Monthly Archives: March 2017

March 17, 2017

Blockchain & Corporate Records: DGCL Amendments Would Open the Door

Posted in our “Blockchain” Practice Area, this Cooley memo notes that this year’s proposed DGCL amendments would grant statutory authority for the use of “blockchain” or “distributed ledger” technology for the administration of corporate records. Last year, Broc blogged about a possible move by Delaware in this direction.

Blockchain technology allows for the creation of an “open ledger” shared among a network of participants, instead of relying on a single, central ledger. Information is stored in “blocks” that record all network transactions and permit the ownership and existence of assets to be independently validated. Advocates of the technology see great potential for using it to address the shortcomings of the current stock transfer and record-keeping process.

The amendments would allow a Delaware corporation to rely on the contents of a distributed ledger as its stock ledger.  But the memo points out that the distributed ledger must meet several requirements:

As amended, Section 219(c) would define “stock ledger” to include “one or more records administered by or on behalf of the corporation.” As amended, Section 224 will provide that any records “administered by or on behalf of the corporation” may be “one or more distributed electronic networks or databases.”

Not just any ledger will suffice however. The amendments would require that the ledger:

– Be convertible into clearly legible paper form within a reasonable time;

– Be able to be used to prepare the list of stockholders specified in Section 219 as well as in Section 220, dealing with stockholder demands to inspect the corporations books and records;

– Records the information specified in Section 156 for consideration for partly paid shares, Section 159 for the transfer of shares for collateral security, Section 217(a) for pledged shares, and Section 218 for voting trusts; and

– Records transfers of stock as governed by Article 8 of the Delaware Uniform Commercial Code.

Board Trends: Directors are Older, But a Little More Diverse

This MoFo blog reviews a recent IRRC & ISS report on board refreshment trends at S&P 1500 companies.  Here are some of the highlights:

– Board tenure continues to rise, with average and median director tenures of 8.7 years & 7 years, respectively.
– Directors are getting older, with the average age of directors reaching 62.5 years 2016 – was the highest recorded during the study period.
– More than 50% of S&P 1500 added at least one new director to their boards in 2015. From 2012 to 2016, the prevalence of “zero change” boards steadily decreased.
– From 2008 to 2016, women and persons aged 50 to 59 years old made up the majority of the incoming class of “new” directors.
– Women are gradually gaining ground. Among S&P companies the number of female directors increased from 11.9% (in 2008) to 17.8% (in 2016). In 2008, 33% of all boards were all male—however, this number dropped to 13.8% in 2016.
– Minority representation remains low, with minority directors occupying slightly more than 10% of all board seats. Larger cap companies typically had at least one minority director, but smaller cap companies in the group typically did not.

Transcript: “Hot Tabulation Issues for Your Annual Meeting”

We have posted the transcript for the recent webcast: “Hot Tabulation Issues for Your Annual Meeting.”

John Jenkins

March 16, 2017

BlackRock: Boards Must Address Climate Change & Board Diversity

According to this Reuters article, the world’s largest asset manager has a message for boards – we expect you to act on climate change risk & gender diversity – and if you don’t, you may not be able to count on our vote.

BlackRock recently posted its 2017-2018 engagement priorities, and these issues are at the top of the list. When it comes to gender diversity, BlackRock’s clearly communicates its expectations – and the potential consequences for companies that disappoint them:

Over the coming year, we will engage companies to better understand their progress on improving gender balance in the boardroom. Diverse boards, including but not limited to diversity of expertise, experience, age, race and gender, make better decisions. If there is no progress within a reasonable time frame, we will hold nominating and/or governance committees accountable for an apparent lack of commitment to board effectiveness.

BlackRock’s message on climate change is equally forceful:

For directors of companies in sectors that are significantly exposed to climate risk, BlackRock expects the whole board to have demonstrable fluency in how climate risk affects the business and management’s approach to adapting and mitigating the risk. We have the same expectation of boards wherever a company faces a material, business-specific risk. We would assess this both through corporate disclosures and direct engagement with independent board members, if necessary.

BlackRock also makes a push for more and better disclosure of climate risks.  As with board diversity, BlackRock indicates that it will use its vote to pressure companies who lag on addressing & disclosing climate change issues – and may vote against the re-election of certain directors it deems most responsible for board process and risk oversight.

BlackRock’s emphasis on climate change engagement responds to a now withdrawn shareholder proposal calling upon it to “walk the walk” on climate change.  The proposal – which Broc blogged about last year – criticized BlackRock’s proxy voting record on climate change shareholder proposals & called on it to review its voting policies.

Activism: Has Chief Justice Strine Become “Wolfsbane”?

According to this CNBC article, Leo Strine – Delaware’s “secretly powerful” chief justice – says that hedge funds are “wolves” who damage ordinary investors. Here’s an excerpt:

Strine’s main argument is that the “current corporate governance system … gives the most voice and the most power to those whose perspectives and incentives are least aligned with that of ordinary Americans.”

That has allowed such investors to act and manipulate decisions by corporations that often are not in the long-term best interest of average shareholders, he said. He points to the “continuing creep toward direct stock market control of public corporations,” which he says bears no accountability toward human investors.

Strine’s ideas are laid out in an upcoming Yale Law Journal article, and are consistent with his prior writings expressing concern about whether financial intermediaries appropriately represent the interests of the people whose money they invest.

The Chief Justice’s hedge fund critics have responded to his most recent volley by saying that a justice should not be on the record “condemning a group of people who tend to litigate in his court and the lower Delaware courts,” and that he doesn’t offer much in terms of a fix for what he sees as a flawed system.  None of these critics would agree to be quoted – “fearing retribution from Strine.”

Strine doesn’t condemn all hedge funds – his argument is a little more nuanced than that, and focuses on the need to take consider the impact of short-term activist strategies on the lives of the human beings institutions purport to represent. He also speaks well of an alternative approach that at least one leading hedge fund has already adopted:

Evidence suggests that hedge fund activism is perhaps most valuable when it involves a somewhat rougher form of relationship investing of the kind for which Warren Buffet is known. The activist may need to knock a bit loudly, but once let in, assumes the duties and economic consequences of becoming a genuine fiduciary with duties to other stockholders and of holding its position for a period of five to ten years, during which it is a constructive participant in helping the rest of the board and management improve a lagging company. Nelson Peltz and his Trian Fund Management might be thought of in this manner.

Chief Justice Strine’s an intimidating guy – but he’s hardly the first Delaware judge to use his position as a “bully pulpit.”  Members of the Chancery Court have often written and spoken outside of the courtroom during their tenure – including current Vice Chancellor Travis Laster & former Chancellor William Allen.  That’s just how they roll in Delaware. Other litigants don’t appear to have been too daunted by the scholarship of these “secretly powerful” figures.

Whistleblowers: 9th Circuit Says Dodd-Frank Protects Internal Reporters

This Perkins Coie memo reviews the 9th Circuit’s recent decision in Somers v. Digital Realty – which held held that employees who report securities law violations internally, but not to the SEC, are still protected as “whistleblowers” under Dodd-Frank. The ruling aligns the 9th Circuit with the 2nd Circuit and against the 5th Circuit – and the split may be heading for the Supreme Court.

John Jenkins

March 15, 2017

Executive Order: Major Federal Agency Shake-Up on the Horizon

This blog from Steve Quinlivan flags a recent Executive Order that could result in a major shake-up among federal agencies.  Here’s an excerpt:

President Trump has issued an Executive Order directing the Director of the Office of Management and Budget (Director) to propose a plan to reorganize governmental functions and eliminate unnecessary agencies (as defined in section 551(1) of title 5, United States Code), components of agencies, and agency programs.

The Executive Order directs the head of each agency to submit to the Director a proposed plan to reorganize the agency, if appropriate, in order to improve the efficiency, effectiveness, and accountability of that agency. The submission must be made within 180 days of the date of the order.

The Executive Order contains a laundry list of factors to be considered by the Director in formulating a reorganization plan – including whether any agency functions would be better left to state or local governments or the private sector.  It also requires the OMB’s director to invite public comment on improvements in the organization and functioning of the executive branch, and to consider those comments when formulating the proposed reorganization plan required by the order.

SEC Enforcement: Budget Cuts Looming

Last month, the House Financial Services Committee delivered a sharp rebuke to the SEC’s preliminary budget request – & signaled that the SEC’s recent priorities don’t align with those of House Republicans. Here’s an excerpt from the Committee’s memorandum addressing the request:

The Committee remains concerned that despite receiving significant annual appropriations increases, the SEC has neither met statutory deadlines for the issuance of rulemakings nor significantly improved its annual examination rates for investment advisers. Instead, the SEC has prioritized other objectives that are not central to its mission. For example, the SEC has expended thousands of man-hours and tens of millions of dollars in pursuit of Dodd-Frank mandates unrelated to the causes of the financial crisis while its capital formation objectives languish.

What “other objectives” that the agency has prioritized are likely to be on the budgetary chopping block? Bloomberg reports that the SEC’s Division of Enforcement is front & center, and notes a recently-imposed travel ban is likely the tip of the iceberg:

The measure is part of a series of cuts that the enforcement department – the division responsible for policing federal securities laws – is implementing as it braces for deep spending reductions in President Donald Trump’s budget proposal, according to two people with knowledge of the matter. In addition to the ban on non-essential travel, the department has also imposed a hiring freeze and curbed the use of outside contractors who assist SEC lawyers with cases.

Also, based on the Committee’s reaction to its request, the SEC can forget about a new HQ building.

Cybersecurity: Director Liability for Data Breaches

This Bass Berry memo reviews case law dealing with the potential liability of directors for data breaches. As this excerpt notes, there’s good news & bad news:

As a rising number of companies experience data breaches, director liability lawsuits have inevitably followed. Thus far, however, these suits have been uniformly unsuccessful, failing to move past the motion to dismiss stage. In 2016, despite a continued reluctance on the part of courts to permit these cases to move forward, plaintiffs persisted in pursuing such claims.

Despite their lack of success, the memo speculates that plaintiffs will continue to pursue similar derivative litigation in the hope that they can identify the right legal theory – or the right set of facts.

John Jenkins

March 14, 2017

Snap: Overlooked Issues About Non-Voting Stock

Snap launched its highly anticipated IPO earlier this month.  The deal may be done, but questions about Snap’s no-vote stock remain.  This blog from Jim Moloney & company at Gibson Dunn points out that Snap’s capital structure raises some important issues that have escaped most people’s attention.  Here’s an excerpt:

The NYSE, NASDAQ, and other self-regulating organizations have rules requiring the submission of certain transactions to a shareholder vote, such as a change of control transactions or certain issuances of more than 19.9% of the Company’s outstanding shares. With most shareholders lacking any voting rights altogether, how Snap and other companies that may follow in their wake can cleanse such transactions via disinterested shareholder approval remains an open question.

Snap’s structure may also put it in a bit of a bind when it comes to the standard of review that courts will apply to major board decisions:

While the presence of non-voting shares does not itself preclude a review under the business judgment standard, it seems one practical effect of Snap’s voting structure is that it may serve to hamper the company’s ability to seek shareholder ratification from disinterested shareholders or other procedural safeguards (e.g., obtaining a “sterilized vote” – from a majority-of-the-minority) that could otherwise help shield the directors’ actions from heightened judicial scrutiny.

Snap: The Debate Over Voting Rights Continues

Meanwhile, the broader debate over Snap’s issuance of non-voting shares rages on. This Reuters article reports that Snap’s capital structure was a topic of discussion at a recent meeting of the SEC’s Investor Advisory Committee.  In addition, the IAC has asked the agency to look into whether the non-voting status of Snap’s shares will reduce “public disclosure on executive pay or governance matters.” (Actually, anticipated pay & governance disclosures are spelled out in detail in the “Risk Factors” section of the prospectus – see page 40.)

On the heels of the IAC’s actions, the Council of Institutional Investors is reportedly lobbying the major indices to exclude Snap, because “they’re tapping public markets but giving public shareholders no say.”

I just have one simple question –  “What did some of these institutions think they were buying?”  Sure, the investment decisions & voting decisions at most institutions come from different sides of the house, but that only goes so far.  The fact that many institutions were frothing at the mouth to buy non-voting shares from this company a couple of weeks ago really takes the wind out of the sails of their governance complaints.

Update: Several folks have pointed out that the CII is advocating on behalf of index funds. Those funds – unlike many of the institutions who bought in the deal – won’t have any choice but to buy the stock if Snap’s no-vote shares get included in a relevant index. That’s a fair point, and I shouldn’t have lumped them in with the others.

Conflict Minerals Case:  Final Judgment’s on the Way

Cooley’s Cydney Posner blogs that it’s time to say “so long” to the conflict minerals case:

The parties to the conflict minerals case have filed in the D.C. District Court a “Joint Status Report,” which requests that the Court enter a final judgment in accordance with the decision of the Court of Appeals. As a result, it will be case closed for National Association of Manufacturers v. SEC, which decided that the requirement in the conflict minerals rule to disclose whether companies’ products were “not found to be DRC conflict free” violated companies’ First Amendment rights.

Once the final judgment is in hand, the rule’s fate rests with the SEC.  Although the agency is reviewing the rule, for now, it’s business as usual in terms of annual conflict minerals disclosure requirements.

John Jenkins

March 13, 2017

Survey Results: Board Minutes & Auditors

Here are the results from a recent survey on board minutes & auditors:

1. When it comes to board minutes, our company:

– Provides copies of board minutes to auditors upon request in electronic form only –  48%
– Provides copies of board minutes to auditors upon request in paper form only – 7%
– Provides copies of board minutes to auditors upon request in electronic and paper form – 13%
– Doesn’t provide copies of board minutes to auditors – but we do allow inspection of minutes onsite –  31%
– Doesn’t provide copies of board minutes to auditors – nor do we allow inspection of minutes onsite  – 1%

2. Our auditors ask for copies or inspection of board minutes:

– Each quarter – 97%
– Once a year – 1%
– On irregular basis – 2%
– They never ask for board minutes – 0%

Please take a moment to participate anonymously in this “Quick Survey on Rule 10b5-1 Plan Practices” – and this ““Quick Survey on Codes of Conduct.”

Revenue Recognition: New Disclosures Will Be a Challenge

Speaking of auditors, Deloitte provides this heads up on the disclosure requirements associated with the implementation of FASB’s new revenue recognition standard.  For some companies, the new standard will require them to completely rework their income statements, but all companies will have to grapple with several new disclosure requirements:

The new standard will require entities to disclose much more information about revenue activities and related transactions than they do currently. Consequently, they will need time to implement and test appropriate processes, internal controls, and disclosure controls and procedures (including the identification of relevant personnel and information systems throughout the organization) for (1) data-gathering activities, (2) the identification of applicable disclosures on the basis of relevance and materiality, and (3) the preparation and review of disclosures, including the information that supports such disclosures.

Companies are going to need to be ready to address all of the new disclosure requirements in their first filing after implementation.  Deloitte predicts that things could get messy:

The requirement to consider disclosures as part of preparing quarterly or year-end financial statements most likely will significantly affect an entity’s ability to meet reporting deadlines that are already tight (particularly for SEC filings). In addition, an entity may be unable to obtain the information it needs to satisfy the disclosure requirements (e.g., because of problems related to the collection, preparation, or review of data needed for disclosures), which could result in late filings and the identification of deficiencies in internal controls (e.g., material weaknesses).

New disclosure requirements that may prove challenging to implement include those relating to performance obligations, judgments & estimates, contract balances, and disaggregation of revenues.

The Time May be Ripe for a Debt Buyback

This O’Melveny memo says that the current climate of market uncertainty & the potential for interest rate increases makes this a good time for issuers to think about repurchasing some outstanding debt. This excerpt summarizes the available alternatives for debt buybacks:

Cash repurchases of debt generally can be structured as open-market or private repurchases, cash tender offers, or redemptions pursuant to the contractual terms of the governing indenture. These methods vary in terms of implementation time, cost, and the portion of a given debt series that can be repurchased at one time. The scale of repurchases and the structure used may also depend on restrictive covenants in the company’s indentures and other agreements, as well as the availability of operating losses to offset any taxable gains resulting from the repurchases.

The memo reviews the mechanics of each alternative & addresses the disclosure and tax aspects of a debt repurchase.

John Jenkins

March 10, 2017

Senate Banking Committee Passes Capital-Raising Bills

Here’s the news from this WSJ article by Andrew Ackerman:

The Senate Banking Committee approved a series of modest, bipartisan bills aimed at making it easier for companies to grow and raise cash, the first legislation to move through the panel in the new Congress. Thursday’s bills, which the panel approved as a single package by voice vote, is significant because they are among the first of several deregulatory measures congressional Republicans are expected to advance this Congress.

The measures—most of which were introduced in prior years but failed to clear the Senate—are separate from broader efforts to rollback the 2010 Dodd-Frank financial overhaul which are expected to advance in the House but face an uncertain path in the Senate. The Trump administration, which has laid out plans to roll back Obama-era financial regulations, now appears to be more focused on other parts of its agenda, such as tax changes.

Banking Committee Chairman Mike Crapo (R., Idaho) on Thursday said he wanted to move ahead on bipartisan legislation that lawmakers had already developed in the prior Congress. His panel is working “to build the consensus” on broader changes to Dodd-Frank, though he acknowledged that work is more “contentious” and offered no timetable for such legislation. Only two Democrats, Massachusetts Sen. Elizabeth Warren and Rhode Island Sen. Jack Reed, voiced opposition to Thursday’s package of bills, with Ms. Warren saying she didn’t believe some of the measures had adequate investor protections.

One of the bills, authored by Sens. Pat Toomey (R., Pa.) and Mark Warner (D., Va.) would give privately held firms and startups greater flexibility in awarding stock to employees without triggering what critics say are overly intrusive reporting requirements. The legislation, endorsed by regional grocer Wegmans Food Markets Inc., would boost a $5 million cap in the amount of stock closely held companies can award employees before triggering certain disclosures the companies find meddlesome, such as cash flows and lists of shareholders’ ownership interests. The bill would increase the threshold to $10 million and peg it to inflation.

A second bill, introduced by Sens. Heidi Heitkamp (D., N.D.) and Dean Heller (R., Nev.), would raise to 250 from 100 the number of investors venture-capital funds can acquire before triggering SEC registration requirements. Another measure, also introduced by Mr. Heller, would credit stock exchanges for any fees they may have overpaid the Securities and Exchange Commission.

And a fourth bill, by Mr. Heller and Sen. Gary Peters (D., Mich.), would ease certain restrictions concerning the publication of research on exchange-traded funds. The House Financial Services Committee was expected to approve the same bill on Thursday. A fifth bill, sponsored by Sens. Robert Menendez (D., N.J.) and Orrin Hatch (R., Utah), would impose greater oversight on mutual funds based in, and sold to residents of, U.S. territories like Puerto Rico that have previously escaped SEC regulation.

Financial Choice Act: A Long Shot?

As I’ve blogged before, the “Financial Choice Act” is a House bill that would roll back much of Dodd-Frank (and more). Here’s an excerpt from this Bloomberg article:

Now, though, the drive to wipe out or scale back Dodd-Frank has lost momentum. Trump issued an executive order on Feb. 3 for Treasury Secretary Steven Mnuchin to review the law, but the president made no mention of it in his priority-setting speech to Congress on Feb. 28. As with the Republican vow to repeal Obamacare, the sticking point may be finding a replacement for the law on the books. “We need to regulate more simply, cut back on unintended consequences, and see if we can recalibrate this,” says Douglas Elliott, a partner at management consulting firm Oliver Wyman. “That happens to be an extremely hard thing to do.”

Hensarling does already have a bill in the House, the Financial Choice Act, that’s being given long odds. “We think the chances that the bill becomes law are less than 20 percent—maybe as low as 10 percent,” Brian Gardner, Washington analyst at the investment bank Keefe, Bruyette & Woods, wrote to clients on Feb. 16. Even so, the bill offers a glimpse into Republicans’ thinking on how to shape financial regulation.

Peirce, Fairfax Unlikely to Be Renominated as SEC Commissioners

Living inside the Beltway, you learn that being nominated for a high-ranking government job isn’t the same as obtaining that job. I know all sort of folks that were nominated – and then things got hung up in the Senate for months & years. It’s a brutal wait. All your friends – & work colleagues – presume you’re sliding into this nice new job. But then it never happens. The Twilight Zone. So I feel the pain of Hester Peirce and Lisa Fairfax.

Here’s an excerpt from this WSJ article by Dave Michaels:

Both Hester Peirce and Lisa Fairfax, who were nominated last year to fill two vacant slots at the SEC, rejoined an SEC advisory committee they had stepped away from after former President Barack Obama tapped them to join the agency as commissioners. Ms. Peirce, a Republican, and Ms. Fairfax, a Democrat, both won backing from the Senate Banking Committee last year, but their nominations stalled before they could win approval from the full Senate. In particular, both women faced opposition from Senate Democrats who wanted them to endorse a rule that would require public companies to report their political spending.

Their return to roles on the SEC’s Investor Advisory Committee signals neither Ms. Peirce nor Ms. Fairfax expects to be renominated. Staying away from the SEC advisory committee would be the safe move for a policy wonk or lawyer who expects to face another grilling from partisan senators. Instead, both are now free to make statements about policy that could come back to bite them if they were to face a new Senate hearing.

Broc Romanek – still employed (but the day is young)…

March 9, 2017

Beware of “Virus-Infected” Emails Purportedly From the SEC!!!

Whoa! Last week, a member received an email claiming to be from EDGAR/SEC that had an attachment for revised 10-K filing instructions. She forwarded the email to her IT department – & it turned out the attachment was a “very nasty piece of malware” that could have infected the entire company. It was a phished email that came from a SEC email address ( with a subject line of “Important changes to Form 10-K and Instructions.”

So beware! This is quite a tailored type of malicious email for an in-house lawyer to be receiving! Yesterday, the SEC posted a notice about this phishing scam – see this Fortune article

How Nasdaq Handles Its FAQs

Recently, a member asked how to best navigate “Nasdaq’s FAQs.” There is this “advanced search” function, which include both open-ended search boxes and topical categories in two drop-down boxes (ie. “Category” and “Sub-Category”).

Each FAQ has its own “Identification Number,” which is now prominently displayed at the end of the Search Results Bar. To search by these ID Numbers, select “Material with this Identification Number” from the Find drop down field. You can also choose to search by date to find what’s new. FAQs can also be shared through email by selecting the envelope icon (or Mailto Link) displayed on the bottom right of each FAQ. Other content in Nasdaq’s Reference Library can be searched in the same way.

Nasdaq also recently added a “Google Site” search function to its “Listing Center” that allows users to search all content available on the Listing Center – including the “Reference Library” – in one place.

Reform: More on the “Rule Reduction” Executive Order

Earlier this week, the White House’s Office of Information & Regulatory Affairs issued this memo to federal agencies, reminding them of their obligations set forth in this executive order – and requiring agencies to submit regulatory reduction plans by the end of this month. Although the executive order doesn’t apply to the SEC, the White House has made it clear that it expects independent agencies – like the SEC – to fall in line…

Meanwhile, as noted in this Bloomberg article, it appears that the SEC has imposed a hiring freeze & non-essential travel ban in anticipation of budget cuts…

Broc Romanek – still employed (but the day is young)…

March 8, 2017

HP’s Cool New “Annual Meeting” Webpage!

One of my favorite things is watching how companies continue to innovate & improve the usability of their disclosures. That’s why HP’s new “Annual Meeting” webpage got me smiling. Here’s 4 notable things right off the bat:

1. From this “Committees” page, each of the buttons will take you to an individual committee page – and there’s a video from a committee chair on each one of the pages.
2. Love this agenda page for the meeting.
3. The board page – “Meet your HP Board” – is fully interactive with skills & committees.
4. The PDF of the proxy statement is groovy too.

Hat tip to the HP crew – and their designers at Argyle – for going the extra mile! We have a host of related resources in our “Usable Disclosure” Practice Area – included video archives of an entire conference on the topic…

The “Embattled” CEO

Here’s an excerpt from this article from “The New Yorker”:

Business professors once talked about “the imperial C.E.O.,” but, increasingly, we’re in the era of what Marcel Kahan, a law professor at N.Y.U., calls “the embattled C.E.O.” He told me, “Big shareholders and boards of directors have more power, and are more willing to use it. And C.E.O.s have been the net losers.” The breakdown of the old order began more than thirty years ago, but things have accelerated since the turn of the century. The Sarbanes-Oxley Act, passed in 2002, required greater disclosure to investors, and increased the independence of corporate boards. “In the old days, boards were often loyal to the C.E.O.,” Charles Elson, a corporate-governance expert at the University of Delaware, told me. “Today, they’re more loyal to the company.” The rise of activist investors—who campaign aggressively for change when they’re not satisfied with performance—has exacerbated the trend. One study found that when activist investors succeed in winning seats on the board of directors the probability that the C.E.O. will be gone within a year doubles.

The information revolution has created other dangers for C.E.O.s. In the social-media era, damaging stories travel fast, and boards take public relations very seriously. P.R. disasters have sealed the fate of top executives at no fewer than five advertising companies this year. (The most notorious debacle was at Saatchi & Saatchi: the chairman resigned after telling a reporter that he didn’t think gender inequality in the industry was a problem.)

The predicament of modern C.E.O.s may seem surprising, given their prominence and lavish compensation. Top executives everywhere are paid more than they used to be, and the U.S. has led the way; American C.E.O.s earn, on average, two to four times as much as European ones and five times as much as Japanese ones. Yet it’s precisely these factors that make C.E.O.s vulnerable, because the expectations for their performance are higher. “If you’re paid tremendous amounts of money to make things go right, people naturally feel that you should be held accountable when things go wrong,” Elson says. In that sense, the increasing willingness of boards to fire the C.E.O. is actually the flip side of a fetishization of the position that began in the eighties. In Ralph Cordiner’s day (and in Japan maybe still), belief in a C.E.O.’s power to transform a company was limited. But today’s cult of the C.E.O. is founded on the belief that having the right person at the top is the key to success—from which it follows that a failing company should show its boss the door.

Transcript: “The Latest Developments – Your Upcoming Proxy Disclosures”

We have posted the transcript for the webcast: “The Latest Developments: Your Upcoming Proxy Disclosures.”

Broc Romanek – still employed (but the day is young)…

March 7, 2017

Alan Dye on “Fix-It” Shareholder Proposals

As I blogged a few weeks ago, “fix it” shareholder proposals are “hot” – & confusing. In this 17-minute podcast, Alan Dye discusses this type of shareholder proposal, including:

– What are “fix-it” shareholder proposals?
– How has Corp Fin processed no-action requests related to these proposals?
– Why are people so confused about why some no-action requests were granted – and some weren’t?

This podcast is also posted as part of my “Big Legal Minds” podcast series. Remember that these podcasts are also available on iTunes or Google Play (use the “My Podcasts” app on your iPhone and search for “Big Legal Minds”; you can subscribe to the feed so that any new podcast automatically downloads)…

blm logo

Broc Tales: The First Nine

Reg FD-style! Here are the first 9 stories that have run in my new “Broc Tales Blog”:

1. Why Hassle With Training All Employees (When Only a Few Really Need to Know)?
2. The Reg FD Disclosure Team
3. FD Policy Considerations: A Yawner for Some
4. What Good Is a FD Policy?
5. Regulation Fire Department?
6. It’s “Fair”; Not “Full” (& Other Confusions)
7. “Dude, You Wouldn’t Believe What Just Happened. Is That Normal?”
8. “Wanted: Reg FD Chaperone”
9. What (In The World) Am I Doing?

Check ’em out. If you like them, that’s great – insert your email address when you click the “Subscribe” link if you want these precious tales pushed out to you…

More on Our “Proxy Season Blog”

We continue to post new items regularly on our “Proxy Season Blog” for 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:

– CII: Notes from the Spring Meeting
– Shareholder Proposals: Proponent’s Obligation to Present Proposal at Meeting
– Proxy Access: Strange Schedule 14Ns
– The Annual “Warren Buffet” Letter
– Investors Tell Texas to Oppose Anti-LGBTQ Legislation

Broc Romanek – still employed (but the day is young)…

March 6, 2017

Survey Results: Management Representation Letters

Here’s the results from a recent survey on management representation letters:

1. Who signs your management representation letter:
– CEO – 85%
– CFO – 89%
– Controller – 63%
– General Counsel – 37%
– Corporate Counsel Who Heads Litigation- 0%
– Corporate Counsel Who Handles Corporate Governance & Securities – 0%

2. How many representations does your management representation letter have:
– Less than 10 – 12%
– 11-15 – 12%
– 16-20 – 8%
– More than 20 – 69%

Please take a moment to participate anonymously in this “Quick Survey on Board Minutes & Auditors” – and this “Quick Survey on Codes of Conduct.”

More on “Audit Response Letters:’s Centralization”

Here’s news from WilmerHale’s Alan Wilson:

As noted in this blog by Stan Keller, the Audit Responses Committee of the ABA’s Business Law Section has engaged in discussions with for a few years to avoid inconsistencies between their electronic audit request & delivery platform and the ABA’s “Statement of Policy Regarding Lawyers’ Responses to Auditors’ Requests for Information” (and to eliminate some of the issues in’s standard user agreement).

In late February, the Committee issued this statement that focuses on the development of on-line platforms for the electronic transmission of audit inquiry letters from clients to their counsel – and for counsel to transmit response letters to their clients’ auditors. The statement outlines several considerations for law firms evaluating whether to use such a platform. Firms should review the terms and conditions governing use of any such platform – as well as understand such platform’s functionality and any limits that might relate to their existing audit letter processes (e.g., delivery of audit inquiry letters to individual lawyers rather than a centralized inbox).

The Committee emphasized that each firm must make their own determination whether to use the or any other electronic audit letter platform. Law firms that have not received audit inquiry letters through the platform may want to reach out to in advance to discuss the platform and the firm’s preferences for receiving audit inquiry letters.

March-April Issue: Deal Lawyers Print Newsletter

This March-April issue of the Deal Lawyers print newsletter was just posted – & also mailed – and includes articles on (try a no-risk trial):

– The Corwin Effect: Stockholder Approval of M&A Transactions
– Disclosure in Appraisal Notices
– How to Deal with Equity Holdings During Spin-Offs
– Standards of Review: 2016 Delaware Decisions
– Special Supplement: Stock Options in M&A – Select 409A & Drafting Issues

Remember that – as a “thank you” to those that subscribe to both & our Deal Lawyers print newsletter – we are making all issues of the Deal Lawyers print newsletter available online. There is a big blue tab called “Back Issues” near the top of – 2nd from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.

And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers print newsletter, anyone who has access to will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers print newsletter including how to access the issues online.

Broc Romanek – still employed (but the day is young)…