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."
In this podcast, Ginny Fogg of Norfolk Southern provides some insight into handling director expenses, including:
– Is there a policy for director expenses? Is it written?
– What processes are in place to handle director expenses?
– How are pre-approvals of expenses handled?
– What is your favorite way to celebrate the arrival of Spring?
– How do your directors decide what conferences to attend?
– Have you been to any director conferences yourself?
I rarely blog about pension plans. Not because there is nothing newsworthy. In fact, it’s probably because there is so much newsworthy and I have to draw the line somewhere or I’d be blogging 24 hours per day. The New York Times recently ran an article – entitled “Companies Substitute Intangibles, Like Cheese, for Investments” – describing the growing trend of the use of unusual assets to fund pension plans. Along those lines, check out this case study from Valuation Research Corporation which describes how TUI Travel plc – one of the world’s largest travel companies – is using intellectual property to shore up their pension plan.
9th-11th Say-on-Pay Failures of the Year
As noted in its Form 8-K, Stillwater Mining is the 9th company holding an annual meeting in 2013 to fail to gain majority support for its say-on-pay (32% support). And as noted in its Form 8-K, AXIS Capital Holdings is the 10th company (also 32% support).
And for the 11th failure, as noted in its Form 8-K, Comstock Resources had just 32% support this week – it also failed last year with 35% support.
As noted by Blank Rome’s Yelena Barychev in this blog:
It has been a long-standing practice of the NYSE to post on its website the forms of the documents required to be submitted in connection with the NYSE listing applications. On April 30th, the NYSE filed proposed rule changes to its Listed Company Manual, which, if adopted, will result in the Manual sections containing the listing application materials being deleted, and updated listing application materials will be posted only on the NYSE’s website.
Although the NYSE amends its Manual from time to time, forms of listing agreements contained in the Manual have not always been amended to reflect changes made to the NYSE listing documents. Some provisions in the listing agreements contained in the Manual are obsolete. The NYSE proposes to remove from the Manual (i) each of the agreements set forth in Sections 901.01 through 901.05, (ii) the form of original listing application contained in Section 903.01, and (iii) the form of supplemental listing application contained in Section 903.02.
In the event that in the future the NYSE makes any substantive changes to those documents that are being removed from the Manual, it will submit a rule filing to the SEC to obtain approval of such changes, except for typographical or stylistic changes. The NYSE also plans to maintain all historical versions of those documents on its website after changes have been made, so that it will be possible to review how each document has changed over time.
In addition, the NYSE proposes to state certain requirements, which it has been imposing as a matter of practice, in the Manual to add transparency to the listing process. For example, the NYSE proposes to include in the Manual a new Section 107.00, Financial Disclosure and Other Information Requirements, which will contain the following requirements, among others:
– Section 107.03 (SEC Compliance): No security shall be approved for listing if the issuer has not for the 12 months immediately preceding the date of listing filed on a timely basis all periodic reports required to be filed with the SEC or Other Regulatory Authority or the security is suspended from trading by the SEC pursuant to Section 12(k) of the Exchange Act.
– Section 107.04 (Exchange Information Requests): The NYSE may request any information or documentation, public or non-public, deemed necessary to make a determination regarding a security’s initial listing, including, but not limited to, any material provided to or received from the SEC or Other Regulatory Authority. A company’s security may be denied listing if the company fails to provide such information within a reasonable period of time or if any communication to the NYSE contains a material misrepresentation or omits material information necessary to make the communication to the NYSE not misleading.
The NYSE also proposes to no longer require the following supporting documents in connection with an original listing application (see Section 702.04):
– Stock Distribution Schedule (the stock distribution schedule requirement is obsolete because the NYSE obtains the distribution information it needs from the applicant’s public filings and from its transfer agent).
– Certificate of Transfer Agent/Certificate of Registrar (the information that the NYSE needs about the applicant’s outstanding shares is available in its prospectus or periodic SEC reports, as well as the report of the applicant’s outstanding shares that will be required to be delivered to the Exchange once a quarter after listing).
– Notice of Availability of Stock Certificates (all transactions in listed securities in the national market system are conducted electronically through DTCC).
– Prospectus (final prospectuses are publicly available on the SEC’s website).
– Financial Statements (financial statements are included in the applicant’s SEC filings which are publicly available on the SEC’s website).
On the Rise: “Foreign Indefinitely Reinvested Earnings” (IRE) Balances
Apple recently chose to borrow a record $17 billion in the US bond market instead of using available overseas cash because paying interest on the bonds was a better choice than paying the repatriation tax. Since many companies maintain “Foreign Indefinitely Reinvested Earnings” (IRE) balances, Audit Analytics has put together this chart with the amounts of Foreign IRE balances held by the Russell 3000 since 2008. The percentage has increased yet again.
Our Executive Pay Conferences: 15% Early Bird Discount Ends Tomorrow Night
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
CEO Gives Bonus to Employees: Motivational Tool or Gift of Shareholder Assets?
This Telegraph article describes how a CEO of a UK company – Lord Wolfson of Next – recently gave away his bonus to the 19,400 employees of his company. It got me thinking. On the one hand, that certainly helps the pay gap – and could prove to be a great motivational tool. On the other hand, maybe that bonus to employees should have come from the company directly to drive loyalty to the company and not that particular CEO? What do you think?
Comp Committee & Advisor Independence: Actions to Take Now
We have mailed the March-April Issue of The Corporate Executive, featuring a comprehensive article by Mark Borges about the new comp committee & advisor rules, including:
– Compensation Committee and Advisor Independence Standards: Actions to Take Now
– What’s Covered by the New Requirements
– When the New Requirements Take Effect
– Ensuring the Independence of Your Compensation Committee Members
– Assessing the Independence of Compensation Committee Advisers
– Updating Your Compensation Committee Charter
– Disclosing Compensation Consultant Conflicts of Interest
– The Initial Disclosures–Examples
– Final Cost-Basis Reporting Regs–Bad News for Stock Compensation
Act Now: Get this issue rushed to when you try a 2013 No-Risk Trial to The Corporate Executive.
Tune in tomorrow for the webcast – “Social Media: Parsing the Hypos” – during which two legal pros (Dave Lynn & Davis Polk’s Joe Hall) and two IR pros (Q4’s Darrell Heaps & IR Web Report’s Dominic Jones) will join an in-house lawyer – Zillow’s Brad Owens – to parse a group of hypotheticals to determine what is feasible – and what is not – under the SEC’s Regulation FD framework. The panel will also cover what are effective IR strategies to leverage social media and more. Please print off the hypotheticals in advance.
Meanwhile, there are now 11 companies that have filed Form 8-Ks announcing the use of social media channels. Here is my list with links to all those 8-Ks.
Survey: Corporate Leadership Lacking on Social Media
A while back, The Conference Board put out these survey results that found limited use and understanding of social media among officers and directors. The survey notes that while 90% of respondents claim to understand the impact that social media can have on their company, just 32% monitor social media to detect risks to their business activities and 14% use metrics from social media to measure corporate performance – and only 24% of senior managers and 8% of directors receive reports containing summary information. Notably, half of the companies don’t collect this information at all.
If It Didn’t Happen on Twitter, It Didn’t Really Happen. Here’s Why.
Great food for thought from Mark Suster’s blog entitled “If It Didn’t Happen on Twitter, It Didn’t Really Happen. Here’s Why.”
According to this Bloomberg article, SEC Chair Mary Jo White may go the unusual route of adopting the rule lifting the prohibition against general solicitation and general advertising in exempt securities offerings – first proposed back in August last year – as an interim final rule. Here is an excerpt from that article:
White, who became SEC chairman on April 10, has suggested the commission pass the existing plan without major changes and add additional protections later, said the people, who declined to be identified because the deliberations are private. The approach would placate congressional Republicans who have complained the SEC has slow-walked the rule, which was required to be completed by July 2012.
Approving the regulation would allow White to make good on a promise she made in her Senate confirmation hearing to prioritize rules mandated by the Jumpstart Our Business Startups Act, which was designed to boost capital-raising and job creation. At the same time, it could anger advocates for small investors and at least one Democratic commissioner.
But then you have this MarketWatch piece, which describes Chair White as saying that investor protections are key to the JOBS Act – in essence, “haste makes waste” as noted by Steve Quinlivan. So I don’t know what to believe…
Learn more about “what is an ‘interim final rule’?” from this paper…
1788 Annual Meetings in May: How Many Protests?
Thanks to CorpGov.net and CookESG Research, here is a list of the 1788 annual meetings to be held in May. Davis Polk’s Ning Chiu blogs about protests at bank annual meetings as the 99% Power group gets back into action. Here’s the first sprinkling of media accounts of protests:
Meanwhile, on BeyondProxy.com, investor Tom Russo provides a preview of the Berkshire Hathaway annual meeting. Here’s a nice pic of shareholders arriving for the meeting in their private jets – and this DealBook “live meeting” blog has pics from the meeting itself. Berkshire Hathaway’s annual meeting has gotten so big that 2000 people ran a 5k related to the meeting…
Webcast: “FCPA Issues in Deals Today”
Tune in tomorrow for the DealLawyers.com webcast – “FCPA Issues in Deals Today” – to hear Mauricio Espana and Derek Winokur of Dechert and Rebekah Poston of Squire Sanders explain how FCPA diligence is being conducted, how reps & warranties related to FCPA violations are being negotiated, and more.
After reading so many articles about the uphill climb that today’s law students have in finding a job, I thought I would ask one how bad it really is. Here are some thoughts from Kyle Flann (flan0160@umn.edu) a 3L at the U. of Minnesota:
For the last 21 years of my life I have been in school. From graduating high school, to getting my undergraduate degree, to attending law school – which I will graduate from in less than a month. For the last 21 years I have been a student. Yet even after all the sleepless nights working tirelessly on term papers and preparing for final exams, little did I know what would be my next biggest challenge. The last 21 years have been attempting to prepare for this one moment… trying to land a job.
Finding My Passion
Going into college I hadn’t been completely sure what I intended to do with my life. I bounced around classes and majors until finally taking a course in business law, which changed everything. I discovered how much I love business and declared my major soon after. The ability of businesses to be innovative and analytical in trying to become the most efficient and successful business it can be appealed greatly to a mind like mine. My decision to go to law school and to pursue my JD with a concentration in business law sprang from this love of business, and I have found the variety of legal issues that business attorneys are exposed to extremely exciting.
From Day One of law school I have intended to pursue my career in corporate law – and that has been my job focus every step of the way. However, even with a clear vision of what I want – and using a variety of search techniques – I’ve struggled in this search as have a majority of my classmates.
Morale is Low
The job market for lawyers is tough right now. For law students it is even more difficult. The wavering morale of my classmates is reflected by the whisperings that permeate the lecture halls. Searching for jobs right now can be extremely frustrating. Not only do you need to distinguish yourself from your classmates, but also from previous years’ still unemployed graduates, as well as experienced attorneys many of whom have been forced back into the job market.
Just getting an initial interview is a big deal for most law students. And a student actually having a job lined up before graduation is increasingly rare. Not having the security of a job offer is very intimidating, especially with enormous student debt looming, some with payments starting just weeks after bar exam results are released.
Today’s Job Search Tools: Online
In trying to find a job, I believe I’ve been doing as much – or more – than most of my classmates. Most of my job search has included utilizing a variety of online resources. I’ve found many extremely useful job boards including my career services job board; the Association of Corporate Counsel job board; and the job board on FindLaw.com. In addition, I have utilized some of the more general job boards such as Indeed, Monster, The Ladders, Career Builder and Simply Hired – although these boards typically have less relevant positions than what I am looking for.
I’ve also identified a variety of law firms and companies around the Midwest that I am interested in working for – and have signed up for the mailing lists associated with their individual career boards. These actions have allowed me to identify hundreds of potential job opportunities – and I’ve applied to nearly every one.
In addition to this I have attempted everyone’s first piece of advice in conducting a job search: “networking.” This honestly has been one of the most useful steps I have taken. It has led to me meeting many kind folks, receiving useful advice, and on occasion has even led to some interviews.
Networking at events has been great, but again using online tools has also been successful for me. Utilizing my career services networking webpage has allowed me to meet many who have been in the same position as me and who can give me terrific advice. In addition, using social networking – primarily LinkedIn – to get introduced to others in my industry has been very effective. It seems like there is a way to reach just about anyone through these tools – and I’ve yet to find someone who isn’t at least willing to talk to me about how their career has progressed and to give me any advice they may have.
Know Yourself
While my job search has been terrifying – and at times slightly depressing – in the end, I am confident that I will find a job that I will love and that will jumpstart my career. I know this because I know my own work ethic and I know my own desire to find the right job. I will continue to work in every way I know how until I find an employer willing to let me grow with them. I know it may take a while but I am willing to do what it takes (and I know my classmates are too). So while we will continue to grumble about this job market, be ensured that we will continue to apply – and that there are many terrific young lawyers coming out for hire.
Give Me the Bad News Please
If there is one thing that I could say to potential employers, it would be this: the worst thing about this job search for me personally is not hearing anything at all from a position I have applied for.
I would much rather get a rejection letter than to never hear anything. At least getting some correspondence reinforces the belief that at least someone took the time to look at my application and resume – and have taken me and my job search seriously. It is much appreciated by me and many others to at least have this closure in these situations, even if it means not getting an opportunity at a job we believe we are qualified for.
As noted in this article, Congress – and President Obama – partially repealed part of the STOCK Act quietly last week. The repeal kills an obligation to provide public disclosure for trades made by all Hill – and nearly all executive branch – staffers. So now the transparency provisions of the STOCK Act apply to just the President, Vice President, members of Congress (including those running for Congress) and a handful of the highest-ranking executive branch officials.
A repeal certainly is not good optics, as made clear by this hilarious segment from Jon Stewart’s “The Daily Show.” Not so funny is that the STOCK Act has so many loopholes that it might not do anything to prevent insider trading anyways, as noted in this article. Doesn’t anyone inside the Beltway recognize – or care – that this is not the way to rehabilitate a very tarnished image in the minds of the general public…
The Wall Street Journal’s investigative reporting into Rule 10b5-1 plans continues. This April 25th article questions the use of these plans by directors who are also large shareholders at three companies – either individually or through funds they control. Then this follow-up article from Tuesday – entitled “Insider-Trading Probe Trains Lens on Boards” – notes that the U.S. attorney’s office for the Eastern District of New York issued subpoenas requesting information from the companies and funds cited in the April 25th article. Kevin LaCroix has blogged about these articles…
Happy Anniversary Baby! 11 Years of Blogging and Counting
Tomorrow marks 11 years of my blither and bother on this blog (note the DealLawyers.com Blog is nearly 10 years old – not shabby!). It’s one time of the year that I feel entitled to toot my own horn – as it takes stamina and boldness to blog for so long. A hearty “thanks” to all those that read this blog for putting up with my personality. I’m sure I won’t get more refined with age…
Inspired by the LumaScapes that are popular out in Silicon Valley, I recently cobbled together this “Proxy Season BrocScape” that includes some of the service providers that help us get through the proxy season. Each logo is a link to that service provider’s site. Let me know if you think I am missing anyone – including whether I am missing any providers in this extensive new list of service providers. Thanks to Randi Morrison for helping to identify service providers – and Mike Wilkinson for doing the BrocScape graphics!
Life as SEC’s Inspector General
In this podcast, David Kotz of Berkeley Research Group discusses his time at the SEC, including:
– How did you wind up at the SEC?
– How did you decide which tires to kick at the SEC?
– How long did it typically take between the start of an investigation and finalizing a report?
– What is the hardest part of being an Inspector General at a federal agency?
– What skills did you refine at the SEC that help you in your new job?
Our May Eminders is Posted!
We have posted the May issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
1. To whom does your internal audit head directly report to at your company:
– CEO – 11%
– CFO – 33%
– General Counsel – 17%
– Audit Committee Chair – 44%
– Lead Director or Non-Executive Chair – 0%
– Other – 6%
– We don’t have an internal audit head – 0%
2. Does the head of internal audit attend your company’s board meetings?
-Yes, the internal audit head attends at least a portion of all board meetings – 0%
– Yes, the internal audit head attends at least a portion of some board meetings – 6%
– The internal audit head rarely attends board meetings – 17%
– The internal audit head doesn’t attend board meetings – 78%
3. Does the head of internal audit attend your company’s audit committee meetings?
– Yes, the internal audit head attends at least a portion of all audit committee meetings – 100%
– Yes, the internal audit head attends at least a portion of some audit committee meetings – 0%
– The internal audit head rarely attends audit committee meetings – 0%
– The internal audit head doesn’t attend audit committee meetings – 0%
4. Does the head of internal audit attend your company’s board committee meetings, other than audit committee meetings?
– Yes, the internal audit head attends one or more governance committee meetings – 0%
– Yes, the internal audit head attends one or more compensation committee meetings – 0%
– Yes, the internal audit head attends one or more other board committee meetings (eg. risk management or finance committees) – 11%
– No, the internal audit head doesn’t attend board committee meetings, other than audit committee meetings – 89%
Please take a moment to participate in this “Quick Survey on Lead Directors” and “Quick Survey on Rule 10b5-1 Plan Practices.”
Recent Court Decisions on Resource Extraction & Shareholder Proposal Rules
The D.C. Circuit has dismissed for lack of jurisdiction the case brought by the American Petroleum Institute and others against the SEC rules requiring certain companies to disclose payments made to foreign governments relating to the commercial development of oil, natural gas or minerals. The case will now be decided in the U.S. District Court for the District of Columbia, where the petitioners had also filed suit “out of an abundance of caution.”
The Commission had not disputed the Circuit Court’s right to hear the petition for review, but intervenor Oxfam America argued that the petitioners must first sue in district court. Exchange Act Section 25 establishes the framework for initial appellate review of Commission actions. Congress created original appellate jurisdiction over challenges to certain Commission rules in 1975, because it believed that the district court’s factfinding function is rarely necessary in these cases.
In this case, the D.C. Circuit determined that absent a statutory grant of original appellate jurisdiction under Section 25, a party must first file in district court. While certain enumerated sections of the Exchange Act specifically give the appellate court jurisdiction, the Commission did not rely on any of those sections when it published the resource extraction rule. In fact, the Court noted that Section 25 is limited to Exchange Act provisions directly relating to the operation or regulation of the national market system, a national clearing system or the Commission’s oversight of the self-regulatory organizations.
In another case, the U.S. District Court for the Southern District of New York found that the 2010 amendment to Rule 14a-8(i)(8) did not change its original holding in Lucian Bebchuk v Electronic Arts. In February 2008, the plaintiff submitted a shareholder proposal to the company to amend its bylaws and require management to allow shareholders to vote on all “qualified proposals.” Qualified proposals include all submissions made on behalf of any shareholders owing at least 5% of stock that are valid under state law and did not deal with ordinary business operations. Before the SEC could respond to a no-action letter request from the company, plaintiff filed suit.
In November 2008, the district court held that the proposal was contrary to the proxy rules because it eliminated the discretion of the company and dismissed the complaint under Rule 14a-8(i)(3). The court found that the plaintiff’s proposal contradicts the purpose of Rule 14a-8 given that different grounds are available for exclusion of shareholder proposals, which the plaintiff’s proposal would not recognize.
Plaintiff appealed and while appeal was pending, the SEC adopted the proxy access rules in 2010 and amended Rule 14a-8(i)(8). The Second Circuit then remanded to the district court to determine the relevance of the proxy rule changes to this case.
The Art of Hiring Outside Counsel
In this podcast, Steve Shapiro of Pircher, Nichols & Meeks describes what to look for when hiring outside counsel, including:
– What are the main reasons to hire outside counsel?
– How should performance of outside counsel be measured?
– What can companies do to improve the performance of outside counsel?
This Congress remains a riddle wrapped in a conundrum. As noted in this article, Mary Jo White’s recent confirmation – which I blogged as a “slam dunk – turned out to be less than meets the eye.
The term of a SEC Commissioner is a fixed 5 years, with one Commissioner’s term expiring each year. Mary Schapiro left the SEC early – which is not atypical – as her term expires next year. So when President Obama nominated Mary Jo for Mary’s seat, he nominated her to complete the one year left on that term and he nominated her for the full 5 year term that follows. This also is not atypical, with the most recent examples of Harvey Pitt becoming Chair after being confirmed for the remainder of Arthur Levitt’s term and the full 5 year term that followed (and the same happened for John Shad in 1981).
In this case, the Senate Banking Committee only voted on the remaining one year term – not what Obama had envisioned. Apparently, this short-timer status was a deal cut to get votes from both sides of the aisle. No vote was taken on the following five-year term. I’m not aware of any another occasion when the Senate declined to vote on the follow up term. So this Congress continues to break new ground…
Another First! Annie Small Named as SEC’s General Counsel
Last week, Annie Small was named as the SEC’s General Counsel – the first woman to serve in that role. Annie comes from the White House – and she briefly worked as the SEC’s Deputy General Counsel for Litigation and Adjudication and WilmerHale before that. She replaces Geoffrey Aronow, who becomes Senior Counsel to Chair White. Note that Colleen Mahoney was Acting General Counsel for several months when Dick Walker switched to Director of Enforcement and before Harvey Goldschmidt came on board.
Meanwhile, the FASB appointed Russell Golden as its new Chair.
SEC Enters Into 1st Non-Prosecution Agreement for FCPA Violations
On the same day that the SEC announced Co-Directors for Enforcement – the start of a “tougher” enforcement era – the SEC announced that, for the first time, it entered into a non-prosecution agreement (known as a “NPA”) with a company relating to misconduct under the Foreign Corrupt Practices Act. As noted in this press release, the SEC decided not to prosecute Ralph Lauren for FCPA violations due to the company’s cooperation – here’s a blog from David Smyth about the case. I am posting memos in the “Foreign Corrupt Practices Act” Practice Area.
