January 4, 2018

Survey Results: Director Compensation

Here’s the results from our recent survey on director compensation in the wake of the 2015 Citrix decision:

1. When it comes to limits on our director pay:
– Yes, we have adopted limits since Citrix – 51%
– Yes, we had limits even before Citrix – 22%
– No, we don’t have limits – 26%

2. For those that have limits, our limits apply to:
– Cash only – 0%
– Equity only – 56%
– Both cash & equity – 44%

3. For those that have equity limits, our limits are based on:
– Dollar limit – 85%
– Share limit – 33%

4. For those that have limits, our limits are based on:
– Multiple of annual compensation – 35%
– Maximum number based on estimates of future compensation for a set period – 36%
– Other – 35%

5. For those that have limits, our limits are based on:
– Peer review – 43.6%
– What we could derive from the case law & settlements – 20.0%
– Our discretion – 58.2%
– Other – 16.4%

Please take a moment to participate anonymously in these surveys: “Quick Survey on More on Blackout Periods” – and “Quick Survey on Whistleblower Policies and Procedures.”

Privilege: “Oral Download” of Investigation Results to SEC May Waive Work-Product Protection

This Cleary memo addresses a recent decision by a Florida federal magistrate that could throw a monkey-wrench into a common method of informing the SEC’s Enforcement Division about information obtained in an internal investigation.

It’s not unusual for outside counsel retained to conduct that investigation to share factual information conveyed in witness interviews with the Division of Enforcement. That’s frequently done orally, and under the assumption that conveyance of this information won’t waive the protection of the attorney-work product doctrine for the underlying documentation of those interviews. The memo says this decision calls that assumption into question. Here’s the intro:

On December 5, 2017, Magistrate Judge Jonathan Goodman in the United States District Court for the Southern District of Florida held in SEC v. Herrera that the “oral download” of external counsel’s interview notes to the Securities and Exchange Commission (“SEC”) waived protection from disclosure under the attorney work product doctrine. In the same order, Magistrate Judge Goodman held that providing similar access to the client’s auditor did not result in a waiver.

As a result of the decision, the law firm was ordered to disclose to certain former employees of its client the interview notes that were orally conveyed to the SEC. The firm subsequently moved for clarification or reconsideration of the order – and an evidentiary hearing is scheduled for January 10th.

Coming Attractions: Securities Class Actions for Cyber Breaches

This Davis Polk memo says that securities class actions surrounding cybersecurity breaches are just a trickle now – but may soon become a wave:

The existence of securities fraud litigation following a cyber breach is, to some extent, not surprising. Lawyer-driven securities litigation often follows stock price declines, even declines that are ostensibly unrelated to any prior public disclosure by an issuer. Until recently, significant declines in stock price following disclosures of cyber breaches were rare. But that is changing. The recent securities fraud class actions brought against Yahoo! and Equifax demonstrate this point; in both of those cases, significant stock price declines followed the disclosure of the breach. Similar cases can be expected whenever stock price declines follow cyber breach disclosures.

The memo addresses emerging theories of liability in these cases & steps that companies can take to reduce their risk of a securities class action in the event of a cyber breach.

John Jenkins