A few days ago, Corp Fin issued Staff Legal Bulletin No. 14I – it’s first SLB on shareholder proposals in two years. And it’s a big one. As CII notes, the SLB creates a path for companies to omit proposals by presenting a “well-developed” description to the Corp Fin Staff of the board’s analysis of the issue raised by the proposal & the issue’s significance to the company – and the SLB places a greater expectation on proponents to tie social or ethical issues to a significant effect on the company’s business.
Here’s a summary of the four main items in the SLB from the Stinson Leonard Street blog:
– Deference to company analyses of significant policy issues under the Rule 14a-8(i)(7)’s “ordinary business” exclusion basis
– Expansion of the “economic relevance” exception under Rule 14a-8(i)(5)
– Additional eligibility requirements for proposals “by proxy” under Rule 14a-8(b)
– Application of Rule 14a-8(d) to the use of images in shareholder proposals & supporting statements and encouraged reliance on Rule 14a-8(i)(3)’s “false and misleading” standard for exclusion
In her Davis Polk blog, Ning Chiu does a good job of identifying the open issues relating to how companies might be able to create the board’s analysis over significant policy issues under (i)(7). More on this SLB soon…
“NASDAQ” v. “Nasdaq”? Branding 101
As Steve Quinlivan noted in this blog, Nasdaq has filed an immediately effective rule change with the SEC to reflect a corporate branding change to Nasdaq’s name. If you read through our stuff – including our fabulous “Nasdaq Listing Standards Handbook” – you’ll see that we have never used “all caps” for Nasdaq. It ain’t Plain English. I’ll use all caps for acronyms – like the “SEC” – but I won’t use all caps otherwise. It’s bad branding…
The irony is that Nasdaq didn’t use all caps long ago – but then changed it to “NASDAQ.” I think it was originally all caps, as it was an acronym for National Association of Securities Dealers Automated Quotations. So it went from upper case to lower case to upper case and now again lower case…
Our New “Deal U. Workshop” Is On!
Our new “Deal U. Workshop” is the perfect way to train those less-experienced in working with M&A. Each attendee receives these three critical – and practical – resources:
1. Deal U. Podcasts – Access to nearly 60 podcasts about M&A activities – tailored to those new to this area. Each podcast ranges between 5-10 minutes – for a total of 7 hours in content. Here’s a list of the podcast topics.
2. Deal U. Situational Scenarios – Our 30+ situational scenarios – with detailed analyses – will help you fully comprehend many different aspects of deal practice.
3. “Deal Tales” Paperbacks – A Three Volume Set – Education by entertainment! This series of three paperback books teaches the kind of things that you won’t learn at conferences, nor in treatises or firm memos. With the set containing over 600 pages, John Jenkins – a 30-year vet of the deal world – brings his humorous M&A stories to bear.
This is a great way to outsource your training – our resources are practical (and entertaining at the same time). Call Albert Chen at 512.960.4823 for a flat firmwide or sliding scale rate – or register now for a single user.
– Broc Romanek
If you weren’t paid to read a proxy statement, would you ever think about looking at anything other than the summary comp table? I know I wouldn’t – it’s just human nature to have a prurient interest in this kind of stuff. Maybe the Wu-Tang Clan put it best:
Cash Rules Everything Around Me
C.R.E.A.M. get the money
dolla dolla bill y’all. . .
Anyway, because they know that we’re dying to know, Equilar just issued a new study on General Counsel pay at 1,100 public companies. As with previous Equilar GC pay studies, this one isn’t publicly available, but here’s Equilar’s press release summarizing it. Here are the key findings:
– How Much – The median total compensation for General Counsels, broken out by revenue range was:
o Under $1 Billion: $918k
o $1 Billion to $5 Billion: $1.5 million
o $5 Billion to $15 Billion: $2.4 million
o Over $15 Billion: $3.8 million
– Equity Awards are a Big Part of Comp – Equity awards represented about 1/2 of total compensation at the smallest companies in the study, and nearly 2/3rds at the largest. However, it’s good to be at the top of the pyramid – GCs at the largest companies were awarded more than 7x the amount in stock value as those who worked for companies with less than $1 billion in revenue.
– Pay Increases – Overall, GC pay rose 4% last year. The big winners were GCs of companies in the $1-5 billion range – they saw their comp increase by an average of 8.1%. Their counterparts at companies in the $5-15 billion range saw pay climb 3.3%, while those at the smallest companies surveyed received a 6.6% bump. GCs at the largest companies fared the worst – experiencing a decrease of 0.6% in compensation.
For data on broader in-house comp trends, check out this BarkerGilmore study. It covers both private & public companies and addresses comp trends for the GC, managing counsel and senior counsel.
Securities Fraud: Do Not Disrespect the Wu-Tang Clan
So, “Harper’s” magazine published the transcripts of the jury selection in Martin Shkreli’s securities fraud case. Among his other antics, Shkreli purchased the only copy of Wu-Tang Clan’s “Once Upon a Time in Shaolin” album for $2 million – and then contrived to manufacture a bizarre & convoluted beef with the Clan.
The transcripts reveal that these shenanigans didn’t sit too well with Juror #59:
Juror #59: Your Honor, totally he is guilty and in no way can I let him slide out of anything because…
The Court: Okay. Is that your attitude toward anyone charged with a crime who has not been proven guilty?
Juror #59: It’s my attitude toward his entire demeanor, what he has done to people.
The Court: All right. We are going to excuse you, sir.
Juror #59: And he disrespected the Wu-Tang Clan.
Future defendants are on notice – do not disrespect the Wu-Tang Clan.
Our New Practice Area: “Wu-Tang Clan”
As we’ve shown with our recent blogs on ICOs, blockchain & cryptocurrencies, we strive to keep up with the latest developments on the securities law and capital markets front. Along those lines, there’s an emerging player on the scene that we think merits its own practice area.
If you’ve been playing along with the home version of our game today, then by now you know that I’m talking about the Wu-Tang Clan.
Scoff if you want, but shortly after the Clan’s pivotal role in Martin Shkreli’s fraud trial, a “Wu-Tang Coin” ICO was launched with the stated purpose of purchasing the band’s “Once Upon a Time in Shaolin” album from Shkreli & releasing it to the public.
As if that weren’t enough, now “Rolling Stone” reports that band member Ghostface Killah has himself jumped in to the world of crypto-finance:
Ghostface Killah has cofounded a cryptocurrency company called Cream Capital, CNBC reports. The company is looking to raise $30 million during its initial coin offering (ICO).
Cream Capital takes its name from Wu-Tang Clan’s 1993 classic song “C.R.E.A.M.,” which stands for “Cash rules everything around me.” In the case of the company, Cream Capital Chief Executive Brett Westbrook told CNBC it has been granted the trademark for Crypto Rules Everything Around Me.
The ICO “Cream Dividend” tokens will be sold in November, which can then be exchanged for Ether. Ether is the value token of the Ethereum blockchain.
And so, we proudly introduce the “Wu-Tang Clan” Practice Area. Check it out!
When it comes to acknowledging the Wu-Tang Clan’s prominence in finance & the capital markets, we concede that we’re a distant second to Dave Chappelle, whose classic “Wu-Tang Financial” sketch saw it all coming several years ago. No, I’m not going to link to it – the language is NSFW – but do yourself a favor and check it out on your own time.
– John Jenkins
If you put up a statue called “Fearless Girl” that’s intended to point a finger at Wall Street’s lack of gender diversity, you shouldn’t be surprised if people ask whether you’re “walking the walk.” That’s the position State Street finds itself in – and according to this recent Guardian article, it hasn’t lived up to its rhetoric:
As selfies with Fearless Girl shot across social media, State Street, one of America’s leading money managers, was quietly and consistently voting down gender equality proposals at some of the country’s largest corporations.
On a shareholder proposal calling for Alphabet, Google’s parent company, to disclose any pay disparities between men and women, State Street voted no. On the same proposal before Wells Fargo, State Street voted no.
According to SEC records seen by the Guardian, in 2017 alone State Street rejected shareholder proposals to tackle gender inequality at least a dozen times – including at Aetna, American Express, Bank of America, Express Scripts, JP Morgan Chase and MasterCard.
In State Street’s defense, when it announced its gender diversity initiative, it focused on diversity at the board level & said that it would give portfolio companies a year to get their acts together. So, State Street’s efforts are still a work in process – but the media’s decision to scrutinize its voting record on gender diversity shouldn’t come as a shock.
SEC Staff Comments: 2017 Trends
This EY memo surveys trends in Corp Fin comment letters during the year ended June 30, 2017. As this excerpt suggests, there aren’t a lot surprises when it comes to areas of the Staff’s focus:
– Non-GAAP financial measures topped our list of the most frequent topics in SEC staff comment letters for the year ended 30 June 2017.
– Emerging topics of SEC staff focus include how companies are applying the new revenue recognition standard as well as what they are disclosing about cyber risks and cyber incidents.
– The SEC staff also frequently comments on management’s discussion and analysis, segment reporting and income taxes.
The memo also shares some thoughts on best practices in responding to Staff comments:
– Responses to each comment should focus on the specific question(s) asked by the SEC staff, and those responses should cite authoritative literature wherever possible.
– Responses should address the registrant’s unique facts and circumstances. While it may be helpful to consider response letters from other registrants as a resource, registrants should not just repeat responses made by other registrants to similar comments.
– If revisions are being made to a filing as a result of a comment from the SEC staff, responses should indicate specifically where these revisions are being made. If additional disclosure will be included in a future filing, the registrant should consider providing the proposed language in its response letter to avoid an additional comment once the disclosure is filed.
– Companies should seek the input of all appropriate internal personnel and professional advisers (such as legal counsel and independent auditors) to determine whether they have responded to the comment letter in a complete and accurate manner. Waiting until a later round of comments to involve the necessary resources may delay or hinder a successful resolution.
Our November Eminders is Posted!
We have posted the November issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
– John Jenkins