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."
Trying not to blog considering most of you are on vacation – and that we lost power here again! But there is always a lot going on. As noted in this excerpt from this SNR Denton memo (posted in our “National Security” Practice Area):
One of the key components of the new round of Iran sanctions legislation currently under consideration by the US Congress is a new US SEC disclosure obligation for SEC-registered “public” companies that are engaged, directly or indirectly through their affiliates, in certain Iran-related conduct. Section 501 of the House-passed bill (HR 1905) and Section 214 of the Senate-passed bill (S 2101) both would amend Section 13 of the Securities Exchange Act of 1934 (“Exchange Act”) to require that SEC-registered public companies make certain disclosures regarding Iran in their annual and quarterly reports.
UK Government to Require Mandatory Greenhouse Gas Emissions Reporting
Speaking of new disclosures, as noted in Gibson Dunn’s blog, the UK recently announced at that it will become the first country to require emissions data disclosure in companies’ annual directors’ reports. In comparison, the SEC issued an interpretive release early in 2010 providing guidance on existing US disclosure requirements as they apply to climate change matters.
More on “UK One Step Closer to Binding Say-on-Pay: On to Parliament”
Recently, I blogged about the UK’s march towards binding say-on-pay. Now, as described in this Davis Polk blog, the UK has published a consultation paper focusing on the content of remuneration reports of UK-incorporated quoted companies that would disclose the compensation of directors, including executive directors. Read the blog for more…
Yesterday, the SEC posted a Sunshine Act notice that it will consider a trio of Corp Fin rulemakings at an open Commission meeting on Wednesday, August 22nd. The trio of rulemakings is: conflict minerals, resource extraction and the elimination of the prohibition against general solicitation under Regulation D – the first two being Dodd-Frank rulemakings and the last one under the JOBS Act. We are in the process of pushing back our “JOBS Act Update: Where Are We Now” webcast to a date in early September so that this development can be covered soon after it happens.
The SEC’s announcement is more than 7 weeks in advance of the meeting, a much longer notice period than I can recall for any other open meeting. A single week is typical. Here are a few theories why the notice is so early:
– Stave off Congressional pressure? As noted in this WSJ article last week, 58 Congressfolk sent a letter to SEC Chair Schapiro asking why the SEC has missed the April 2011 deadline for the mining and resource extraction rulemakings. Perhaps because these rulemakings are among the most challenging rulemakings that the Staff has had to do in a long time, as the subjects are way outside the traditional securities laws. Interestingly, this notice comes out after Congress has gone on recess.
– Response to Oxfam America lawsuit that SEC wasn’t rulemaking fast enough? As I blogged recently, an activist group has sued the SEC to compel it to act on the resource extraction rulemaking. Perhaps this was in response to the lawsuit to make it go away.
As for the Regulation D rulemaking, note that wording of Item 3 in the notice doesn’t state that the SEC will consider whether “to propose” the rule. The wording of these descriptions are vetted carefully, so the absence of the term “propose” could imply an interim final rule, or perhaps something else. Recall that the JOBS Act called for this rulemaking to be finished within 90 days of the Act’s passage – Chair Schapiro testified before a House subcommittee last week that the SEC would not make the July 4th deadline. That tight deadline was never realistic…
What is a “Sunshine Act Notice”?
Under the “Government in the Sunshine Act,” the SEC – just like other federal regulatory agencies – must provide notice to the public before holding a Commission meeting. As noted in Section (e)(1), the notice must be announced at least one week before the meeting. There is no upper limit on the notice coming out sooner.
Note that in Section (e)(2) that the meeting date can be easily changed. A change in meeting date must be noticed too – but only as of the “earliest practicable time.” So it could be possible for the SEC to push back the August 22nd meeting date for one – or more – of the three agenda items if need be…
SEC Updates “Implementation of Dodd-Frank Act Rulemaking Timeline” to “Pending Action”
Yesterday, the SEC cleaned up its “Implementing Dodd-Frank” Timeline by removing all of the predictions of when the rulemakings might take place. Instead, all of the outstanding Dodd-Frank rulemakings are simply under a caption labeled “Pending Action.” This relieves the SEC from having to continuously update the timeline each time it misses a prediction…
Ode to Electricity
Seen on my wife’s Facebook status in the wake of a painful, widespread power outage in hot DC:
“Dear Electricity, please come back. I know I took you for granted…just, you know, used you. I miss your wit and charm, your warm glow and how very cool you are…so cool.”
Melissa Gleespen of Owens Corning recently shared her latest Regulation FD animated training video. She notes: “We hold an Investor Day every 18 months. In preparation, we hold in-person training with the presenters and those who will interact with investors. Our CFO specified that for the training I should make ‘one of those videos, a new one.’ This video was well-received. It got lots of laughs, showed that I am human and stimulated a robust discussion. I think that if I should ever show up with a PowerPoint presentation, I will be shown the door. I encourage other lawyers to try making training movies, too. It costs ones of dollars and there is unsuspected comedy gold in the practice of law.”
Here’s a podcast that I taped with Melissa from a year ago, along with her earlier work…
JOBS Act: Corp Fin Updates Its Confidential Submission Process Again
Yesterday, Corp Fin provided an updated announcement that merely says that EGCs and FPIs should continue to use the secure email system currently in place – but that Edgar will soon be reconfigured to allow for an EDGAR-based system for confidential and non-public submission of draft registration statements.
Report: Views on Use of “Virtual Annual Meeting” Services
Recently, Broadridge published a report – entitled “Guidelines for Protecting and Enhancing Online Shareholder Participation in Annual Meetings” – based on the views of a group it assembled to recommend “best practices” for electronic participation in shareholder meetings. The report’s conclusions are not that profound, but can be useful to help guide those using the Web to supplement its in-person meeting – and it includes a useful appendix that summarizes each state’s laws governing electronic participation in shareholder meetings.
Deal Cube Tournament: Round Two; 8th Match
Last match of the second round – this round sets up the Sweet Sixteen! 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, I blogged about corporate political spending. It’s a hot topic, but the numerous shareholder proposals on the topic have not received widespread shareholder support – although the first proposal did recently receive a majority vote as noted in this Davis Polk blog. And now there is a new Manhattan Institute study that claims that corporate political spending doesn’t hurt shareholders.
As noted in Jim Hamilton’s blog, some members of Congress are again (still?) pushing the SEC to adopt rules requiring disclosure of corporate political activity and to require a shareholder vote before being able to use funds for political spending. A push from someone in Congress in this area is essentially an annual rite of passage – but you never know when something might get traction on the Hill.
And one last item about The Conference Board’s corporate political spending conference I attended. One term that was bandied about was how to avoid being “Target-ized.” I asked Heidi Welsh of Si2 what that meant and here is her guidance:
Basically, Target gave $150k to a Minnesota political committee called “Minnesota Forward,” which was “business friendly” ie. in favor of lower taxes, less regulation, etc. Then Minnesota Forward gave the money to a Republican gubernatorial candidate, Tom Emmer. Emmer is against gay marriage and had taken some other strongly conservative social positions. The contribution was made known from media trolling of the state’s campaign finance disclosures – which are more robust than most – and gay rights groups felt the company had betrayed its commitment to the gay community (Target previously was well regarded by the Human Rights Campaign, etc.). So there was a nation-wide boycott. Very hard to quantify the impact on sales (it always is), but the publicity firestorm was intense and until now it’s been used as the index case for political embarrassment that can occur when companies dabble in politics.
Today, I think there are three more recent examples that are far more potent: 1. ALEC and Pepsi, Coke, etc., with “stand your ground” legislation (I think 14 companies have cut their funding to the group), 2. Wal-Mart lobbying against FCPA while knowing it quashed an internal investigation of bribery in Mexico, 3. the health insurance companies and the $86 million funneled through AHIP to the U.S. Chamber of Commerce on health care lobbying. The common denominator on all these three is that the money went to non-profit groups (either trade/501 c-6s or 501 c-3s) and thence into politics.
The challenge for companies is “how to address an apparently insatiable appetite for more information about how corporate money gets into the political arena?” Usually it’s not a straight-forward path as there are different definitions about what “political spending” is. My sense is that the general public’s definition is much broader than the one used by most companies. For example, this issue of “what is political spending” was in a Chicago Tribune article. Boeing apparently didn’t consider ballot initiative spending to be “political.” We found in our study of 2010 corporate political spending that companies spend quite a bit on ballot initiatives, but don’t always consider them political since they theoretically are non-partisan (but generally aren’t really).
Our analysis of all the S&P 500 political spending policies suggests that companies usually think it just means campaign spending directly to candidates, although this is changing. But the shareholder proponents on this topic have increasingly focused on indirect political spending, which encompasses money that is spent on both campaigns and lobbying, and on issue ads and campaigns from non-profits. While the investors in almost all cases are looking at company treasury money, the general public usually doesn’t perceive much difference between treasury and PAC money – even though the latter is from executives/employees, and isn’t “shareholder money” per se (unless you get into the issue of executive compensation, which many do). The 99 percenters don’t make these distinctions, however.
Does Corporate Spending Disclosure Impinge on Free Speech?
Check out Nell Minow’s blog entitled “‘Tis the Season of the Shareholders” on the important topic of whether forcing companies to make disclosures about their political spending is impinging on free speech.
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:
– Progress Report: Political Contributions & Lobbying Proposals
– Extension of the CPA-Zicklin Corporation Political Disclosure and Accountability Index
– How to Mitigate Disruptions at Your Annual Meeting
– ProxyMonitor.org: Tracking Fortune 200 Ballots & Voting Results
– ICCR’s ESG Shareholder Proposal Database
– US Season Preview: Governance Proposals
Deal Cube Tournament: Round Two; 7th 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:
I’m still reeling from the news that FINRA’s Corporate Financing fees are going way, way up as I recently blogged. As I blogged, FINRA’s new rates – effective this upcoming Monday, July 2nd – are as follows: the calculation is raised from 0.10 percent to 0.15 percent of the aggregate value of all securities on the offering document, plus $500. The maximum is raised from $75,500 to $225,500. In the case of a WKSI, such an issuer filing a shelf offering must pay the maximum fee of $225,500.
Last Friday, the SEC issued four releases publishing a group of FINRA’s with immediately effective rule changes that all raise various fees. This is the release that raises the Corporate Financing filing fee. As Suzanne Rothwell notes, this is a significant change. In the case of a $500 million offering, the filing fee was $50,500 and will now be $75,500. For a $1 billion offering, the fee was $75,500, the maximum, and will now be $150,500. In the case of REIT offerings, which generally register $2 billion on the initial and each follow-on registration statement, the fee is increased from $75,500 to $225,500. – a $150,000 difference.
Webcast: “Proxy Season Post-Mortem: The Latest Compensation Disclosures”
Tune in tomorrow for the CompensationStandards.com webcast – “Proxy Season Post-Mortem: The Latest Compensation Disclosures ” – to hear Mark Borges of Compensia, Dave Lynn of CompensationStandards.com and Morrison & Foerster and Ron Mueller of Gibson Dunn analyze what was (and what was not) disclosed this proxy season – as well as how the SEC’s new compensation committee and compensation advisor rules impact you.
Court Finds No Duty to Publicly Disclose Wells Notices
I’m feeling quite manly because my new “Legal Proceedings Disclosure Handbook” answered the question of whether receiving a Wells notice from the SEC’s Enforcement Division requires disclosure of the SEC investigation with a very lengthy answer that can be summed up as “it depends.”
Last week, as noted in this Morrison & Foerster memo, a US District Court in New York ruled that Goldman Sachs could not be sued for fraud under the federal securities laws for failing to publicly disclose that it had received a Wells notice. The court’s decision – Richman v. Goldman Sachs Group (S.D.N.Y. June 21, 2012) – held that there is no “automatic” obligation to disclose receipt of a Wells notice under the federal securities laws. The court went further, providing some guidance to companies grappling with the always-difficult issue of whether to disclose the receipt of a Wells notice.
Deal Cube Tournament: Round Two; 6th 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:
On Sunday, the Washington Post ran this front-page, lengthy article about the extent to which members of Congress trade in stocks of companies that lobby them. It is a meandering piece that explains how the new Stock Act fails to prohibit trading that can easily be perceived as giving an advantage to Congress (and fails to prohibit trading to the extent that laws reining in senior members of federal agencies do). To me, that is the central point – perception is everything. And that is reflected by the fact that nearly 2000 people have commented on the article – most of them raking Congress over the coals.
The bizarre thing is that the WaPo article gets into the details of a number of specific trades – but most of the dertails seem to clear the profiled Congress-folk of any wrongdoing (this blog agrees there were no smoking guns found). On the other hand, there are excerpts such as this that would sound like classic insider trading to the layperson:
“[a]t least 34 members of Congress recast their portfolios following phone calls or meetings with high-ranking Treasury Department and Federal Reserve officials during the economic crisis.”
The bottom line is that Congress should take the perception point to heart and either require all members of Congress to use blind trusts to trade – or at least impose upon themselves the same stringent laws that they apply to federal agencies…
SEC Posts Internal Memo on Conducting Economic Analysis for Rulemaking
Last week, the SEC posted its internal memo about how it will conduct economic analysis when it is involved with rulemaking in the wake of last year’s loss in the proxy access lawsuit in the District of Columbia Circuit court.
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:
– Anarchy Comes to an Annual Shareholders Meeting in Pittsburgh – And Executive Compensation is One of the Reasons!
– Loeb Tries to Win a Yahoo Proxy Battle, One Blog Post at a Time
– Six Companies to Provide More Auditor Information
– Questions that Shareholder Might Ask During Annual Meetings
– Exclusive Forum Proposal Survives No-Action Challenge
– AFL-CIO Releases Updated Proxy Voting Guidelines
Deal Cube Tournament: Round Two; 5th 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:
I’ve added 5 more companies to CompensationStandards.com’s failed say-on-pay list for 2012. We are now at 54 companies in ’12 that have failed to garner major support. Hat tip to Karla Bos of ING Funds for keeping me updated.
For this year’s pre-season poll predicting how many say-on-pay failures there would be, the results were as follows: Less than 10 failures – 5%; 11-20 failures – 13%; 21-30 failures – 24%; 31-40 failures – 20%; 41-50 failures – 17%; 50-99 failures – 24% and more than 100 failures – 24%. So once again, perhaps I predicted too few failures myself in designing the poll. But a hardy 24% predicted correctly…
The Latest on CEO/Director Background Diligence
Recently, I’ve blogged several times about the Yahoo resume saga. In this podcast, Keith Meyer of CTPartners provides some insight into conducting diligence into management and director backgrounds, including:
– How much vetting of a CEO candidate’s background should be conducted?
– What if the CEO candidate is an internal one? Is diligence still necessary?
– Should director candidates be vetted? Does it depend if they already sit on prominent boards?
– Who should conduct the diligence?
– Who should receive the results of diligence?
Transcript: “Looking Out for #1: How to Manage Your Career”
We have posted the transcript from our recent webcast: “Looking Out for #1: How to Manage Your Career.”
Deal Cube Tournament: Round Two; 4th 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:
Yes, Congress passed a comprehensive reform of the IPO process just a few months ago (JOBS Act). Yes, Congress did so without holding a single hearing. Yes, Congress is now complaining the IPO process is broken and needs reform. You can’t make this stuff up folks. One member asked: “If Congress reforms the IPO process 3x per year. How many years will it take for them to get it right?”
See this letter from the head of the House Financial Services Committee Darrell Issa (R-Ca.) – although Democrats are agreeing with this notion too. And here’s a WSJ article – and Prof. Bainbridge blog about it.
The Latest D&O Insurance Developments
In this podcast, Tom Bentz of Holland & Knight explains the latest in D&O insurance, including:
– What are the latest developments in D&O insurance?
– What role does the recent explosion in M&A litigation play in D&O insurance?
– What are some of the most common mistakes companies make regarding their D&O insurance?
– What should directors do now to make sure that they have broad coverage?
Deal Cube Tournament: Round Two; 3rd 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:
Yesterday, the SEC finally adopted rules that direct the stock exchanges to adopt listing standards for compensation committees and compensation advisers under Section 952 of Dodd-Frank (Section 952 added Section 10C to the ’34 Act). The Commission adopted the rules by seriatim.
The stock exchanges have 90 days from when the SEC’s rules are published in the Federal Register to propose listing standards (and they have one year to finalize them). As noted in Mark Borges’ blog, if the exchanges and the SEC move quickly, it’s possible that the listing standards could be in place in time for the 2013 proxy season. In any event, there will be at least one new disclosure requirement in place for the 2013 proxy season – the adopting release provides that companies must comply with the disclosure changes in Item 407 of Regulation S-K in any proxy statement for a regular annual meeting occurring on or after January 1, 2013. This Item 407 change requires disclosure of an assessment of whether any work performed by a compensation consultant raises any conflict of interest (and if so, to disclose the nature of the conflict and how it was addressed).
As Mike Melbinger’s blog notes, the SEC’s rules confirm that Section 10C does not require compensation committees to retain – or obtain advice – only from independent advisers. A listed issuer’s compensation committee may receive advice from non-independent counsel, such as in-house counsel or outside counsel retained by management, or from a non-independent compensation consultant or other adviser, including those engaged by management.
Tune in next Thursday, June 28th, for the webcast – “Proxy Season Post-Mortem: The Latest Compensation Disclosures” – to hear Mark Borges, Dave Lynn and Ron Mueller analyze what was (and what was not) disclosed this proxy season as well as discuss these new rules.
UK One Step Closer to Binding Say-on-Pay: On to Parliament
Yesterday, the UK took another step closer to mandating binding say-on-pay when Business Secretary Vince Cable presented a bill to Parliament mandating binding say-on-pay for consideration. Here is a page with information on the “Enterprise and Regulatory Reform Bill.”
As I understand it, it looks very likely that the bill will pass and perhaps be law by October of 2013. There would actually be three types of say-on-pay votes:
– Review of past compensation – non-binding and annual
– Prospective review on compensation policy – binding and would happen every three years so long as the company’s pay policy hadn’t changed; if it had changed, would happen annually
– Share plans – binding
The biggest debate is over the annual advisory vote – which is backward looking – and supermajority vote thresholds. This Manifest blog captures some of the debate. I’ll be blogging more on this as I figure it out.
What will happen now is that amendments to the Enterprise Bill are introduced in the House of Commons for debate. It then goes to committee and then to the upper chamber, the House of Lords, which then has their debate and committee and then if all is well, it is passed into law (unlike Congress, no riders or changes can be snuck in – only the bill that has been debated can pass). The Financial Reporting Council – which is a separate body and which looks after the UK Governance Code – will then do its own consultation regarding amendments to the UK Governance Code to ensure that the Law, as it applies to UK incorporated companies, will apply to listed companies. Thanks to Sarah Wilson of Manifest for helping to explain the UK process!
SEC Chief Accountant Kroeker Headed Back to Private Sector
Yesterday, the SEC announced that that Chief Accountant Jim Kroeker will leave the SEC in July to enter the private sector. No word on where he is headed…some conjecture in FEI’s Financial Reporting Blog.
Deal Cube Tournament: Round Two; 2nd 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:
