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 35-minute podcast, Ann Yerger discusses her career – including:
– How did you get into this field?
– What’s it like running an association?
– How did governance change during your decade running CII?
– How is your role running EY’s Center for Board Matters different than working at CII?
– What changes do you foresee in the governance arena going forward?
– What types of work tasks are your favorite to work on?
This podcast is also posted as part of my “Big Legal Minds” podcast series. Remember that these podcasts are also available on iTunes or Google Play (use the “My Podcasts” app on your iPhone and search for “Big Legal Minds”; you can subscribe to the feed so that any new podcast automatically downloads…
Bob Stebbins Named as SEC’s GC
Yesterday, the SEC announced that Bob Stebbins will become the next General Counsel for the agency. Hailing from Willkie Farr’s NYC office, Bob primarily has worked with M&A, private equity, VC and investment funds…
Perks: Other Shoe Drops in SEC’s Enforcement Case
As noted in this blog, the SEC brought an enforcement action against MDC Partners back in January for not disclosing perks for a former CEO adequately. At that time, the company agreed to pay a $1.5 million penalty.
Last week, the SEC announced it had settled with the former CEO himself – and that he paid $5.5 million ($1.85 million in disgorgement, $150k in interest and a $3.5 million penalty). That’s big money!
Here’s an excerpt from the SEC’s press release:
According to the SEC’s order, shareholders were informed in annual filings that Miles S. Nadal received an annual perquisite allowance of $500,000 in addition to other benefits as the chairman and CEO of MDC Partners. But the SEC’s investigation found that without disclosing information to investors as required, MDC Partners paid for Nadal’s personal use of private airplanes as well as charitable donations in his name, yacht and sports car expenses, cosmetic surgery, and a wide range of other perks. All total, Nadal improperly obtained an additional $11.285 million in perks beyond his disclosed benefits and $500,000 annual allowances. He has since resigned and returned $11.285 million to the company.
Here’s one of the best pieces I’ve seen written about gender diversity on boards – and it’s written by an institutional investor! Board diversity is one of those topics that I find hard to blog about because its depressing. The data shows that there has been little progress over the past decade – for both gender & racial diversity. Bear in mind that it’s been a decade since this has been targeted as a major governance issue. Everyone seems to agree it’s a big problem – yet things don’t really don’t seem to be changing. At least in the US.
For gender diversity, one of the reasons why boards aren’t being diversified fast enough is the gap in perception between male & female directors regarding the magnitude of this problem. Another is the myth that there aren’t enough women at the top of the ladder who can serve as candidates. Meanwhile, boards that aren’t diversified are failing to reap the benefits that diversity produces.
Now I don’t believe that disclosure about diversity is going to fix the problem – but I do think that a regulatory push might be necessary because it seems quite clear that boards don’t seem willing to fix this problem on their own. Many countries in Europe have found success by requiring a minimum level of female directors on boards (30%). It might be time for such a drastic solution…
9 Board Diversity Notables…
Here are 9 other board diversity notable items:
1. In this blog, Bob Lamm waxes more on the topic – and so does Doug Chia in this blog.
2. Here’s Equilar’s new “Gender Diversity Index” – which is a chart that tracks the progress of women on Russell 3000 boards – currently at 15.1% as of 12/31/16. Based on an analysis of the growth rate over the past 4 years, the study projects that parity wouldn’t be reached until 2055.
4. Don’t forget we have posted the transcript for our recent webcast: “Board Refreshment & Recruitment” – which tackled board diversity disclosure & more.
6. In 2016, as noted in this new study, fewer than 15% of all board seats in the Fortune 500 were held by minorities.
7. This recent study by Board Governance Research/IRRCi shows there is scant age diversity on S&P 500 boards.
8. In celebration of “International Women’s Day” recently, 40 stock exchanges hosted a bell ringing ceremony to raise awareness of the pivotal role the private sector can play in advancing gender equality to achieve the UN’s SDG 5.
9. The state of Pennsylvania recently passed a resolution to “encourage” companies incorporated there to promote gender board diversity. Not worth much because it’s aspirational…
The Diverse Board…
This 1775 painting from Thomas Beach – entitled “The Hand That Was Not Called” – seems to capture today’s “diverse” board:
As noted in this press release, Lucas Moskowitz was named the SEC’s Chief of Staff yesterday. From the cover page of this Form F-1, it looks like new Corp Fin Director Bill Hinman worked with new SEC Chair Jay Clayton on Alibaba’s IPO. Yesterday was Bill’s first day on the job…
Former Corp Fin Accountant Busted for Ethics Violations
This SEC Enforcement announcement really caught my eye. I don’t recall a SEC Staffer ever being criminally charged over trades executed while they were working at the SEC. An accountant who worked in Corp Fin for 16 years – starting in ’98 – failed to accurately report trades he engaged in. And then lied about it when questioned. He also engaged in prohibited options trading. After rising to the level of branch chief, the dude was ultimately let go for other reasons – then this crazy situation was revealed. He disgorged $50k in profits – and paid another $50k in penalties. He also pled guilty to criminal charges brought by the DOJ.
As explained on the SEC’s complaint (pg. 3), the SEC has a host of ethics rules that require Staffers to pre-clear and report their trades – as well as hold any securities purchased for at least 6 months. In addition, certain types of trades are prohibited (eg. options & derivatives). When I was on the Staff, this was never an issue for me as I didn’t earn enough to be playing in the stock market…
Farewell to Rich Ferlauto: A Governance Pioneer
A sad farewell to Rich Ferlauto, a pioneer for shareholder rights – and someone who worked hard to better conditions for all investors. And all humans. I first met Rich when he launched the Office of Investments at the AFL-CIO. He then helped AFSCME become active in the area of corporate governance. Then he went to the SEC, where he served as Deputy Director of the Office of Investor Education.
Even when he became sick, Rich was very active, trying to save the planet despite his condition. He co-founded the 50/50 Climate Project. I met with Rich several times over the past year or so to discuss his latest endeavors. Always an optimist. Always looking to help others. He was a force – and will be missed.
Just coming back from a nice holiday in Japan & Hong Kong (see my pics on Instagram). Last Thursday marked my 15th anniversary – 15 years! – of my blither & bother on this blog (note the “DealLawyers.com Blog” is nearly 14 years old – not shabby!).
It’s the one time of year that I feel entitled to toot my own horn – as it takes stamina & boldness to blog for so long. A hearty “thanks” to all those that read this blog for putting up with my personality. As I was one of the first lawyers to blog, my track record is among the longest as a blogger – lawyer or otherwise…
Japan/Hong Kong: Crowdfunding & Fund Ads
When I travel overseas, I keep my eye out for unique things that pertain to our field. One of the wildest things that I saw was a Bridgewater Associates video on the plane as we were landing in Hong Kong. Unfortunately, I can’t find the video on the Internet – it shows a group of business people in a huge office realizing the value of crowdfunding – then, they all come together to push down the walls from the inside to collapse a huge Wall Street-looking building.
Even better was this poster ad that I saw in a Tokyo subway station. It promotes a Daiwa Securities fund – check out the dude’s face in the middle. A look of utter fear! And one of these persons is a famous Japanese actor (Ken Watanabe – Godzilla, Last Samurai). It’s like putting Tom Cruise’s face on a prospectus.
Cap’n Cashbags: 15 Years of Blogging
In this 20-second video, Cap’n Cashbags – a CEO – tries to convince his director friend that 15 years of blogging is worth celebrating…
Dig this 170-page Form 10-K for the US Government! It was drafted at the behest of former Microsoft CEO Steve Ballmer (the guy who bought the LA Clippers a few years ago for a cool $2 billion) – and his “USAFacts Institute” project.
The “Top 5” things that tickled me (page numbers are those of the PDF – not the ones from the actual doc):
1. Includes the standard “forward-looking statements” disclaimer, but it is tailored! (pg 5)
2. Executive pay data for the US officers – where’s that equity comp? (pg 152)
3. Executive pay data for state governors – Maine gov is underpaid! (pg 153)
4. Related-party transactions – ie. political contributions (pg 154)
5. Cover page notes that all US governments have $15.1 trillion in aggregate debt (pg 1)
While I love that all the exhibits are numbered 99.xx, I think they missed a real opportunity to include the Constitution as “Exhibit 3.1,” the Bill of Rights as “Exhibit 3.2,” and so on. Hat tip to Bjorn Hall of Rise Companies for pointing this gem out!
IPO alternatives appear to be alive and well as we learn from press reports that unicorn music service Spotify may go public through a “self-filing,” also known as a “direct listing.” In my first book, over 10 years ago, I talked at length about the potential value of this very straightforward technique. Assuming you otherwise qualify for an exchange listing, you simply file to register some already outstanding shares for trading, without raising new money, and off you go. Recent self-filers include Coronado Biosciences.
T+2 in Practice: Three Implications Not to Be Missed
This Weil blog by Howard Dicker & Kaitlin Descovich provides some great practice pointers about the shortened settlement period. Also see these memos about the rule change in our “Settlement” Practice Area…
Grimes’ decision marks the failure of the SEC’s game plan to pursue Hill through an in-house administrative proceeding, a strategy approved by a federal appeals court in Atlanta last June after more than a year of litigation by Hill.
Critics of such proceedings, which were championed by former SEC enforcement chief Andrew Ceresney, say they are unfair to defendants because there are no juries and limited depositions, and because judges are on the SEC payroll. Federal appeals courts have divided on the proceedings’ constitutionality, raising the prospect that the U.S. Supreme Court may take up the issue.
I’m very excited to announce that Liz Dunshee has joined us as an Editor for our sites. Liz is an “all-star” in every sense of that word, as you’ll soon find out. She’s based in Minneapolis – her email address is included in her bio if you want to drop a line. She’ll be blogging soon enough.
Given her tender age, Liz is poised to take over this enterprise from me someday – when either my paws can’t hammer this keyboard anymore or I refuse to write “conflict minerals” one more time…
Did you know? The term “conflict minerals” has been mentioned in over 200 entries in this blog! #ThoughtThisWasaSecuritiesLawJob
White Collar Crime in a Post-Bharara World
Here’s some analysis of where the SDNY might be headed in the wake of Preet Bharara’s ouster:
Book Review: How to Make An Effective Corporate Video
Recently, I read the new book by Vern Oakley entitled “Leadership in Focus: Bringing Out Your Best on Camera.” For those that watched my “Usable Proxy Workshop” a few years back (the video archives from that excellent event are still available), you’ll remember Vern as the filmmaker that helps many companies with their corporate videos. This new book is easy to read, filled with interesting anecdotes & stories to bring home the points that Vern wants to make. My favorite type of book!
Here’s some of my favorite chapters, along with an explanation about why I feel that way:
1. “Speak from Your Heart: Connect with Millions“: A more humanizing presentation holds the viewer’s attention & helps connects them to your ideas. Too many videos – and blogs! – are bereft of any humanity. You want the video to feel “authentic” (but not sharing too much, of course – share what’s appropriate).
2. “Nobody Wants Perfect“: Building authenticity means bringing your guard down a little. Show some vulnerability. That shows courage. Your flaws can motivate people to listen to you more closely.
3. “The Leader Has No Clothes“: There is no failure, only feedback. And you want to provide feedback, not criticism. Empathy builds trust. If your trusted advisors aren’t offering the kind of objective feedback you want, share this book!
4. “Anatomy of an Effective Video“: Good practical stuff!
As noted in this WSJ article, the bartering to tweak the “Financial Choice Act” continues. Most of the Corp Fin-related notables in the bill remain untouched (eg. pay ratio would still get the axe) – but there are a few proposed changes that would impact you, such as changes to the ownership thresholds under Rule 14a-8, the shareholder proposal rule. This chart contains the changes – so far – from “Financial Choice Act 1.0.”
Of course, it’s still too soon to say what form the Choice Act will ultimately wind up taking – and even too soon to know if this legislation will eventually be “the one” put forward to replace Dodd-Frank…
By the way, the White House recently issued this memo, which affirms that its executive order with the “kill two rules-for-adopting one” mandate isn’t binding on independent agencies – like the SEC. But this new memo also reaffirms President Trump’s encouragement that independent agencies voluntarily abide by this mandate. The new memo dovetails with OMB’s Interim Guidance from a few months back on this topic…
Katherine Blair: Life as a Corporate Lawyer
In this 32-minute podcast, Katherine Blair of Manatt Phelps discusses her long & enjoyable career, including.
– Where did you grow up?
– How did you wind up becoming a lawyer?
– How did you wind up selecting securities laws?
– How has practicing in a law firm evolved over time?
– What is corporate practice in Los Angeles like?
– How active are the LA County & California bars?
– What types of tasks do you enjoy the most?
This podcast is also posted as part of my “Big Legal Minds” podcast series. Remember that these podcasts are also available on iTunes or Google Play (use the “My Podcasts” app on your iPhone and search for “Big Legal Minds”; you can subscribe to the feed so that any new podcast automatically downloads…
Resource Extraction: 12 Senate Democrats Want to Try Again
Recently, a group of a dozen Senate Democrats sent this letter to the SEC asking that they try again with a resource extraction rule. I wouldn’t bet on that happening. This counters the letter that 6 Senate Republicans sent down to the SEC a few months ago…
The big news from Wells Fargo a few days ago was that the company’s board exercised its discretion to clawback $75 million from its former CEO and former head of community banking. Here’s the 113-page Wells Fargo board report – and here’s the news:
Recently, Corp Fin denied a no-action request from Celgene to exclude a shareholder proposal submitted by John Chevedden. The proposal sought a bylaw that would prevent the board from seeing a running vote tally when say-on-pay or shareholder approval of plans were on the ballot. The company made unsuccessful arguments under Rule 14a-8(i)(2) (arguing it was a state law matter) – and (i)(7) ordinary business. Over the years, Corp Fin has allowed exclusion of shareholder proposals that sought confidentiality for preliminary vote tallies for uncontested matters under (i)(7) – a broader plate of topics than the narrower “pay topics only” proposal at issue in this case.
Conflict Minerals: NGOs Say “Ignore Corp Fin Guidance”
As noted in this Cooley blog, a number of non-governmental organizations have issued statements emphatically rejecting Corp Fin’s recently updated statement about the effect of the Court of Appeals Decision on the conflict minerals rule – and they’re asking companies to disregard the Corp Fin guidance…
Yesterday, the self-effectuating changes – under the JOBS Act – to many of the SEC’s ’33 Act & ’34 Act forms became effective – since the rule changes were published in the Code of Federal Regulations. I originally blogged about this a few weeks ago, several days before the SEC put out their press release about it – not sure why the SEC waited to do that, but it seems to have caused some confusion among loyal readers (that along with my unartful title of that blog).
Most of these changes impact cover pages, which will help the SEC identify whether a filer is an “emerging growth company” or not. In other words, your cover pages will now change for these forms regardless if your company is an EGC or not.
Six employees at KPMG LLP have resigned after the U.S. audit regulator began investigating the leak of a confidential plan to inspect work performed by the global accounting firm, the company said Tuesday. The departing KPMG employees include four partners and Scott Marcello, a partner and the head of the firm’s audit practice, according to KPMG. The firm confirmed the matter after being contacted by The Wall Street Journal. Mr. Marcello couldn’t immediately be reached for comment.
The Public Company Accounting Oversight Board, created by Congress after the accounting scandals that took down Enron Corp. and WorldCom Inc. to police audits of listed companies, has hired an outside law firm to probe the breach, according to people familiar with the matter. The accounting board discovered the leak more than a month ago, according to the people, and the incident has sparked renewed concern about the management of the regulator, which has been criticized as moving slowly to advance new audit standards.
Revenue Recognition: Are Most Companies Behind?
Here’s an excerpt in this blog from “The SEC Institute”:
The second recent development is the release by Deloitte in a “Heads Up” newsletter in April 2017 of their most recent updated survey “Adopting the New Revenue Standard — Where Do Companies Stand?” In the survey, Deloitte found that many companies that had originally contemplated using a full retrospective have moved more towards the modified retrospective method. And, along with the worries of the SEC Chief Accountant above, they also found: “Slightly more than half of respondents had started to implement the new standard, but most were in the very early phases of adoption.”
Just when the U.S. is looking at how to roll back its regulations on corporations (among others), the rest of the world seems to be headed in the opposite direction. On Tuesday, the EU Parliament approved a Shareholder Rights Directive, which introduces, among other things, the concept of binding say-on-pay votes for companies listed in EU markets (over 8,000 of them). The Directive also includes some interesting measures intended to impede short-termism.
According to the fact sheet issued by the European Commission, the Directive must still be adopted by the European Council (expected shortly) and, assuming adoption, will become effective two years thereafter.
To date, 1,972 Russell 3000 companies have held Say on Pay votes and 93% have passed with above 70% support. 31 companies (1.6%) have failed Say on Pay thus far in 2016; no additional companies have failed since our last report. Proxy advisory firm ISS has recommended ‘Against’ Say on Pay proposals at 12% of companies it has assessed thus far in 2016. Our special topic this week features a breakdown of Say on Pay results for S&P 500 companies compared against all other companies in the Russell 3000. So far in 2016, smaller companies are receiving higher average Say on Pay support compared to larger companies despite having a slightly higher failure rate. This development is a reversal from prior years when larger companies had noticeably stronger Say on Pay results.
Alex Lajoux: Evolving Corporate Governance
In this 34-minute podcast, Alex Lajoux, former Chief Knowledge Officer of the NACD, talks about her amazing career, including:
1. Where did you grow up?
2. How did you get into this field in the 1970s?
3. How has the NACD grown over the years?
4. How has governance changed during that time?
5. What are you doing now?
This podcast is also posted as part of my “Big Legal Minds” podcast series. Remember that these podcasts are also available on iTunes or Google Play (use the “My Podcasts” app on your iPhone and search for “Big Legal Minds”; you can subscribe to the feed so that any new podcast automatically downloads…
