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."
U.S. Senator Jay Rockefeller announced on Wednesday that he has sent letters to the chief executive officers of all Fortune 500 companies requesting information by October 19, 2012 on how each company is addressing cybersecurity. The broad requests for each company’s views on cybersecurity–including how each company developed its own practices and the role of the federal government in developing cybersecurity practices–follow recent unsuccessful efforts by Senator Rockefeller and other lawmakers to pass legislation imposing heighted cybersecurity standards at the national level. The most recent effort, introduced by Senator Joe Lieberman and co-sponsored by Senator Rockefeller, was voted down in the U.S. Senate last month despite White House support.
This is not the first effort by lawmakers to focus on cybersecurity outside of the legislative process. In May of last year, Senator Rockefeller and four other Senators petitioned the SEC to issue guidance to public companies concerning their obligation to provide disclosure about cybersecurity. The SEC’s Division of Corporation Finance responded last October by releasing guidance to public companies to assist them in assessing what disclosures should be made when faced with cybersecurity risks and incidents. (Gibson Dunn’s alert discussing that guidance is available here.) Senator Rockefeller has also petitioned the White House to issue an executive order that would accomplish similar goals as the Lieberman/Rockefeller bill–such as establishing a voluntary program to designate cybersecurity standards for companies in control of critical infrastructure. Critics argue that such efforts circumvent the legislative process, would create new liability risks for covered businesses, and potentially impose an impractical “one-size-fits-all” approach to cybersecurity across very different settings and businesses.
Although responses to Senator Rockefeller’s letters to the Fortune 500 CEOs are voluntary, many businesses will likely offer some response (although that need not come from the CEO). The letters include eight questions designed to discover how companies are addressing cybersecurity and the views of the CEOs on the system the Lieberman/Rockefeller cybersecurity bill would have established if voted into law, including concerns the CEO might have with the voluntary program contemplated in the bill. Recipients of the requests should, of course, recognize that their responses (or failure to respond) may be used in the political battle over cybersecurity regulation and could potentially trigger further contact or Congressional inquiry.
Shareholder Proposals: The Latest Count on Proxy Access Proposals
In this blog, Professor Larry Hamermesh updates his survey of the voting results on proxy access shareholder proposals during this year. He notes: “In the last couple months there have been three additional votes (at Forest Laboratories, Medtronic and H&R Block). As the updated voting tabulation reflects, these three most recent votes didn’t add much to any argument that the SEC’s now-invalidated 3 year/3% ownership thresholds gave shareholders less than they would have voted for themselves: we’re talking favorable votes of 8% or less of the outstanding shares, and less than 10% of the shares actually voted. That compares to the 46%-51% approval levels at Nabors Industries and Chesapeake Energy for proposals that pretty much tracked the SEC’s threshholds.”
At the Printers: 2013 Executive Compensation Disclosure Treatise
We just wrapped up the Lynn, Borges & Romanek’s “2013 Executive Compensation Disclosure Treatise & Reporting Guide.” For those that want to access it online, it’s now posted on CompensationStandards.com. For those that like a hard copy, it will be finished being printed in a few weeks.
How to Order a Hard-Copy: Remember that a hard copy of the 2013 Treatise is not part of a CompensationStandards.com membership so it must be purchased separately – however, CompensationStandards.com members can obtain a 40% discount by trying a no-risk trial now. This will ensure delivery of this 1200-plus page comprehensive Treatise as soon as it’s done being printed.
And note there an additional 40% off when you purchase this Treatise in combination with the just finished Romanek’s “Proxy Season Disclosure Treatise & Reporting Guide.”
1. Does your company conduct share buybacks only if they comply with Rule 10b-18:
– Yes – 77.3%
– No – 13.6%
– Not sure, it hasn’t come up – 9.1%
2. If your company has conducted a buyback outside of Rule 10b-18, does it:
– Routinely conduct buybacks outside of Rule 10b-18 – 18.2%
– Occasionally conduct buybacks outside of Rule 10b-18 – 81.8%
– Inadvertently conducted a buyback outside of Rule 10b-18 one time – 0%
3. If your company has conducted a buyback outside of Rule 10b-18, did noncompliance involve:
– The volume limits – 44.4%
– The timing of repurchases – 0%
– The price of repurchases – 22.2%
– Use of more than one broker – 11.1%
– Other – 22.2%
Please take a moment to participate in this “Quick Survey on Proxy Solicitors” and this “Quick Survey on Delegation of Authority.”
Our New “Accountant Changes & Disagreements Disclosure Handbook”
I’ve added one more company to our failed say-on-pay list for 2012 on CompensationStandards.com as RBC Bearings failed during the past week with less than 30% support. We are now at 58 companies in ’12 that have failed to garner major support. Hat tip to Karla Bos of ING Funds for keeping me updated.
In this podcast, Dave Lynn and Marty Dunn discuss:
– Proposed changes to Rule 506 and Rule 144A under Title II of the JOBS Act
– Our upcoming conferences
– Favorite things about Ireland
Double Talk on Cost-Benefit Analyses
We want the SEC to conduct better cost-benefit analyses. But, in some cases, we want to rush rulemaking so they don’t have time to do them. And around and round we go. The fun of Congress. Learn more in this AdvisorOne article about a JOBS Act joint House hearing last week.
Here is a Huffington Post article discussing a study which puts the cost of the financial crisis at $12.8 trillion. However, the financial industry – and some members of Congress – don’t want such costs to be considered when evaluating new rules related to the crisis.
The Second Deal Cube Tourney: Round One; 16th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
Board Composition and Behavior
– Questioning board performance. Nearly one-third of directors believe someone on their board should be replaced. Diminished performance because of aging and lack of expertise were cited as the two primary reasons.
– Finding new directors. When seeking new board members, 91 percent of directors say they take suggestions from other directors, with 11 percent considering investor input for candidates. A quarter consider racial and gender diversity as “very important.”
– Reconsidering board leadership. About half of boards that have a combined CEO and Chair position are already discussing splitting the role at their next CEO succession.
– Self-evaluations prompt changes. Two-thirds of directors (66 percent) made changes during the last 12 months as a result of their full-board or committee self-evaluations.
– Continuing director education. Over half of directors (52 percent) believe some form of annual board education should be required. Of those with this belief, over 40 percent had less than four hours of outside training last year, and 21 percent did none at all.
– Time commitments increase. More than half of directors say the amount of time they spent on board work rose last year. Two-thirds of those increased their hours over 10 percent, and one-fifth more than 20 percent.
Executive Compensation
– Voices that influence compensation. Directors rate the following groups as “very influential” or “influential” when it comes to their boards’ decisions about executive compensation: 86 percent cite compensation consultants, followed closely by the CEO (79 percent), and then institutional investors (54 percent).
– Responding to say-on-pay. In the second year of say-on-pay, 64 percent of companies took some action to address voting results: 41 percent modified compensation disclosures, 29 percent made compensation more performance-based and 23 percent worked more closely with proxy advisory firms. Two percent of directors indicated that their companies decreased executive compensation.
– The influence of proxy advisory firms. Over 60 percent of directors estimate that proxy advisory firms have more than a 20 percent influence on proxy voting at their company. Almost half of directors rate quality of the firms’ work as “fair” or “poor.”
Strategy Oversight
– More time wanted on strategy. Strategic planning topped the board’s “wish list,” with over 75 percent of directors saying they want to devote more time to it, up from 60 percent of directors who wanted to do so last year.
– Getting the right information. Two-thirds are satisfied with the customer satisfaction research management provides, while nearly 72 percent are satisfied with information about employee values and satisfaction. However, a number of boards do not receive any information about either customers or employee satisfaction (20 and 16 percent, respectively); and 21 percent are dissatisfied with competitive intelligence.
Podcast: Whether the Conflict Minerals Rules Will Work
In this podcast, Dan McGroarty of American Resources Policy Network provides some insight into whether the SEC’s new conflict minerals rules will ultimately lead to the goal that Congress envisioned when it mandated the rulemaking in Dodd-Frank, including:
– How do you think the SEC’s recent conflict minerals rulemaking will impact corporate practices in using these minerals?
– What do you think companies should do in reaction to the rulemaking?
– How might activists proceed from here to target companies that still use minerals in countries with major human right violations?
For next Thursday’s conflict minerals webcast, the panel will not spend any time going over the actual rules – they’ll presume you’ve read some of the numerous memos (or maybe even the SEC’s adopting release). Instead, the panel will go over these 10 pressing questions on everyone’s mind.
The Second Deal Cube Tourney: Round One; 15th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
A few months ago, I blogged about how Congress blundered when drafting the STOCK Act as a loophole for spouses and children of members of Congress were not covered. Now a US District Court has preliminarily enjoined the enforcement of a STOCK Act provision requiring senior executive branch officials to disclose their financial transactions, as noted in this Huffington Post article. If you recall, instead of coming up with an insider trading law to cover just themselves, they decided to throw in a bunch of senior government employees without thinking it through…
Webcast: “M&A Deal Protections: The Latest Developments and Techniques”
Tune in tomorrow for the DealLawyers.com webcast – “M&A Deal Protections: The Latest Developments and Techniques” – to hear Greenberg Traurig’s Cliff Neimeth; Potter Anderson’s John Grossbauer; and Richards Layton’s Ray DiCamillo discuss the latest in “deal protection” techniques.
The Second Deal Cube Tourney: Round One; 14th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
Recently, Dave blogged about how Corp Fin has commented upon cybersecurity disclosures during the past year since the Staff issued CF Disclosure Guidance: Topic No. 2, Cybersecurity. Since then, Bloomberg ran this article noting how some high profile companies have received futures comments in this area (including Google and Amazon) (Gunster’s Securities Edge blog covered this yesterday). One member wrote in:
This story is consistent with my experience with a number of clients, some of who have only minimal cyberrisks – that they had determined not to be material – but were told that they needed to add a risk factor. Any company that has an attack described in the media should expect a comment, regardless of the level of attack. Most companies do not want to elaborate on the details in responses to the Staff, because doing so could make them more vulnerable.
Feel free to share your own experiences (on a confidential basis as always)…
Death Rattles for Mass Media Covering Business Stories?
As long as I am blasting reporters this week. When I returned from vacation a few Sundays ago, I was struck by how thin the Business section was for the NY Times. It was merely 8 pages long – and the last page was entirely comprised of ads. For the Sunday issue. I breezed through the section in about 3 minutes. And given my area of interest, I mainly focused on a lead article that claimed that SEC Commissioner Aguilar had voted against SEC Chair Schapiro’s proposal for money market reform without previously raising any issue with it. [Several years ago, the Washington Post completely disbanded a separate Business section other than on Sunday – now, any biz stories are buried in the middle of the “A” section.]
As money market reform is not in my bailiwick, I don’t have any strong opinions as to what is the proper reform – but I do know enough to believe that the NY Times article was wildly off the mark as Aguilar has actively participated in SEC roundtables on the topic going back as far as two years (as well as speeches). This article was corrected for this point the next day – but the tone of the article lived on.
My point is that I am much more likely to trust blogs written by folks in the field than reporters who have a tough job covering a wide sea of topics for which they have a passing familiarity, boxed in by the stress of strict deadlines. It doesn’t look good for the mass media unless they continue to transform their reporting model by using real pros to cover these highly specialized topics that are nearly impossible to pick up in a day. There are several examples of successful reporters doing this type of thing – the NY Times’ Steven Davidoff and Forbes’ Francine McKenna for starters (although to be fair, they are columnists. They may write about news but are paid to put a definitive, personal spin on it. We still need beat reporters to cover and analyze the news).
The Second Deal Cube Tourney: Round One; 13th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
Did you know that approximately 2000 people attend this Conference every year? And the vast majority of our attendees are in-house. They have figured out that we work hard to ensure that the panels are practical and that you leave with valuable knowledge – and new friends. If you haven’t been to our Conferences before, give it a try – particularly this year when New Orleans needs the tourism dollars. Here are the agendas for the event. Register Now.
In my capacity as the DJ for our Conferences – “Dr. Broc” – I’ll soon be putting together my set list. Here’s a sampling of last year’s set list. Feel free to send suggestions…
Congress Delays Bill to Increase Executive Power Over Independent Regulatory Agencies
I almost can’t write about this stuff anymore. I don’t like being so negative. But how are agencies supposed to be “independent” when Congress controls the purse strings – and now some in Congress want to ramp up the President’s oversight of these agencies through the `Independent Agency Regulatory Analysis Act of 2012,’ as noted in this DealBook article. And again, they are trying to get a bill passed without any hearings!
I just announced a webcast – “How the SEC Really Works” – in which you will learn how the various offices within the SEC work and the real role of the SEC Commissioners, etc. You also will learn how members of Congress (and their Staff) interact with the SEC.
The Second Deal Cube Tourney: Round One; 12th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
As someone who grew up being a wheeler-dealer in baseball cards – I amassed over 25k cards in the mid-70s when I was a young teenager – my head got turned when I read this article about how the Coalition for Accountability in Political Spending was using the tactic of handing out SEC Commissioner trading cards outside of the Union Station Metro Station (which is next to the SEC’s HQ) in an effort to have the SEC adopt rules that would mandate political contributions disclosures (remember the rulemaking petition in this area that received a quarter million comments). I love it (meaning the trading cards)! Here are pictures of the trading cards, as well as pics of the street teams handing them out, etc.
I hate the Citizens United decision. Living in a swing-state, I am witnessing firsthand the destruction to our society wrought by that wrong-headed decision. Something clearly needs to be done to fix the problems caused by the decision before we are truly living in that world dominated by Biff from “Back to the Future Part II.”
Wouldn’t it be groovy to have trading cards of the SEC Staffers themselves? Who would be the valuable Charizard? And would rare cards of folks that didn’t stay long be worth more than tenured Staffers who spent their entire careers there? “I’ll trade you a Howard Morin for a Bobby O and MaryAnne Busse, but only if you throw in a Terry Hatfield as a kicker”…
FINRA’s New Rule 5123: Kicks In Beginning December 3rd
Here’s news from Cleary Gottlieb: “On September 5th, FINRA announced a December 3rd effective date for new FINRA Rule 5123 (Private Placements of Securities). Upon effectiveness of the Rule, FINRA members that sell certain securities in private placement transactions under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D to individual, non-institutional investors who do not meet limited exemption criteria will be required to file the offering documents used, or file a notice stating no offering document was used, with FINRA within 15 days after the date of first sale. FINRA members also will have to file any material amendments to any filed offering document within 15 days after the date of first sale made using the amended document. All filings made under FINRA Rule 5123 will be confidential and submitted electronically through the FINRA Firm Gateway system.
FINRA Rule 5123 will not apply to many of the most common private placement transactions, including (i) sales pursuant to Rule 144A or Regulation S, (ii) sales to qualified institutional buyers (QIBs), institutional accredited investors, qualified purchasers, employees and affiliates (as defined in FINRA Rule 5123) of the issuer, eligible contract participants, or knowledgeable employees (as defined in the Investment Company Act), even if sales are made pursuant to Section 4(a)(2) or Rule 506, and (iii) sales of certain investment grade, non-convertible debt or preferred securities or certain short-term debt securities. Additionally, the filing required by FINRA Rule 5123 is a “notice” filing only. FINRA will not conduct any pre-sale review or clearance of any private placement offering documents.”
This September-October issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:
– Dealing With Activist Hedge Funds
– A Year-End Rush for the Exit? Tax Uncertainty and Transactional Planning
– Shareholder Activism Via Board Control Often Requires Long Range View
– The Nuts & Bolts of NDAs
– Asset Acquisition Due Diligence: Search for Hidden Unclaimed Property Liabilities Required
Companies incorporated outside of California but with significant California contacts (so-called “quasi-California corporations”) have struggled with exactly how to comply with the long-arm statute found in Section 2115 of the California Corporations Code. The statute purports to impose a number of provisions of the California Corporations Code on quasi-California corporations, including the state’s requirement to obtain separate approval from holders of each class of capital stock on a merger “to the exclusion of the law of the jurisdiction in which [the quasi-California corporation] is incorporated.”
Section 2115 has been thought to be legally infirm for some time, particularly after a decision by the Delaware Supreme Court in 2005. However, there never has been an acknowledgement by a California court that Section 2115 reaches too far. That changed earlier this year, when a California Court of Appeal stated in dicta that certain matters of internal corporate governance fall within a corporation’s internal affairs and should be governed by the laws of the corporation’s state of incorporation.
The Second Deal Cube Tourney: Round One; 10th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
SEC Enforcement Director Rob Khuzami recently penned this blog on the SEC’s ‘revolving door’ myth that I blogged about last month. We both saw things similarly – that the mass media was trying to turn the “revolving door” into something it isn’t, just as the academics found – and I was going to leave this blog at that.
Then I got mad. Last week, Bloomberg came out with this silly article – entitled “Top Bank Lawyer’s E-Mails Show Washington’s Inside Game” – in which I bet the reporters wrote the article’s title before they slugged through a bunch of emails from the SEC that they accessed via a FOIA request. In a way, I felt kind of sorry for them. I’m sure they were hoping for so much more.
I’m not sure why but the reporters decided to focus on former SEC Commissioner/Market Reg Director Annette Nazareth – and her big “abuse” is that she sent friendly emails to Commissioners and Staffers with whom she used to work with. The horror! In one email, she provides her ten cents on certain provisions of Dodd-Frank. What a scandal! And there is much more nonsense in this long and detailed piece. Do you think other emails traded with the Staff by thousands of others have a different tone than the ones singled out in the article? All of the highlighted emails were innocuous – with the crime that they were written by a human and not a machine. These are emails for heaven’s sakes. Not formal memos.
I kept reading, waiting for a smoking gun. But basically it showed that Annette did her job on behalf of her clients – and that the SEC did it’s job of not treating her differently. If anything, the article’s title should have been “We Stuck Our Noses In Other People’s Emails and Proved the Revolving Door Study Was Correct.” It’s really unbelievable that Bloomberg’s editors let this thing see the light of day (as well as the WaPo editors who re-ran the Bloomberg piece yesterday).
Sadly, other publications blindly decided to run with the theme floated in the Bloomberg piece, such as this Advisor One article. This New York Magazine article expounds on the Bloomberg piece and goes as far to liken the responsibilities of lawyers to journalists. Here’s an excerpt: “We don’t like these kinds of cozy relationships between journalists and the sources they cover, and we roundly criticize journalists who step over the line.” It’s news to me that this type of code applies to lawyers. In fact, all government agencies want input from the outside – without it, we would get laws that don’t work. [And I certainly wouldn’t characterize the type of emails in the article as “cozy.” They were normal informal emails. They weren’t talking about going to the ballgame together, etc. – and even that type of email doesn’t show anything sinister.]
The problem with this exaggerated journalism is that it could impact someone’s reputation. And even more importantly – looking at the big picture – it could cause some bright folks from deciding to ever work at the SEC. Why take a huge pay cut to serve your country if you will then be pilloried for continuing relationships with those you worked with when you leave?
So Bloomberg reporters, please step up and be real journalists. There is plenty of real news to cover these days. If you can’t think of anything, give me a half hour to troll through your emails and let’s see what I come up with. I imagine it will be a whole lot juicer than the trivial trove of nothingness that you found here…
NYSE Proposes 4% Average Drop in Proxy Distribution Fees
A few weeks ago, the NYSE filed this proposal with the SEC that follows up on some of the NYSE Proxy Fee Advisory Committee’s recommendations from May to streamline proxy distribution fees and make them more transparent. If approved by the SEC, the net effect of the proposed changes would be a decrease in proxy distribution fees of approximately 4%, with the impact depending on a company’s circumstances.
Dodd-Frank: SEC Sends Credit Rating Standardization Study to Congress
