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 joint survey conducted by ACCA/NACD was just released with some interesting results. A poll of 600 directors and general counsel demonstrates significant agreement about who bears responsibility for the recent wave of corporate governance scandals – and considerable doubt about the proposed remedies. See http://www.acca.com/Surveys/resp_corpgov.pdf.
As requested by the SEC after the short-lived Sandy Weill nomination for the NYSE board snafu, the NYSE has started the reform of its own corporate governance – with a special committee recommending disclosure of NYSE officer compensation and bars from such officers sitting on NYSE-listed company boards. See http://www.washingtonpost.com/wp-dyn/articles/A21876-2003Jun5.html?nav=hptoc_b.
Recently, CalPERS sent letters to the companies in the Wilshire 2500 index informing them that they withhold their vote for the election of audit committee members as directors if the auditor provides non-audit services. This appears to be aimed at certain forms of tax related consulting and information systems design and implementation services, which are permitted under SEC rules with audit committee approval – without regard to the dollar amount of those services or their relation to the amount of total audit fees. CalPERS does exclude preparation of tax forms and SEC compliance documents from the types of non-audit services that to which it objects.
Yesterday, the NASD proposed that the CEO and Chief Compliance Officer of member firm to jointly certify annually that the firm has adequate compliance and supervisory policies and procedures in place – see http://www.nasdr.com/pdf-text/0329ntm.pdf.
To counter Senator Biden’s “legislative history,” the ABA’s comment letter to the SEC on certifications addressed the applicability of Section 906 certifications to Form 6-Ks, 8-Ks and 11-Ks – see http://www.sec.gov/rules/proposed/s70603/aba051303.htm.
We have posted the transcript of our recent webcast that we held on “Shareholder Access to the Ballot” – we have decided to make it available free to anyone (not just subscribers) to help frame this important debate – see http://www.thecorporatecounsel.net/Audio/05_21_03_transcript.htm.
The panelists included: Andrew Brownstein, Partner, Wachtell Lipton Rosen & Katz; Richard Ferlauto, Director of Pension and Benefit Policy, AFSCME; Lawrence Hamermesh, Professor, Widener University; Richard Koppes, Of Counsel, Jones Day; Ted White, Director of Corporate Governance, CalPERS; and Beth Young, Senior Research Analyst, TheCorporateLibrary.com and Corporate Governance Consultant.
We are hearing that the SEC staff will soon be issuing the long-awaited Regulation G FAQs (yes, i know we have heard that before) – we will post as soon as they are available.
Congrats to Amy Starr and Consuelo Hitchcock, who were named as Senior Special Counsels to advise Director Alan Beller. David Lynn returns to Corp Fin to become Chief Counsel (the big stud) – and Brian Breheny leaves Clifford Chance to become head of the Office of Mergers & Acquisitions.
The SEC is seeking to bar Ernst & Young from taking any new public company clients for 6 months due to alleged breaches of independence. See the Washington Post article at http://www.washingtonpost.com/wp-dyn/articles/A51527-2003May28.html.
For Section16.net subscribers, we have announced a June 24th “Nuts and Bolts” webcast on how to make Section 16 electronic filings – see http://www.section16.net/webcast/0603-b.htm.
At yesterday’s open Commission meeting, the biggest surprise was the SEC’s acknowledgement of the massive workload required for internal control attestations – the SEC moved back the effective date of the Section 404 internal control report from this fall to the middle of next year. “Accelerated filers” will file their first report for fiscal years ending after June 15, 2004 – all others can wait until their fiscal years ending after April 15, 2005.
Here are some significant components of the final rules under Section 404 of Sarbanes-Oxley:
– clarification that quarterly report unnecessary; rather, only material changes to internal controls needs to be disclosed quarterly
– the definition of “internal control over financial reporting” is not defined by referring to defintion under AU Section 319 – rather, the definition relies on the one in the COSO Report – and the SEC has built the COSO definition into the rules. In addition, the definition includes language from Section 103 of Sarbanes-Oxley (i.e. the specific assertions about internal control matters that registered
public accounting firms must make) – and includes the component of internal control over the safeguarding of assets.
– foreign private issuers and financial institutions that are under other regulatory internal control regimes will be “accommodated” by the SEC – but will not be exempted from the new rules
The SEC adopted the CEO/CFO certification proposal substantially as proposed.The SEC’s press release on these actions is at http://www.sec.gov/news/press/2003-66.htm.
For TheCorporateCounsel.net subscribers, we have provided 3 new disclosure analyses: which companies have adopted QLCCs; how companies are disclosing their pre-approval of non audit service policies; and which companies have suspended/terminated split dollar arrangements. These analyses are in our “Disclosure” Practice Area at http://www.thecorporatecounsel.net/member/FAQ/Disclosure/.
The SEC has moved its open Commission meeting on internal control reports – and CEO/CFO certification placement – from Wednesday at 10 am to today at 2 pm.
Last Wednesday, Representative Richard Baker introduced a bill (H.R. 2179) that would enhance SEC authority by letting the SEC assess higher fines, obtain bank records and serve subpoenas. In addition, the bill would force states to channel money from securities settlements to the SEC’s Fair Fund (one of the reasons for the bill is because NY has not yet given investors any funds from the historic Wall Street settlement reached a few weeks ago).
The bill was referred to the House Financial Services subcommittee. The bill would supersede laws in several laws, including FL and TX, that allow defendants to keep their homes regardless of legal findings against them. Rep. Baker said that he drafted the bill with help from the SEC.
The bill would increase fines to as much as $2 million, up from the current $600,000 maximum. The bill would also let people, such as attorneys, give information to the SEC about company activities without having to give it to other parties, such as those involved in a lawsuit against the company. The text of the proposed legislation is at http://thomas.loc.gov/cgi-bin/query/z?c108:H.R.2179.
In a closely watched vote, Intel shareholders narrowly missed approving a shareholder proposal at Intel regarding expensing stock options – 48% of shareholders voted in favor of the proposal yesterday.
Today is our webcast on “Shareholder Access to the Ballot” – it is expected that the 6 panelists, with differing perspectives and viewpoints, will provide useful information in shaping this important debate – see http://www.greatgovernance.com/members/AudioCenter.html.
