the SEC doing to require disclosure to investors in this regard and proper reporting of such reserves?
This article from the Harvard Business Review is one of the best I have read on say-on-pay in terms of the “big picture”…
Google’s CEO & Disclosure of Health Issues
As noted in this Bloomberg article, Google recently revealed that its CEO Larry Page suffers from a health condition that can result in hoarse speech and labored breathing, though according to doctors won’t impede him from running the company. This disclosure was made through a blog posting. So far, I haven’t heard any complaints about Google’s disclosure (nor should there be IMHO) – unlike the fracas over the health of Apple’s Steve Jobs as noted in this blog.
Have trouble sleeping at night? According to this article, you are not alone. Bernie Madoff can’t sleep either…
Over on the “Mentor Blog,” I recently blogged about “New SEC Software Identifies Potential Fraud.” And I’ve been reading how the new SEC Chair is bringing in other prosecutors to work on the Staff (here’s the latest). So it was interesting to read this DealBook article – which first caught my eye due to its catchy title – about how Chair White intends to bring more financial fraud cases. Only 79 such cases were brought during the most recent fiscal year. Learn more in David Smyth’s blog.
From the Staff’s perspective, financial fraud cases are a real bear. They chew up a lot of resources and require special expertise as an accounting background is necessary for some members of the investigatory team. Unlike insider trader cases – which often can be a slam dunk – financial fraud cases typically take years to bring, rather than months. And since the SEC tends to be graded – by Congress and the media – by how many cases it brings, financial fraud cases are mainly a lot of risk and little reward for the agency. So it will be interesting to see if the SEC’s approach does change and how it goes about pulling it off…
The One Word That Shouldn’t Exist in an Entrepreneur’s Vocabulary
Speaking of lessons learned, this blog by Mark Suster in “Both Sides of the Table” is fantastic. Share it with your loved ones and colleagues. It’s all about “You don’t ask, you don’t get,” which might sound trite in isolation – but Mark is such a wonderful story teller that he brings the concept to life…
Rare Study: CEO Evaluations
In this podcast, Professor Dave Larcker discusses his new study – conducted jointly by the Center for Leadership Development and Research at Stanford Graduate School of Business, Stanford University’s Rock Center for Corporate Governance and The Miles Group – about the annual evaluations that boards give their CEOs, including:
– How hard was it to find information about CEO evaluations?
– What were the findings that didn’t surprise you?
– What were the most surprising findings?
– Why do you think boards are not pressuring CEOs to do a better job in mentoring talent?
1. Does your company require insiders to sell shares only pursuant to a Rule 10b5-1 trading plan?
– Yes, insiders are required to use Rule 10b5-1 plans in order to sell shares – 0%
– No, but they are strongly encouraged – 31%
– No, and they are not explicitly encouraged – 69%
– Not sure, it hasn’t come up – 0%
2. Does your company review and approve each insider’s Rule 10b5-1 trading plan?
– Yes, it is subject to prior review and approval by the company pursuant to the insider trading policy – 91%
n=2 (5.88%) Yes, but only the template plan is reviewed and not the actual trading schedule – 6%
– No, but we have a broker that we require to be used and have reviewed that brokers template – 0%
– No, and there is no requirement to go through a specific broker – 3%
3. Does your company allow sales of shares through Rule 10b5-1 trading plans during blackout periods?
– Yes – 91%
– No – 3%
– Not sure, it hasn’t come up – 6%
4. Does your company require a waiting period between execution of Rule 10b5-1 trading plans and time of first sale?
– Yes, it is a two week waiting period or less – 15%
– Yes, it is a one month waiting period (or close to it) – 44%
– Yes, it is a two month waiting period (or close to it) – 12%
– Yes, it is a waiting period until the next open window – 12%
– No – 18%
– Not sure, it hasn’t come up – 0%
5. Does your company allow insiders to voluntarily terminate a Rule 10b5-1 plan?
– Yes – 82%
– No, only terminations dictated by the trading plan are allowed – 18%
6. Does your company make public disclosure of the insiders’ Rule 10b5-1 trading plans?
– Yes, but only for directors and/or one or more officers – 15%
– Yes, for all directors and employees – 6%
– No – 79%
7. If your company makes public disclosure, how does it do it?
– Form 8-K – 50%
– Press release – 8%
– Website posting – 8%
– Combination of above – 8%
– Other – 25%
Relief Granted! Treasury Subsidiaries of Non-Financial Companies
Recently, I blogged about the dire need for relief from the CFTC over an unintended consequence of Dodd-Frank. Good news! In this no-action letter, the CFTC Staff granted that relief (learn more in this Davis Polk memo)…
Webcast: “Proxy Season Post-Mortem: The Latest Compensation Disclosures”
Tune in tomorrow for the CompensationStandards.com webcast – “Proxy Season Post-Mortem: The Latest Compensation Disclosures” – to hear Mark Borges of Compensia, Dave Lynn of CompensationStandards.com and Morrison & Foerster and Ron Mueller of Gibson Dunn analyze what was (and what was not) disclosed this proxy season.
Spanking brand new. Posted in our “Form 10-K” Practice Area, this comprehensive “Form 10-K Handbook” provides a heap of practical guidance about how to deal with Form 10-K. This one is a real gem – 41 pages of practical guidance.
The Dangers of Social Media: The SEC’s Enforcement Division Is Social Too
Here’s news from Vince Pisano of Xtract Research: Recently, the SEC commenced an action for insider trading against an investor in Thailand who purchased common stock, out of the money call options, and single stock futures on common stock of Smithfield Foods in the week before the announcement of its acquisition by Shuanghui International Holdings. The SEC alleged that the investor was tipped to an impending transaction by a Facebook friend, who was a former employee at the investor’s employer and is now employed by an investment bank that counseled a competing bidder. In eight days, the investor reaped unrealized gains of $3.2 million on an investment of approximately $2.7 million. The investor’s purchases of options and single stock futures were so large, they constituted almost the entire market. Perhaps he thought no one would notice.
Since the investor is said to be an employee of a plastics factory in Thailand, either additional persons will be soon be implicated or applications for jobs at Thailand plastics factories will soar. The regulators were obviously drawn to this investor by the size of his positions – but notably, the only connection to inside information alleged in the SEC’s complaint is to a Facebook friend. First emails and now social media sites. The SEC has computers and knows how to use them.
In this blog, David Smyth notes how quickly the SEC’s Enforcement staff brought this action – which involves the largest-ever acquisition of a U.S. company by a Chinese company…
Webcast: “A Proxy Season Post-Mortem: Lessons Learned”
Tune in tomorrow for the webcast – “A Proxy Season Post-Mortem: Lessons Learned“- to hear Ning Chiu of Davis Polk; Marty Dunn of O’Melveny & Myers; Keir Gumbs of Covington & Burling; and Dave Lynn of TheCorporateCounsel.net & Morrison & Forester analyze the latest developments that transpired during the proxy season.
There have been a dozen more failures during the past few days, including three more companies that have failed two years in a row – and two more have failed three years in a row! At three-peater Nabor Industries, two comp committee members failed to receive majority support and tendered their resignations, which were not accepted by the board – and as noted in this WSJ article, the company engaged in some shady vote counting on its proxy access proposal. Wow…
Here are the latest failures:
– Nabors Industries – Form 8-K (33%; also failed in 2012 with 25% and in 2011 with 42%)
– OpenTable – Form 8-K (47%)
– Big Lots – Form 8-K (31%; also failed in 2012 with 31%)
– East West Bancorp – Form 8-K (42%)
– Tutor Perini – Form 8-K (38%; a 3-peat with 38% in 2012, 49% in 2011)
– The Children’s Place Retail Stores – Form 8-K (17%)
– Gleacher & Company – Form 8-K (39%)
– Insite Vision – Form 8-K (38%; also failed in 2012 at 49%)
– Radioshack – Form 8-K (46%)
– Delcath Systems – Form 8-K (49% support)
– Equal Energy – Form 8-K (44% support)
– Healthways – Form 8-K (32% support; failed in 2012 with 33% support)
– Hercules Technology Growth Capital – Form 8-K (49%)
Thanks to Karla Bos of ING for the heads up on these! Also check out this Towers Watson article entitled “Smaller Companies Seeing More Say-on-Pay Failures.”
As the July 1st deadline approaches, advisers to companies, particularly outside legal counsel, and board compensation committees have been focusing on what it means to “provide advice” as contemplated by the Instruction to Rule 10C-1(b)(4). The Securities Law Committee of the Society of Corporate Secretaries and Governance Professionals reported in a Society Alert that this question was discussed recently at its regular meeting with the Staff of the SEC’s Division of Corporation Finance.
At this meeting, Tom Kim, the Division’s Chief Counsel, clarified an informal Staff response to a question raised at the beginning of the month on how to determine whether a company’s outside legal counsel (or other outside adviser) was indirectly “providing advice” to a compensation committee. He indicated that, while the question does not lend itself to a “bright line” test, in-house legal counsel should be in the best position to make the determination and control the vetting process. For example, if in-house legal counsel has a lawyer outside the door of the compensation committee meeting and goes out and gets advice and then comes back in and transmits that advice, then obviously that adviser should have been vetted. He called this the “ventriloquist” scenario.
On the other hand, if in-house legal counsel speaks to several outside legal counsel as a matter of course and then is in a compensation committee meeting giving advice based on what he or she has heard and formulated in his or her own mind, this situation would not require that these counsel be vetted.
For everything else – including the more realistic scenario of in-house legal counsel talking to one outside law firm on a regular basis – it is up to the company to use its judgment as to whether, based on the relevant facts and circumstances, a party is providing advice to the compensation committee and, thus, an independence assessment is required.
Transcript: “FCPA Issues in Deals Today”
We have posted the transcript for the DealLawyers.com webcast: “FCPA Issues in Deals Today.”
Last week, I was excited to see the SEC’s new Edgar search page, the first facelift for the page in a decade. For example, check out the beta view for company filings – here is Capital One as an example.
The display is much nicer than the old search tool. The upgrade begins to overcome one of my long-standing complaints – obscure nomenclature for the form names – since the form description is easily viewed (although there is still room for improvement, eg. a proxy statement is described as “Other definitive proxy statements” – and the form types still aren’t intuitive to a typical investor, eg. DEF 14A). Overall, the upgrade gets a “groovy” grade!
The new page’s tagline of “Free access to more than 20 million filings” reminds me of the old days of McDonald’s marketing campaign of “X million served“…
You Ever Wonder What Annual Shareholder Meetings Look Like?
In case you have never seen an annual shareholder meeting before, The National Center for Public Policy Research has posted videos for some of the 32 meetings this year that it has presented as a proponent. It also has posted press releases for each of those meetings, explaining what it’s activist position is for each company.
We continue to post 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:
– Big Banks Beat Back “Break ‘Em Up” Shareholder Proposals
– ISS, Notices of Exempt Solicitation and HP
– Proxy Season Preview: ESG Proposals
– Declassified Boards: Shareholder Rights Project’s Results for ’13
– Lead Directors: Limited to Serve Only At One Board In That Capacity
– Disney’s Proxy Access Shareholder Proposal Doesn’t Pass
My lessons learned from this case relate to the quite detailed description in the court opinion about the deliberations of whether Gary Prince should have been deemed a Section 16 officer by the law firm and the company. Starting at page 35 and going on for at least 8 pages is a description of the action taken by the law firm weighing in on whether disclosure was necessary. Scary for those of you in firms. Here’s a statement from Alan at the end of his blog that hammers this point home:
The decision also offers a lesson in communications between outside counsel and a corporate client and communications among law firm lawyers in developing their advice to a client. The court lays out a pattern of communications between Integral Systems and its outside counsel in which the company sought the firm’s concurrence that Prince was not an executive officer, but resolution of the issue was left unclear at best.
More on “SEC Extends Comment Period on Proxy Fees”
Recently, I blogged that the SEC has extended the comment period on the proxy fee proposal that has been outstanding for a while. The Society of Corporate Secretaries has posted this interview with Time Warner’s Paul Washington – who chaired the Proxy Fee Advisory Committee -, about what is at stake for companies in this proxy fee proposal. Paul is persuasive – particularly at the end – and it would be unfortunate if the fee proposal is turned down. There should at least be a clear and short timeline for getting a better structure approved.
Webcast: “Conflicts of Interest: How to Handle in Deals”
Tune in tomorrow for the DealLawyers.com webcast – “Conflicts of Interest: How to Handle in Deals” – to hear Steven Haas of Hunton & Williams, Mike Reilly of Potter Anderson and Melissa Sawyer of Sullivan & Cromwell discuss how boards deal with conflicts of interests in the wake of El Paso, Del Monte and Southern Peru, including in relation to stapled financing.
We have posted the transcript for our webcast: “Social Media: Parsing the Hypos.” Note that the number of companies announcing social media channels via Form 8-K has slowed to a trickle. Here’s our list.
Since Dell is going through a going private transaction that has hit some speed bumps – and its IR department maintains the only in-house IRO blog that I am aware of – I thought it would be interesting to see what the DellShares Blog says about the deal. Only a handful of entries devoted to the deal – but Dell has created a stand-along web page devoted to information about the deal process, which I learned of because of the blog…
I’m speaking at NIRI’s annual conference on a social media panel next week. It will be interesting to see how IROs view the latest development from the SEC compared to the lawyers. I’ll report back…
– Why are more E&S proposals being submitted?
– Any particular types the most common?
– Which investors are most interested in them?
– Any surprises this year compared to last year?
Study: Corporate Governance Practices & Trends for 3000 US Companies
Speaking of Kelly, she was part of the E&Y team that joined with the Society of Corporate Secretaries to produce this study on governance trends and practices at US companies, including a review of small- and mid-sized companies.
Cool Places: The Union League in Philly
Yesterday, I was at the Union League in Philly for a full-day meeting of the MidAtlantic Chapter of the Society of Corporate Secretaries. The Union League is one of those grand old buildings. Our conference was held in this room with old bookcases and a large statue of Abe Lincoln right in the middle of the wall, as you can see below. Very cool…
In this podcast, Jeff Mahoney, General Counsel of Council of Institutional Investors, discusses CII’s recent letters to the SEC in a push for rulemaking or interpretive guidance regarding Rule 10b5-1 plans (here is the May letter – and the December letter), including:
– Why did CII send in letters to the SEC about Rule 10b5-1 plans?
– What are you hearing from investors about possible Rule 10b5-1 plan abuses?
Unclaimed Property & Escheatment: Delaware
Here’s an interesting Forbes article entitled “Once A Friendly Locale To Business, The Modern State Of Delaware Is A Bully.” As noted in the memos in our “Escheatment” Practice Area, Delaware’s voluntary disclosure program ends at the end of June…
Our June Eminders is Posted!
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