Author Archives: Broc Romanek

It looks like the corporate governance expertise developed over the years at TIAA-CREF will now be spreading through the movement of personnel – as Chairman John Biggs moves to be head of the new Public Company Accounting Oversight Board and Ken Bertsch moves as Director of Corporate Governance at TIAA-CREF to Moody’s Investors Service to become their Vice President and Director, Corporate Governance.

Finally, the Justice Department and the SEC are taking action against Enron’s former CFO – see http://www.sec.gov/news/press/2002-143.htm.

In the seemingly neverending saga of how to interpret Section 402 (prohibition on personal loans to insiders) Senators Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations, and Susan Collins have sent a letter to Chairman Pitt urging the SEC to “resist any efforts” by lobbyists to weaken section 402. The exact text of the letter is at http://www.realcorporatelawyer.com/402letter.pdf.

According to reliable sources, the NYSE filed an amended proposal with the SEC last Friday with respect to shareholder approval of equity compensation plans and discretionary voting of “broker non-votes.” The SEC is expected to release the proposed rule today or tomorrow (with a 21 day comment period) – and then will be on the SEC’s web site.

The other corporate governance listing standards proposals would then be handled separately – and may be a few months away from formal proposal by the SEC (as it seeks harmonization between the NYSE and Nasdaq).

Tommorrow, the SEC and the Securities and Exchange Commission Historical Society host an oral histories roundtable – with a group of staffers from the early years of the Division of Enforcement weighing in. This is being held at the SEC’s HQ in DC. So much history is being created now, it will be interesting to compare the two eras…there will be a live webcast available for this at http://www.sechistorical.org/

In a speech today before the Council of Institutional Investors, Chairman Pitt noted that he has asked the Division of Corporation Finance to consider eliminating the “ordinary business” exclusion basis from the shareholder proposal rule. This basis – under Rule 14a-8(i)(7) – has been the most controversial basis under a very controversial rule.

This follows recent sentiment expressed by Chairman Pitt regarding the inclusion of a shareholder proposal regarding stock option expensing. Historically, this type of proposal has been excluded by the Corp Fin staff – and an appeal is pending before the Commission on this matter.

This also follows a recent rule petition that requests the SEC to revise the shareholder proposal rule to allow shareholders to elect directors through the proposal process.

Chairman Pitt’s speech before the Council of Institutional Investors is at http://www.sec.gov/news/speech/spch582.htm.

Yesterday, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) agreed to start eliminating the major differences between their rules. This is the first major step towards the creation of global standards – as the two groups cover companies in the U.S. and nearly 50 other countries.

As part of the goal to reach “convergence,” the groups first will tackle major philosophical differences in their approaches to rule writing (i.e. rules-based in the U.S. versus principles-based elsewhere) – and also will conduct major rulemaking projects together. The tentative goal to have the first set of uniform standards worked out by 2005 (which is the time by which European Union companies are required to adopt IASB standards).

Yesterday, Tyco detailed the alleged fraudulent arrangements with its former CEO, CFO and Chief Legal Officer in a Form 8-K filed at http://www.sec.gov/Archives/edgar/data/833444/000091205702035700/0000912057-02-035700-index.htm.

Sullivan & Cromwell (in a law firm client memo dated 9/12) has reversed its initial position that cashless exercise programs should be suspended until more guidance was available. Now, S&C believes that all forms of cashless exercise programs are permissible – as well as indemnification advances. As it was last month, the S&C memo may be a harbinger of a sea change in what law firms advise on these topics. This memo is located at http://www.realcorporatelawyer.com/Features/SullivanCromwell-Section402.pdf.

The recent struggle on the Worldcom board between court-appointed Richard Breeden and Stiles Kellett – as well as the revelations about General Electric’s payments to Jack Welch – further highlight the need to reform the way that boards work.

See two articles that touch on this topic – one by Nell Minow at http://www.usatoday.com/news/opinion/2002-09-16-opin-stockholders_x.htm – and the other from the Washington Post at http://www.washingtonpost