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."
A few days ago, I blogged on CompensationStandards.com’s “The Advisors’ Blog” about a sample voting instruction form to illustrate how the four frequency choices can be displayed on a proxy card (note the names of the directors). Mike Andresino of Posternak Blankstein & Lund weighed in that if management is recommending triennial as the frequency, then instead of ordering the choices, reading left to right, as “1-yr / 2-yr / 3-yr / abstain,” he would put the one the company wants first, like this: “3-yr/ 2-yr /1-yr / abstain” (this obviously would be tricky if management recommended biennial).
I confirmed with Broadridge that their systems could indeed process this type of change in order for all of its voting formats: paper, telephone, ProxyVote.com, and ProxyEdge. Whether transfer agents and tabulators can handle that remains to be seen.
And don’t forget that Mark Borges is maintaining a daily recap of the latest proxy statement filings and a scorecard of what frequency companies are recommending in his “Proxy Disclosure Blog.”
I am wrapping up the Winter 2011 issue of the Compensation Standards newsletter that will be posted right after New Year’s Day (available to all 2011 members of CompensationStandards.com). This issue will contain more practical guidance on say-on-pay preparation, supplementing the July-August 2010 issue of The Corporate Counsel that I wrote a few months back. One topic I tackle is what you need to check now to ensure that Broadridge’s systems work properly with other players in the meeting process so that tabulation is done correctly.
Since all memberships expire at the end of this month, renew now to receive this issue as soon as it’s out. Or try a no-risk trial if you are not yet a member to receive this issue as soon as it’s up.
The SEC’s Enforcement Logo: Now You See It, Now You Don’t
For a few months, the SEC’s home page contained an Enforcement “stamp” symbol, essentially an icon for the Enforcement Division. This icon was prominent on the upper right-hand corner of the home page, with links to the Division’s “headline” cases. Personally, I never understood why the Enforcement Division needed to be branded separately from the SEC itself – so I’m happy to see that iall has now disappeared.
– Why did the firm write the guide?
– Should in-house counsel consult the guide when a need for an internal investigation arises? Or is that too late?
– What are your favorite pieces of guidance in the guide?
Here are the survey results from our most recent Quick Survey, repeated below (compare to an identical survey we conducted three years ago):
1. Does your compensation committee:
– have a policy that it will not employ any compensation consultants who perform services for management – 30%
– not have such a policy, but does not intend to employ any of the same compensation consultants as management – 50%
– employ some (or all) of the same compensation consultants used by management – 20%
2. In practice, how does your compensation committee go about hiring an expert for making recommendations regarding CEO compensation?
– Management offers up a consultant to the compensation committee that it finds acceptable, subject to committee approval – 55%
– Compensation committee left completely on its own to find and hire whatever consultant it wants – 40%
– Compensation committee has not hired an expert for setting CEO compensation – 4.9%
3. Assume the company already is using consultant A for general compensation advisory purposes, will your compensation committee:
– Use the same consultant to help set executive compensation – 10%
– Use a different consultant to help set executive compensation – 70%
– Too early to tell what the compensation committee will do going forward – 20%
4. Regarding compensation committee charters, the committee has:
– A charter that states that the compensation committee will be the sole entity in the company to hire compensation consultants specifically related to CEO compensation – 80%
– A charter that states that both the compensation committee and management have the authority to hire compensation consultants specifically related to CEO compensation – 0%
– A charter that does not address who hires compensation consultants – 20%
Please take a moment to participate on this “Quick Survey on Regulation FD Practices.”
Social Media Within IR Web Pages
In this podcast, Darrell Heaps of Q4 Web Systems explains how companies can incorporate social media elements within their IR web pages, including:
– What is the Q4 platform?
– How is social media integrated into the platform?
– Can you give an example of a company using your platform so folks can see what it looks like?
More on our “Proxy Season Blog”
With the proxy season gearing up once more, we are posting 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:
– U.S. Proxy Season Review: Withhold Votes
– Is ISS Too Powerful?
– Seven Smart Practices for Shareowner Meetings
– Symantec Done With All-Virtual Shareholders Meetings
– Tabulators in the News
As I blogged last week, we are in the midst of a voting campaign among the ABA Journal’s Blawg 100. We’ve moved up to 4th place, behind two intellectual property blogs and the SCOTUS blog. We really need your support. If you value what you read all year long here, please repay us with 30 seconds of your time.
To help you navigate the ABA Journal’s voting framework, here are the steps you need to take:
a. If you voted last year:
1. You likely need to recover your password by simply inputting your email address. You will promptly receive an email with your password and screen name in it.
2. Once you have your password, you should login to their site
3. Once logged in, go to the “Niche” category and scroll down to TheCorporateCounsel.net Blog (it’s second from the bottom) and click on the “Vote” symbol to the left of that. Thanks!
b. If you didn’t vote last year:
1. Register to vote – it’s free. You don’t have to be an ABA member to vote nor do you even have to be a lawyer. When you pick a password, it must be at least 5 characters long (but it can be any 5 characters – eg. 11111). If you’re an ABA member, your ABA id/password won’t work for the ABA Journal’s site unfortunately as they are separate.
2. Once you activate your registration by clicking on the link emailed to you, you should login using the screen name and password that you picked when you registered.
3. Once logged in, go to the “Niche” category and scroll down to TheCorporateCounsel.net Blog (it’s second from the bottom) and click on the “Vote” symbol to the left of that. Thanks!
Here is this year’s promotional video that I taped during a conference in Chicago last week. It reflects the lethargic mood of our community during this year’s campaign – if we received the number of votes that we had last year, we would win again handily. Compare to last year’s promotion. If you’re having troubles voting, please shoot me an email and let me know and I can help you. Thanks for the support!
Corp Fin Fills Some Leadership Positions
Last week, Corp Fin announced the following promotions:
– Amy Starr, Chief, Office of Market Trends
– Kathy Hsu, Chief, Office of Structured Finance
– Mike McTiernan, Assistant Director, AD8 Real Estate and Business Services
– Amanda Ravitz, Assistant Director, AD10 Electronics and Machinery
– Suzanne Hayes, Assistant Director, AD12 Financial Services (this is the new 2nd financial services group that is not officially named yet)
We’ve updated our “Corp Fin Organization Chart.” Congrats to all five, it’s been quite a while since an Assistant Director slot was open so I know those spots were widely coveted…
Proxy Access Lawsuit: Two Amicus Curiae Briefs Filed
Last week, two amicus curiae briefs were filed in the lawsuit filed by the Business Roundtable and US Chamber of Commerce against the SEC’s proxy access rule – these briefs from the State of Delaware and the Investment Company Institute were filed in support of the plaintiffs. This is in addition to the initial brief filed by the plaintiffs a few weeks ago.
Meanwhile, the United Brotherhood of Carpenters’ approach to access this season is a letter writing campaign to 100 companies, where the union is seeking access to the company’s nominating committee. In addition, this union is still seeking triennial votes for say-when-on-pay, as noted in this comment letter from Ed Durkin to ISS.
– How much effort did it take to create the video?
– Did you get help on the technology side?
– How has it been received by those that have been trained with it?
More on “Dodd-Frank: An Unintended Consequence?”
Since I received such strong member feedback to my blog about silly SEC filings being forced upon some companies by Section 1503(b)(1) of Dodd-Frank (the miner safety provision), I thought I would share another one – this Form 8-K from Westmoreland Coal Company. I wish the reader response to my “Jimmy from Legal” was as strong! Real life always beats fiction…
On Wednesday, the SEC will hold an open Commission meeting to propose rules on mine safety and conflict materials, among other non-Corp Fin related items.
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:
– FASB Delays Proposed Multiemployer Postretirement Plan Disclosures
– Congress: The Mid-Term Election’s Impact on the Corporate Community
– Corp Fin Accounting Comments: What’s on the Radar?
– More on ” An Insider’s View of the SEC: Principles to Guide Reform”
– The Goldman Case and the Inspector General: The Costs
– Microsoft Latest to Dump PR Wires for Earnings Releases
Unfortunately, Congress eliminated a SEC self-funding provision from Dodd-Frank during the reconciliation process, as noted in this blog. As I’ve said before, I don’t understand how people expect the SEC to be truly independent if they have to constantly bow to political pressures, of which there are more lately than ever before. Note that the SEC has revised it’s “Dodd-Frank Implementation Timeline” to delay creating all the new Offices that Dodd-Frank requires – and here is the SEC’s detailed justification for this year’s budget request.
Given all the nonsense in Congress these days, I guess we shouldn’t be surprised to hear this latest news from Lynn Turner: Recently, the Consumer Federation of America and Americans for Financial Reform sent letters urging Congress to provide funding to the SEC and CFTC in amounts that will enable them to do their jobs (neither letter is posted online; but see this blog). In the past, Congress has provided insufficient funding for technology acquisitions, market specialists, and other tools necessary to do their job. Congress has also failed then to oversee the agencies and ensure they are getting their job done.
Congress is once again debating whether or not to fund these agencies adequately. This comes after Congress in the Dodd-Frank legislation required these agencies to carry out hundreds of rule makings, dozens of in-depth surveys and reports, and create new Divisions and Offices within the agencies. Yet some in Congress are now suggesting that while telling the SEC and CFTC they must implement the legislation, they must do it without any further resources.
There is at least one draft continuing resolution (CR) that shows an increase to $244 million in funding for the CFTC and no increased funding for the SEC. However, the House may do a full-year continuing resolution with funding for CFTC and SEC at the higher levels approved by appropriators – $285 million for CFTC and $1.3 billion for SEC. The Senate may come back with a part-year CR that includes no added funding for either agency. You may recall it was in the Senate that Senators Durbin and Inouye killed self-funding during the Dodd-Frank negotiations that would have alleviated this recurring annual problem and provided funding sufficient for the regulators to do their jobs.
As the one letter aptly says: “There is widespread agreement that our recent financial collapse was caused in part because regulators who had the authority to rein in bad practices did not do so. But just as regulators need the will to regulate, they also need sufficient funding so that their respective agencies can operate effectively and efficiently. It is not enough for Congress to increase the authority and responsibilities of these agencies without giving them the funding they need to fulfill those responsibilities. We therefore strongly urge Congress, as it finalizes its 2011 spending plans, to include the $286 million for the CFTC and $1.3 billion for the SEC included in Senate appropriations bills.”
“Smaller Reporting Companies”: A Surprising Number
In addition to breaking the news over the past few days about how the first batch of proxy statements filed with recommendations for “say-when-on-pay” looks, Mark Borges also blogged this gem recently on CompensationStandards.com’s “Proxy Disclosure Blog“:
A couple weeks ago, I participated in a panel on disclosure issues for smaller reporting companies at the ABA Business section Fall meeting in Washington D.C. Gerry LaPorte, the Chief of the Office of Small Business Policy in the SEC’s Division of Corporation Finance, was one of my co-panelists. Of the many interesting items that Gerry discussed, one statistic really caught me and the rest of the panel offguard.
This statistic involves the number of companies that self-identify as a “smaller reporting company,” For the period from October 1, 2009 through September 30, 2010 (the Commission’s latest fiscal year for which data is available), the number of entities filing annual reports on Form 10-K fell into the following categories:
This total does not include foreign private issuers, registered investment companies, registered employee benefit plans (which file on Form 11-K), and asset-backed issuers, which take the total of SEC-registered entities up to the “13,000” total which we often refer to when talking about the number of companies registered with the Commission.
I had no idea that nearly 50% of the entities that file Forms 10-K are smaller reporting companies. While these entities represent a sizeable number of the filings made on EDGAR, they make up significantly less than 10% of the total U.S. market capitalization. At least I now know why it’s sometimes difficult to find proxy statements with a full-blown executive compensation disclosure section (particularly during the “off-peak” months).
Joint Ventures in India
In this DealLawyers.com podcast, Steven Goldberg of Baker Hostetler discusses Scripps Networks Interactive joint venture with New Delhi Television, including:
– Can you briefly describe the background of the deal?
– Did any unique issues arise in connection with this joint venture?
– What pointers do you have for companies when approaching a joint venture?
On Monday, Corp Fin updated its “Financial Reporting Manual” for issues related to income averaging for significance testing, significance testing of equity method investees, reporting when there are both errors and changes in accounting, stock-based compensation in IPOs, internal control over financial reporting, selected financial data, MD&A, as well as other changes (see Topics 1600 and 9500). Corp Fin has been updating this Manual much more frequently than in the past – deciding to do minor tweaks here and there rather than overhauls every five years. Good idea.
Recently, Corp Fin Chief Accountant Wayne Carnall gave this slide presentation about common issues facing smaller issuers.
More on “The SEC’s New PCAOB Appointment Procedures: Time for New Board Members?”
Last month, I blogged about the SEC’s new procedures to appoint board members of the PCAOB – and then I went on to write about the three PCAOB board member openings (including the Chair) that have remained unfilled despite the Supreme Court removing the uncertainty that was hanging over the PCAOB’s head for a few years during the pendency of Free Enterprise Fund v. PCAOB.
In this recent Bloomberg article, it is rumored that former SEC General Counsel Jim Doty and former Corp Fin Director John Huber are among the leading candidates to serve as the next PCAOB Board Chair. This article coincided with this speech by SEC Chair Mary Schapiro at the annual AICPA Conference in which she stated that the SEC is in the final stages of the selection process for all three openings. So I imagine it will be any day now…
By the way, here is a nice speech from PCAOB Acting Chair Dan Goelzer about the PCAOB’s recent accomplishments and upcoming agenda that he delivered at the AICPA Conference yesterday.
More on our “Proxy Season Blog”
With the proxy season gearing up once more, we are posting 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:
– How Disruptive Shareholders at Annual Meetings Can Go to Jail
– Transfer Agents Take Up the Proxy Plumbing Mantle
– Trend: Taking Annual Meeting Questions from the Web
– Study: Review of 460 Annual Shareholder Meetings
– Investment Clubs Get Moxie
– impose a structure,
– assist board/committee in compliying with fiduciary duties,
– help ensure legal compliance, and
– give attorney-client privilege protection, when necessary.
Check it out and give Mike and Eric your feedback…
Study: Reissuance Restatements vs Revision Restatements
In this recent study, Audit Analytics conducted research about the various types of restatements and, among other things, found the following:
– In 2009, 44% of Reissuance restatements (those requiring an 8-K, Item 4.02 disclosure because past financial statements could no longer be relied upon) were issued in the subsequent Form 10-K instead of a 10-K/A.
– Since 2005, both Reissuance restatements and Revision restatements (those not requiring an 8-K, Item 4.02 disclosure) have declined, but Revision restatements have increased as a percentage of overall adjustments.
We just mailed the hard copies of Lynn, Borges & Romanek’s “2011 Executive Compensation Disclosure Treatise & Reporting Guide” to those that ordered it. As you can imagine, our members believe this is a critical resource for this proxy season. This hard copy of the 2011 Treatise is not part of CompensationStandards.com and must be purchased separately – however, CompensationStandards.com members can obtain a 40% discount by trying a no-risk trial now. We will then quickly deliver this 1000-plus page comprehensive Treatise as soon as you try the trial.
If you need assistance, please call our headquarters at (925) 685-5111 or email info@compensationstandards.com.
We are grateful that our blog has made the ABA Journal’s Blawg 100 for the third year in a row. You may recall that our blog won the voting contest among the 100 last year, the first year that the Journal put the Blawg 100 head-to-head in a round of voting.
This year, the voting is much more competitive and we currently stand in 8th place, behind such players as TaxGirl and IP Watchdog (who is way out in front). So we really need your support, particularly since our blog is sort of hidden in the obscure “Niche” category. It’s time for the corporate community to represent! If you value what you read all year long here, please repay us with 30 seconds of your time.
To help you navigate the ABA Journal’s voting framework, here are the steps you need to take:
a. If you voted last year:
1. You likely need to recover your password by simply inputting your email address. You will promptly receive an email with your password and screen name in it.
2. Once you have your password, you should login to their site
3. Once logged in, go to the “Niche” category and scroll down to TheCorporateCounsel.net Blog (it’s second from the bottom) and click on the “Vote” symbol to the left of that. Thanks!
b. If you didn’t vote last year:
1. Register to vote – it’s free (if you’re an ABA member, your ABA id/password won’t work for the ABA Journal’s site unfortunately as they are separate)
2. Once you get your password, you should login emailed to you
3. Once logged in, go to the “Niche” category and scroll down to TheCorporateCounsel.net Blog (it’s second from the bottom) and click on the “Vote” symbol to the left of that. Thanks!
If you’re having troubles, please shoot me an email and let me know and I can help you. Thanks for the support!
Nugget #3: Board Evaluations – Individual Evaluations are More Important in Light of Proxy Access
Recently, I started dribbling out some of the gems that Alan Dye and I shared a number of years ago during a series of “50 Nuggets in 50 Minutes” webcasts. Here is #3:
Board Evaluations – Individual evaluations are more important in light of shareholder access – The need for the nominating committee to evaluate incumbent directors has become clearer as the movement for shareholders to have a greater ability to nominate their own candidates grows [editor’s note: this was written in ’03; now that access is here, it truly apply]. For the nominating committee to evaluate incumbent directors, it needs information – and individual evaluations is one logical way to gather this information.
The latest surveys show that only 25% of public companies conduct individual evaluations. The most popular individual director evaluation method is the use of self-assessment questionnaires. Anyone who handles these evaluations should take care as this process can be quite political!
Poll: Who Should Play “Dave the Animal” in the Feature Movie?
A topic of interest among members is which characters will Dave and I play now that the Dodd-Frank Act has rendered “Billy Broc” Oxley and Dave “The Animal” Sarbanes obsolete (these characters were made infamous during these “The Sarbanes-Oxley Report” videos). So Dave and I seek your input into who we should be pretend to be now in this anonymous poll:
Without much fanfare, ISS recently released its final postseason report about the 2010 proxy season – which has a load of interesting statistics – which we have posted in our “Proxy Season” Practice Area.
DOJ Proclaims “New Era” of FCPA Enforcement
Here is news culled from this Morrison & Foerster memo: In a speech last week on the Foreign Corrupt Practices Act, the head of the U.S. Department of Justice’s Criminal Division proclaimed a “new era of FCPA enforcement.” Assistant Attorney General Lanny Breuer said enforcement of the FCPA is “stronger than it’s ever been — and getting stronger.” He described “historic” growth in FCPA actions and penalties ($1 billion+ in past 12 months and 35 individuals awaiting trial) and took on critics of the DOJ’s increasingly aggressive enforcement strategies. You “are right to be more concerned.” “We are here to stay.” Mr. Breuer concluded with concrete advice to companies “worried” about the new climate of “vigorous” enforcement, including encouraging companies to self-report.
According to this blog, you shouldn’t be surprised to see NBA star Ben Wallace in law school one day. That would be one mammoth lawyer!
Mailed: November-December Issue of The Corporate Executive
The November-December Issue of The Corporate Executive includes pieces on:
– Trap for the Unwary: Carrying Forward Contributions Under a Section 423 ESPP
– IRS Issues Private Letter Ruling on Division of Restricted Stock Pursuant to Divorce
– Purchase Date as Grant Date: Not a Bad Idea for Purchase Date FMV Only ESPPs
– The Box: Awards Contingent Upon Shareholder Approval of an Additional Allocation of Shares to the Plan
– Section 6039 Forms Expected Any Day Now
– Conducting Risk Assessments–A Step-by-Step Action Plan
– Examples of Effective Say-on-Pay Disclosures
As usual, Dominic Jones has been providing great coverage about how two companies recently experienced leaks on their IR web pages – where earnings information was released inadvertently ahead of the planned release time (see his coverage of Disney and NetApp). In addition to this coverage, Dominic blogged this piece yesterday: “IR website vendors explain how they prevent disclosure leaks.” It’s worth checking out to help ensure your company won’t experience this type of snafu.
Recently, I enjoyed reading Nell Minow’s piece about overcoming adversity and some reader responses like this one. Good piece to show my kids.
The Latest on IASB’s Loss Contingency Standard
Similar to the controversial FASB project to update its loss contingency standard (see this blog for the latest on that), the IASB is working on updating its own contingency standard. Here is news, courtesy of Tom White of WilmerHale: At its meeting on November 16, the IASB decided to modify its proposed standard for recognition of a loss contingency, IAS 37. Responding to comments – including the letter submitted by an ABA Committee – the IASB decided to modify the proposed recognition standard to reinstate the requirement that the preparer determine that it is more likely than not that a liability exists. The IASB also decided to provide more guidance about how to apply the standard to litigation contingencies. The IASB has also indicated that, in light of other priorities, it does not expect to return to IAS 37 until the 2nd half of 2011, at the earliest.
FASB Announces Post-Implementation Review Process
As Edith Orenstein blogs in FEI’s “Financial Reporting Blog,” the Financial Accounting Foundation (FAF) – which oversees the FASB – announced the launch of a post-implementation review process. This action follows up, in part, on a recommendation made by the SEC’s Committee on Improvements to Financial Reporting (CIFiR) aka the “Pozen Committee” – so named in honor of its chair, Bob Pozen. The recommendation was one of many recommendations aimed mainly at the SEC, but also at FASB and the PCAOB, in the final CIFiR report issued in August 2008. Edith also blogs about the appointment of the new FAF CEO (Terri Polley) and four new trustees.
