Broc Romanek is Editor of CorporateAffairs.tv, TheCorporateCounsel.net, CompensationStandards.com & DealLawyers.com. He also serves as Editor for these print newsletters: Deal Lawyers; Compensation Standards & the Corporate Governance Advisor. He is Commissioner of TheCorporateCounsel.net's "Blue Justice League" & curator of its "Deal Cube Museum."
After nearly six years of service as Corp Fin’s Chief Counsel (& Associate Director), Tom Kim has left the SEC to return to private practice. Tom was one of the SEC’s best and brightest, overseeing the venerable Chief Counsel’s office during a time of great change. Tom leaves having accomplished the rare legal job trifecta (government/in-house/law firm), having also worked in SEC Chair Cox’s office, for General Electric and Latham & Watkins. Tom is using up some of his vacation days before officially departing the agency.
Survey: Most Companies Not Ready for Conflict Minerals Compliance
With the SEC’s conflict minerals rules seemingly in limbo until the court decision this week, perhaps a PwC survey – discussed in this WSJ article – showing that most companies are not ready to comply is not surprising – but it is scary based on the consensus in the memos about the court decision that any appeal will take some time. Here are stats from the PwC survey pulled from this Elm Consulting blog:
– 26% of the respondents did not know if the rule was even applicable to their companies.
– 58% of respondents see this only as a compliance exercise and don’t anticipate additional value from the required efforts.
– 26% of respondents have not established a conflict minerals policy or feel it isn’t applicable.
– For those that have gathered some data on their suppliers, 54% of the respondents could not determine if minerals originated from covered countries or not.
– Almost 27% of respondents plan on relying solely on due diligence information received from suppliers; 58% don’t know if they will extend their efforts beyond their Tier 1 suppliers.
– For data management, 76% of respondents have not determined if they will implement a conflict minerals specific IT solution; almost 9% plan on using an existing system for their conflict minerals data.
– 44% of respondents expect to file a Form SD, but only 8% expect to also file a Conflict Minerals Report, or CMR (required where a company knows, or has reason to believe, that minerals originated from the Covered Countries).
– 9% of respondents expect that their CMR will be audited in 2013 (we are not sure why this number is greater than the number of respondents who think they will issue a CMR to begin with); 26% of respondents expect to defer the audit because they anticipate being classified as “undeterminable” for 2013.
– 25% of respondents appear not to have developed their internal team and don’t know how needs to be involved.
– 34% of respondents don’t know how many direct suppliers are in their supply chain; 23% have between 100 – 1000 and 17% have less than 100.
Director Roles in Going Private Deals
In this podcast, Matt Orsagh of the CFA Institute talks about the SEC’s recent enforcement case in which it charged and fined Revlon for misleading shareholders – as well as the company’s independent directors – as a result of a “going-private” transaction:
– What was the SEC’s recent Revlon enforcement action about?
– How can independent directors break down informational barriers during “going-private” transactions?
– Why are so many boards short-term focused – actively or passively?
– How should boards communicate with shareholders about these types of transactions?
We are very excited to announce that Corp Fin Director Keith Higgins will be part of our “Annual Proxy Disclosure Conference” on September 23rd. Registrations for our upcoming pair of conferences (combined for one price) – in DC and via video webcast – are strong and for good reason. The full agendas for the Conferences are posted – but the panels include:
– Keynote: “Keith Higgins, Director, SEC’s Division of Corporation Finance”
– Keynote: “Former Congressman Mike Oxley”- Q&A with ISS
– Q&A with Glass Lewis
– Say-on-Pay Shareholder Engagement: The Investors Speak
– Compensation Committees & Advisors: The NYSE & Nasdaq Speak
– Realizable Pay Disclosure: How to Do It
– How to Improve Pay-for-Performance Disclosure
– We Don’t Have a Good Pay Story: What Do We Disclose?
– How to Avoid Executive Pay Disclosure Litigation
– Peer Group Disclosures: What to Do Now
– In-House Perspective: Strategies for Effective Solicitations
– Creating Effective Clawbacks (and Disclosures)
– Pledging & Hedging Disclosures
– The Executive Summary
– The Art of Supplemental Materials
– Dealing with the Complexities of Perks
– Say-on-Parachute & Post-Deal Disclosure Developments
– Compensation Accounting, Tax & Risk Assessment Disclosures
– Shareholder Proposals & Executive Pay
– The Rise of Political Contribution Disclosures
Dodd-Frank’s Whistleblower Protections: First Appeals Court Weighs In
As noted in the memos posted in our “Whistleblowers” Practice Area, the Fifth Circuit became the first appellate court to deliver an opinion on the Dodd-Frank whistleblower rules (Asadi v. G.E. Energy(USA)) – finding that a whistleblower can be protected only if they provide information to the SEC. It is noteworthy that some district courts have ruled differently.
Since the SEC’s new Reg D rules were published in the Federal Register yesterday, they become effective on September 23rd (60 days thereafter)…
More on our “Proxy Season Blog”
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:
– For Proxy Advisers, Influence Wanes
– The Battle Over Shareholder Written Consent Bylaws
– More on “Shareholder Proposals: Goldman Sachs for President!”
– How Voting Rights in Corporate Elections Get Compromised Worldwide
– Waning Support for Some Shareholder Proposals
– Activists Unite to Obtain Majority Support for “Split the Company” Shareholder Proposal
Breaking a long streak of losing major cases, the US District Court for DC issued this opinion yesterday rejecting the summary judgment motion of the plaintiffs (Chamber of Commerce and NAM) – and upholding the SEC’s (& intervenor Amnesty International’s) cross-motion for summary judgment.
This means that the SEC’s rules go forward as they currently exist (ie. no de minimis exception, etc.). Even if the plaintiffs appeal, with the first report due May 31, 2014, all companies should be operating on the assumption that the rules are indeed the rules and start preparing now. We are posting memos in our “Conflict Minerals” Practice Area.
Section 16 Filings Facelift: The SEC’s New Edgar Search Page
Last month, I blogged that the SEC’s new Edgar search page received its first facelift in a decade. Now the tool has been further refined so that searches can easily include – or exclude – Section 16 filings. Simply click the “More Options” option that appears underneath the search box. Nice!
Check out Alan Dye’s Section16.net Blog for analysis on how the Supreme Court’s recent DOMA decision might impact Section 16 filings…
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor 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:
– Congress to FASB: “Do As I Say, Not As I Do”
– Facebook IPO Derivative Ruling: Cure for Multiforum Madness?
– Don’t You Love It When Officers Swear During Earnings Calls!
– Chancellor Strine Proposes New Approach to Multijurisdictional Shareholder Litigation
– Study: XBRL Might Be Irrelevant to Investors & Analysts
– No “Dummy Directors”: DE Court Refuses to Dismiss Loyalty Claims Against Outside Directors for Failure to Monitor
– Freedman vs. Novell: The Latest Adventures of the Business Judgment Rule
– Survey: JOBS Act Has No Major Impact on IPO Market (So Far)
On May 15 and June 17, the Steering Committee reviewed the decision made by Broadridge on May 10 to cease its practice of releasing preliminary shareholder voting information to those proponents of shareholder proposals who had requested Broadridge, as agent of banks and brokers, to distribute their soliciting material to shareholders.
In 2011, the Steering Committee had reviewed Broadridge’s practice of sharing voting trend information with dissident shareholders. At that time the Committee found that, so long as the recipients of the early voting data signed confidentiality agreements and in the absence of objections from the brokers and banks to whom the voting information belonged, the Committee had no objection to the practice.
In May of this year, however, circumstances changed. The brokers conveyed to Broadridge their concerns about the early release of their voting data. Broadridge stressed its neutrality on the merits of whether or not brokers’ early vote totals should be released, but stated that, as an agent, it was contractually bound to follow the directions of its principals, the brokers. Some members of the Steering Committee, while acknowledging that Broadridge’s contracts required it to obey its clients’ instructions, questioned the timing of the change, that is, whether Broadridge could have postponed its decision until after the current proxy season. Broadridge responded that as the brokers did not give them latitude to delay the decision, they were required to terminate the practice immediately.
A number of members of the Steering Committee suggested that the SEC was the proper body to provide clarity on this issue going forward. The Committee stated that it would continue to monitor developments on this issue.
Learn more in this article about VIFs and vote reporting…
What Does a SEC Impersonator Look Like?
Over the past few years, the SEC periodically has issued an investor alert warning about government impersonators (here is one and another). Apparently, these impersonators use fraudulent solicitations purporting to be affiliated with – or sponsored by – the SEC. There even has been a recent bogus email scam using the name of Commissioner Gallagher!
So who do you like for the movie? For some reason, I keep thinking Matthew McConaughey would be perfect for the role, particularly using much of his character from last year’s “Magic Mike”…
Transcript: “Law Firms & Independence: What to Do Now”
We have posted the transcript for the recent CompensationStandards.com webcast: “Law Firms & Independence: What to Do Now.”
Today, Netflix will forego the traditional conference call format for its earning call. As noted in this article, the company instead will host a live streaming video on its IR web page that will consist of an analyst and reporter asking management questions. These questions will be pulled from a pool of questions sent in advance by email and via Twitter. So this format is partly Warren Buffett inspired (reporters asking questions submitted by others) and partly inspired by Zillow (questions sent in via Twitter). As you will recall, Netflix’s CEO Reed Hastings has been at the forefront of leveraging social media – resulting in the SEC’s Section 21(a) report on social media.
This follows Yahoo!’s earnings call, which was conducted via video last week, as noted in this WSJ article and IR Magazine piece. Here’s the forward-looking disclaimer for the video. Yahoo! live-tweeted the call – as well as posted pics of CEO Marissa Mayer getting ready beforehand.
It will be interesting to see if this concept of leveraging video catches on with other large or media companies…
SEC’s Inspector General Issues Two Reports on Rulemaking Economic Analysis
With cost-benefit analysis of rulemaking continuing to be a hot topic across the federal government – particularly the SEC – it is noteworthy that the SEC’s IG issued two reports in this area that were posted on Friday. This report concerning the implementation of current economic analysis contains one recommendation – and this report on the current use of this analysis contains six recommendations.
Speaking of reports, the GAO has issued this report on conflict minerals sourcing – and this report on the definition of “accredited investor.”
Transcript: “E-Proxy Practice Tips: Five Years Later”
We have posted the transcript for our recent webcast: “E-Proxy Practice Tips: Five Years Later.”
Heading into last week’s annual conference for the Society of Corporate Secretaries, I blogged about my video on “how to attend conferences” – and I said I would take my own advice and meet ten new people. Here are pics from conference with the ten new people that I met (note the hand signs indicating the # of each person):
Todd Hamblet of Covington & Burling:
Joe Campbell of Computershare:
Todd Gilman of TrueBlue:
Karen Martin, wife of the Society’s David Martin:
Melissa Caen of Southern Company:
Craig Brown of MasterCard:
Tim Olson of Northwestern Company & Cathy Conlon of Broadridge:
Caryn Feinberg of SecondMarket:
Kate Karas of SecondMarket:
Thanks to American Stock Transfer/AST for a great party on Wednesday! Here is the view:
And thanks to Broadridge for the dinner on Thursday. Here I am with Maryellen Anderson:
Finally, kudos to Microsoft (John Seethoff/Peter Kraus/Stacy Anderson) for the rocking give-away hats!
With the three year anniversary of Dodd-Frank bearing down on us tomorrow comes this rumor – from this Bloomberg article – that the SEC is close to proposing pay disparity rules – perhaps as soon as August 21st! Normally, I don’t blog about rumors since they often don’t come true – but new SEC Chair White has promised to move the Dodd-Frank rules along and last week’s Reg D rulemaking proves that she means business. So perhaps we will see an entire set of the “Gang of 4” proposals soon enough.
Meanwhile, as noted in this Ning Chiu blog, there has been a bit of press about the pay ratio requirement in Dodd-Frank – as well as a House bill to stop it.
Registrations for our upcoming pair of conferences – in DC and via video webcast – are strong and for good reason. The full agendas for the Conferences are posted – but the panels include:
– Q&A with ISS
– Q&A with Glass Lewis
– Say-on-Pay Shareholder Engagement: The Investors Speak
– Compensation Committees & Advisors: The NYSE & Nasdaq Speak
– Realizable Pay Disclosure: How to Do It
– How to Improve Pay-for-Performance Disclosure
– We Don’t Have a Good Pay Story: What Do We Disclose?
– How to Avoid Executive Pay Disclosure Litigation
– Peer Group Disclosures: What to Do Now
– In-House Perspective: Strategies for Effective Solicitations
– The SEC Staff Review Process
– Creating Effective Clawbacks (and Disclosures)
– Pledging & Hedging Disclosures
– The Executive Summary
– The Art of Supplemental Materials
– Dealing with the Complexities of Perks
– Say-on-Parachute & Post-Deal Disclosure Developments
– Compensation Accounting, Tax & Risk Assessment Disclosures
– Shareholder Proposals & Executive Pay
– The Rise of Political Contribution Disclosures
More on Corp Fin’s Conflict Minerals FAQs
In addition to the horde of memos on the SEC’s recent FAQs on conflict minerals, you should read this Cooley news brief about informal Corp Fin guidance on the CDI dealing with timely filing for a Form SD and S-3 eligibility – and this Elm Consulting blog about the CDI regarding the need to file a Form SD or obtain an audit even if the company is supporting conflict-free sourcing…
According to this WSJ article, a PwC survey notes that companies are not making a whole lot of progress on conflict minerals: “Two-thirds of respondents to a new survey say their companies are in the early stages or have not yet started compiling information needed to meet the requirements of the Securities and Exchange Commission’s conflict minerals reporting law…. One-third of the nearly 900 executives surveyed said they still are trying to figure out if the reporting requirement applies to their businesses, according to the survey released Wednesday by PwC. Less than 5% said their companies have gathered most of the required information from their suppliers and have begun assessing it.”
July-August Issue: Deal Lawyers Print Newsletter
This July-August issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:
– The Merger Tarantella: Considerations in Post-Merger Corporate Governance
– The In-House Perspective: Post Merger Governance
– Activist Shareholders in the U.S.: A Changing Landscape
– Appraisal Rights: The Next Frontier in Deal Litigation?
– The Standard of Review in Going Private Transactions: Delaware’s Long Awaited Clarification
I’m sure this will be raised among many other topics – the NYSE’s rule change amending Section 312.07 of the Listed Company Manual to remove the 50% quorum requirement and add certain clarifying language that just became effective last Thursday.
Corp Fin’s Back in the CF Disclosure Topic Business, Baby!
It’s been over a year since Corp Fin issued its last guidance in the form of “CF Disclosure Topics” – there were a total of five of them in six months after the first one was issued in the fall of 2011. Yesterday, Corp Fin issued “CF Disclosure Guidance Topics: Topic No. 6 – Staff Observations Regarding Disclosures of Non-Traded REITs.” Maybe there will be flurry of activity along these lines now that there is a new sheriff, er, Director in town…
Corp Fin Updates Financial Reporting Manual (Again)
Yesterday, Corp Fin indicated that it has updated its Financial Reporting Manual for issues related to real estate acquisitions, determining significance for equity method investees, and non-GAAP measures.
Here’s a transcript of SEC Chair White’s remarks on CNBC’s “Closing Bell” from yesterday…
This Cooley news brief from Cydney Posner probably doesn’t tell many in our community anything that wasn’t predictable:
In this article from the Wall Street Journal, Bankers: The JOBS Act Isn’t Doing its Job, the author contends that if “you ask investment bankers, most of them will say the JOBS Act has fallen flat.” According to the article, “only 14% of bankers polled said they felt the JOBS Act was boosting the number of initial public offerings, according to a survey of 101 capital markets executives at large investment banks released by BDO USA LLP this week. That’s half the level who said the law was having a positive impact last winter, and down sharply from 55% who said so last year, according to BDO. The SEC is set to vote on some aspects of the JOBS Act on Wednesday morning, including proposed rules to eliminate the prohibition on general solicitation.”
Even though many of the rules implementing the JOBS Act remain to be adopted, “more than two-thirds of the bankers polled predicted the law will never achieve its goals of increasing the number of companies that go public. ‘There has clearly not been double or triple the amount of IPOs,'” according to the Director of SEC Services for BDO.
However, the new confidential filing process has been widely adopted, with estimates of 150 companies that have filed confidentially under the rule. “Nevertheless, bankers have complained the confidentiality granted by the JOBS Act has obscured the pipeline, making it more difficult to pinpoint windows in the market.” Some companies are also taking advantage of the ability to file just two years of audited financials rather than three. The article reports that this aspect of the rules has been helpful primarily to companies that changed auditors or did an acquisition and may not have three years of audited financials readily available.
The article reports that there were “95 IPOs in the first half of the year, up from 74 in the first half of last year. Excluding Facebook ‘s large $16 billion IPO last year, IPO proceeds from the first half of the year are up 66% from 2012, according to BDO, but most bankers attributed the increase to an increase in deals by private equity firms.”
Tune in to our upcoming webcast – “Reg D Offerings: What Is Happening Now” – that will provide a variety of perspectives on how to implement the new rules…
Transcript: “A Proxy Season Post-Mortem: Lessons Learned”
We have posted the transcript for our recent webcast: “A Proxy Season Post-Mortem: Lessons Learned.”
Here are the latest survey results about lead directors:
1. Our board has a term limit for the Lead/Presiding Director:
– Yes – 20%
– No – 80%
2. The term limit length is:
– 2 years or less – 17%
– 3 years or less – 13%
– 5 years or less – 9%
– Only limited by director’s age – 61%
3. We rotate the Lead/Presiding Director role among independent directors:
– Yes – 26%
– No – 74%
4. When we rotate the role, we do it:
– More frequently than annually – 4%
– Annually – 4%
– No set schedule – 92%
5. Our Lead/Presiding Director receives additional director compensation:
– Yes – 84%
– No – 16%
6. In addition to having a Lead/Presiding Director, we have a non-independent board chair who is not the CEO:
– Yes – 11%
– No – 89%
Please take a moment to participate in this “Quick Survey on Exclusive Forum Bylaws,” “Quick Survey on Annual Meeting Conduct,” and “Quick Survey on Loan Prohibitions & Cashless Exercises.”
Understanding Hedge Fund Governance
Professor Houman Shadab recently published the first comprehensive academic analysis about the governance practices of hedge funds. Here is an excerpt:
“Hedge fund investors are not being systematically ripped off by managers. …. Investors have hedge fund managers on a much shorter leash than managers of public corporations and other types of investment funds. … The oversight role played by hedge fund directors is not substantial. Hedge fund investors are often better off with less transparency, higher fees, and less access to their capital. …. When the stock of public corporations rises by 1%, median CEO compensation rises by $200k, but for hedge fund managers, that number is $2 million.”
Liquidnet’s Approach to ATMs, Stock Buybacks & 10b5-1 Plans
In this podcast, Nicole Olson of Liquidnet explains how Liquidnet helps companies with their at-the-market offerings, stock buybacks and Rule 10b5-1 plans, including:
– For how long has Liquidnet been assisting companies with ATMs, buybacks and 10b5-1 sales?
– How does the matchmaking work between institutional buyers and companies raising capital with ATMs?
– What kind of companies are the best fit for an ATM and for Liquidnet?
– How do the buybacks work? Are companies obligated to exclusively work through Liquidnet?
– What precautions are built into your 10b5-1 plans to avoid negative media publicity?
