TheCorporateCounsel.net

Yesterday, the Senate held a confirmation hearing on Jay Clayton’s nomination to serve as SEC Chair.  In his opening statement, Jay touched on some of his priorities – and improving the competitiveness of America’s capital markets is one of them:

For over 70 years, the U.S. capital markets have been the envy of the world. Our markets have allowed our businesses to grow and create jobs. Our markets have provided a broad cross-section of America the opportunity to invest in that growth, including through pension funds and other retirement assets. In recent years, our markets have faced growing competition from abroad. U.S. – listed IPOs by non-U.S. companies have slowed dramatically. More significantly, it is clear that our public capital markets are less attractive to business than in the past. As a result, investment opportunities for Main Street investors are more limited. Here, I see meaningful room for improvement.

He also expressed his commitment to “rooting out any fraud and shady practices in our financial system” – and pledged to show no favoritism to anyone.

This WSJ article on the hearing notes that Jay faced tough questions from Democratic Senators on potential conflicts of interest arising from his years in the trenches as a deal lawyer:

Mr. Clayton’s background as a top Wall Street lawyer at Sullivan & Cromwell was praised by many Republicans but attracted sharp questions from Sen. Elizabeth Warren and other Democrats. Ms. Warren said ethics restrictions would force Mr. Clayton to recuse himself on enforcement matters related to former clients, such as Goldman Sachs Group Inc. and Barclays PLC, as well as companies represented by his firm before the SEC.

In an ethics agreement with the SEC, Mr. Clayton wrote that he couldn’t vote for one year on matters that directly affect his former clients or involve Sullivan & Cromwell.

Ms. Warren said that could lead to a deadlocked commission on certain cases if the remaining commissioners are split along political lines. “Then major enforcement actions don’t go forward and serious wrongdoing may go unpunished,” she said.

Mr. Clayton denied that his recusal from a case would necessarily lead to a deadlocked commission and said most enforcement matters are decided unanimously by the commission.

Recusal issues could be important, given the existing vacancies at the SEC.  As Broc blogged earlier this month, President Obama’s two nominees are unlikely to be re-nominated – and that could leave the SEC with only 3 Commissioners for an indefinite period.

Study: Governance & Nominating Committees

This EY study reviewed Fortune 100 governance & nominating committee charters and governance guidelines to see how these committees define their responsibilities & carry out their role in board governance, board effectiveness, director selection and board succession planning.

Here’s an excerpt on the study’s findings about the committee’s role in board governance:

The role and profile of the nominating and governance committee have expanded in recent years with the continuing rise in corporate-investor engagement and growing awareness of the need to address governance-related risks.

– Governance policies and practices. The committee is explicitly responsible for the board’s and company’s governance guidelines and policies (100% of reviewed committees). In some cases, committee responsibilities may extend to maintaining the company charter, bylaws and policies on ethics and compliance matters.

– Shareholder proposals and engagement. 48% reference oversight of stakeholder focus areas, such as political spending and environmental sustainability.

– Risk management. 15% are specifically charged with oversight of the company’s reputation, as well as governance and nonfinancial risks, or have responsibilities regarding enterprise management risk, such as reviewing the company’s ERM process, business continuity plans, and strategy for workplace and product safety.

Tips for Managing Your “Quiet Period”

This Westwicke Partners blog provides tips to companies for effectively managing the quarterly “quiet period” – the period prior to the release of financial statements when public companies generally refrain from communicating with investors & analysts. Here’s an excerpt addressing the duration of the quiet period:

Be consistent about the duration. If you use a two-week quiet period during one quarter, try to stick to the same time frame in subsequent periods. It’s a lot easier to defend management silence in your conversations with investors if you can point to a history of similar quiet periods. Why? Investors may try to read into quiet periods of differing lengths and get nervous if the period is seemingly longer than usual. Don’t let your silence create a kind of static that outsiders perceive as meaningful on the downside.

Other topics addressed include the need to keep the IR team fully-informed about quiet periods to avoid inadvertent slip-ups, and managing those communications that must take place during the quiet period. Also see the oodles of resources in our “Window Period Procedures” Practice Area…

– John Jenkins