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."
Last month, I posted a popular list of “31 Top Pet Peeves for Earnings Releases” as voiced by my advisory board. Because this list was so well received, I collected some pet peeves from the advisory board relating to the proxy statement. Some of the pet peeves related the sometimes painful process of collecting information that feeds into the proxy statement. Others related to the drafting process and the proxy statement content itself. Here are the 34 proxy-related pet peeves that can drive you crazy during proxy season:
A. D&O Questionnaires – Directors & Officers Who:
1. Ask for “pre-completed” D&O questionnaires.
2. Have their admins fill out the questionnaire and then make you get answers to questions using only the admin.
3. Act like they’ve never seen a D&O questionnaire before – even though they’ve completed them many times before.
4. Return questionnaires without reading them carefully or at all (e.g. signed but completely blank, incorrect responses, or missing material information).
5. Need multiple reminders to respond to questionnaires.
6. Provide bios regarding their prior employment (e.g. title or years of service) that clearly conflict with press releases and other publicly available information.
7. Approve their bios every year – then suddenly make changes to the description of their prior employment or other service, which should have been made years earlier.
8. Sign off on bios and then complain after the proxy statement is printed that something is amiss.
B. D&O Questionnaires – Corporate Secretaries Who:
9. Needlessly long questionnaires asking directors and officers to confirm information that company already knows – e.g. current position of officer, base salary, bonus, equity grants, vested equity awards current position, etc.
10. Using the same questionnaires for independent directors and officers. Officers should not have to see questions related to director independence in their questionnaire.
11. Finding out about share transactions, which should have been reported months earlier. To make things worse, realizing that – as a result of these unreported share transactions – the director or officer is no longer in compliance with the company’s stock retention policy, which is touted in the proxy statement.
C. Drafting Process
12. When the Head of HR (or someone else in HR) runs the proxy process.
13. Explaining to the payroll department year-after-year that SCT salary is neither W-2 salary nor current salary rate (at least in cases where there has been a change that takes effect on any date other than first of the year).
14. When the content of the draft compensation tables does not align with what’s actually called for by employment agreements, equity grants, etc. It’s particularly awful when the draft tables are received very late in the process and the inconsistencies require everyone to track back through all of the existing disclosure, underlying documents and calculations to try to decipher and either change or appropriately footnote the controller or HR team’s basis for the numbers.
15. Dealing with admins who incorrectly or sloppily track perquisites (e.g., personal transportation) for officers.
16. NEOs who act like they’ve never heard of the proxy disclosure rules regarding perquisites, even though they are warned of them each year.
17. Getting grilled on perquisite disclosure rules because no one wants to tell the NEO that the perquisite is disclosable in the proxy statement.
18. When the back-up provided for a compensation table consists of a huge excel spreadsheet with endless tabs, requiring multiple phone calls regarding which tabs and columns are relevant.
19. Failing to document executive compensation throughout the year.
20. Anyone who misses a drafting deadline.
21. Certain departments (including lawyers) refusing to give you any responses to info requests or comments until after the 10-K has been filed, adding more time pressure to the proxy process.
22. Drafting the CD&A first and then trying to conform it to what actually happened (versus understanding the compensation committee process & decisions and then drafting).
23. Receiving extensive word-smithing comments to the draft CD&A from multiple departments and having to resolve them sentence-by-sentence due to egos involved.
24. Outside counsel who counsel you as if you just graduated from law school.
25. Outside counsel who don’t read what you wrote the year before.
D. Shareholder Proposals
26. Receiving a nutty social issue shareholder proposal. Worse, receiving multiple nutty social issue shareholder proposals.
27. Receiving a shareholder proposal as part of a mass submission from proponents who do not understand your company and don’t care that the proposal does not make sense for your company.
E. Proxy Statement Content
28. Directors who want the proxy written like “Warren Buffet’s letter to his stockholders.”
29. Wasting valuable real estate in the first pages of the proxy statement on proxy mechanics before presenting the ballot items. Every company describes the same mechanics, which are well known.
30. Using the same confusing and inconsistent boilerplate language every year to describe voting standards, abstentions, broker non-votes, street name vs. record holders, etc.
31. It would be helpful if companies could just provide a link to the SEC website in the proxy statement providing information on proxy mechanics. It could be part of a “green” initiative to reduce printing of unnecessary pages.
32. Being too focused on ISS, presentation, etc. and not focused enough on the actual SEC requirements and positions.
33. Filing the proxy card as an additional filing rather than as part of the proxy statement filing. Although this is common practice, there is no requirement to do so.
F. Post-Voting
34. Not providing percentages in the Form 8-K voting results. It is not required but would be very helpful.
Send me your peeves! And thanks to these members of my advisory board for their input: Cable General’s Luke Frutin; Hunton & Williams’ Scott Kimpel; Krasnow Saunders’ Steven Shapiro; Baker Hostetler’s John Harrington; and our own Julie Kim!
How the SEC Really Works: Commissioner Edition
I rarely accept speaking invites these days as I’m feeling a little old – but when I do, I typically do a spiel about “How the SEC Really Works.” That’s why I was excited to read Commissioner Aguilar’s parting statement entitled “(Hopefully) Helpful Tips for New SEC Commissioners.” It pairs nicely with my 2-minute video: “5 Steps to Becoming a SEC Commissioner“…
Transcript: “How to Draft Meaningful Sustainability Reports”
We’ve posted the transcript for our recent webcast: “How to Draft Meaningful Sustainability Reports.”
I’ve updated our “Corp Fin Org Chart” to reflect the coming return of Ted Yu, who will replace Michele Anderson as Chief of Corp Fin’s Office of Mergers & Acquisitions in early January. Michele recently was promoted to Associate Director and oversees that office among others. And Ted had left Corp Fin about 11 months ago to join Skadden…
How Many Regulation A+ Offerings Has the SEC Qualified?
In addition to this blog about the largest A+ crowdfunding offering qualified by the SEC (Elio Motors through StartEngine), here’s a blog by Steve Quinlivan:
Registered statements are “declared effective” by the SEC; Regulation A+ offering documents are “qualified” by the SEC, and when it happens an EDGAR document called “QUALIF” is generated. Per my review, the following Regulation A+ transactions that were filed after the effective date of the Regulation A+ rules have been qualified by the SEC.
– Med-X, Inc.: A Tier 2 offering for $15 million.
– ralliBox, Inc.: A Tier 2 offering for $3 million.
– Groundfloor Finance Inc.: This issuer has had two Tier 1 offerings qualified, the most recent for $1.5 million.
– Costal Financial Corp.: A merger proposal categorized as Tier 1 valued at $13 million.
– Strategic Global Investments Inc.: A Tier 1 offering for $2.8 million.
We have seen various initiatives intended to promote capital formation for smaller reporting companies and emerging growth companies. Among these initiatives, the development of venture exchanges in the United States appears to be gaining momentum. The exchanges would, in comparison to their larger national exchange counterparts (Nasdaq Stock Exchange, New York Stock Exchange, etc.), allow smaller or earlier-stage companies to list their shares and provide for some liquidity.
Support for the formation of venture exchanges has come from representatives from NYSE MKT and Nasdaq OMX, who in May testified before Congress as to the need and proposed structure of a venture exchange. Additionally, a push for legislation promoting capital formation, supported by testimony from a group of industry professionals, has led to the introduction of the Main Street Growth Act, which sets rules and listing standards for a new venture exchange. In February, SEC Chair Mary Jo White expressed at the SEC Speaks conference that the SEC has been encouraging rule changing that would promote the establishment of venture exchanges, as the SEC has approved of these in the past.
Also see this MoFo blog with notes from the recent ABA Fall Conference during which Corp Fin Staffers discussed capital formation developments – and this MoFo blog about an unlawful crowdfunding case that the SEC brought against an unregistered broker (also see this blog)…
Our December Eminders is Posted!
We have posted the December issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
Recently, Nasdaq solicited comment on its shareholder approval rules. It’s a broad – and general – request since the rules haven’t changed much in the 25 years since they were adopted. Nothing specific is proposed – so this is sort of like a concept release. And since these are complicated issues, the comment period runs until February 15th…
The Explosion of Governance Service Providers: Worth It?
Although corporate governance became a household name over a decade ago – in the wake of Sarbanes-Oxley – it’s only until this era of shareholder engagement emerged in the wake of mandatory say-on-pay that governance specialists have exploded upon the scene. There are a number of different types of governance specialists, starting with the small shops or solo practitioners comprised of folks that used to serve as corporate secretaries in-house. There are organizations such as CamberView that consist of those that used to work at institutional investors. There are those that are communication firms like Teneo that are filled with people that held senior management roles (but not as corporate secretary). And then there are more traditional players, law firm personnel, the Big 4 (who each have their own separate governance practice) and proxy solicitors. And of course, ISS provides those services too.
Recently, I asked a random group of folks what they thought of the bigger players in the governance services sectors and I got these responses:
– I have clients who use them – some like them a lot and some do not. It does seem to matter who you get, what your problems are and what you expect. If you don’t actually have any real problems and the CFO hired them just to make everyone feel better, that’s the least value-add.
– Investors like them – it’s easier for investors to deal with a company that has been “coached” by former investors like a CamberView.
– That’s because you know what you are doing in talking to shareholders, but a lot of people find it mystifying and they need a lot of help. Also, they can be in a position to deliver the bad news of telling the CEO: “yes, you absolutely have to let a board member speak because that’s what investors want.”
– It really shows is that proxy solicitors are missing a big opportunity to have more sophisticated services.
– They’ve become like McKinsey — no one ever loses their job for hiring them.
– They’re pricey.
– They’re often hired by the non-lawyers, CFO or boards etc. People who just want to do something. I think they sometimes clash with legal.
– They think they’re like a boutique I-bank, maybe in the activist space. It’s a crowded market.
Book Review: “Comebacks for Lawyer Jokes”
I view myself as quick-witted – but terrible at telling jokes. Here’s an illustration of that in this short video where I review the wisdom of Malcolm Kushner’s book – “Comebacks for Lawyer Jokes.” Stick around til the end for the bloopers:
A few days ago, ISS released QuickScore 3.0, which doesn’t have too many tweaks. US subscribers will now be able to determine whether companies across the Russell 3000 allow for proxy access or the ability of shareholders to nominate directors. And this Mike Melbinger blog explains the updated “Equity Plan Scorecard FAQs”:
ISS made a few changes to the its new EPSC tool (expect more), including: (a) renamed as “CIC Vesting,” the Plan Features factor formerly known as “Automatic Single-Trigger Vesting” and changed the scoring levels plan provisions on the accelerated vesting of outstanding awards on a change in control; (b) increased the period required for full points with respect to the Post-Vesting/Exercise Holding Period Plan Feature to 36 months (versus 12 months previously); (c) re-named the “IPO” model as “Special Cases,” to analyze companies with less than three years of disclosed equity grant data (generally, IPOs and bankruptcy emergent companies); (d) added a new Special Cases model that includes Grant Practice factors other than Burn Rate and Duration will apply to Russell 3000/S&P 500 companies; and (e) adjusted certain factor scores in ISS’ proprietary scoring model. More to come on EPSC issues in future blogs.
Happy Holidays! A Little Zach Deputy…
Enjoy yourself! I’m going to be listening to the one-man band of Zach Deputy…
One challenge we face is how to keep our reminders about the perils of illegal insider trading fresh. No one wants to sound like a whiner – and repetitive reminders tend to lose their value over time. That’s why I love this “Holiday Card to Directors,” which sneaks in a compliance reminder. Thanks to Ashley Bancroft of Consumers Energy for sharing!
Recently, I blogged about whether Edgar-plus services were in a state of decline – and I was surprised to learn how many services are still available still. For example, check out this RBsource Filings video that is only 2-minutes long & gives a nice demo…
Leasing Accounting: FASB Votes to Approve New Standard
At a November 11, 2015 meeting, the Financial Accounting Standards Board (“FASB”) voted to proceed with final revised standards for lease accounting. The new standards would require lessees to record certain assets and liabilities for all leases with a term in excess of 12 months. This is a departure from existing accounting standards, which require balance sheet presentation only for leases classified as capital leases. This change is anticipated to have a significant impact on balance sheets for a broad swath of companies, potentially resulting in recognition of material amounts of lease-related assets and liabilities for many companies. Companies and their advisors should consider now whether the new standards will affect compliance with financial covenants in existing or future debt arrangements.
A Spotlight On Benefit Corporations
Here’s a blog by MoFo’s Susan Mac Cormac and Andrew Winden:
Benefit Corporations and other impact-driven corporate entities, such as Delaware Public Benefit Corporations and California Social Purpose Corporations, are proliferating at a healthy pace. More than 30 states have enacted Benefit Corporation statutes and more than 1,000 companies have incorporated as Benefit Corporations or similar entities. With the number of impact-driven companies increasing rapidly, it is only a matter of time before the management of an impact-driven company decides to scale its impact through an initial public offering.
There are not currently any separate or additional SEC disclosure or other requirements applicable solely to benefit corporations or similar impact-driven companies. However, a registration statement must contain all material information necessary for investors to make their investment decision. The SEC has not established a definition of “material”, but the term has been elucidated through informal SEC guidance and federal court decisions. The leading U.S. Supreme Court decisions on the subject established that a fact about an issue is “material” if the fact would alter the total mix of information available to investors or a reasonable investor would consider the information important in making an investment decision.
Because the enabling statutes for impact-driven companies typically require such a company to provide an annual or biennial report describing its impact objectives and assessing its progress in promoting such objectives against internally established or third party standards, it would be prudent for an impact-driven company to include information about its objectives, standards and assessments of its progress during the periods for which financial statements are required (two or three years) in the registration statement and prospectus since the information is likely to be considered material to investors in such a company.
The Sustainability Accounting Standards Board has developed sustainability accounting standards comprising disclosure guidance and accounting standards on sustainability topics for use by US and foreign public companies in their annual filings with the SEC. These standards vary by industry and identify topics that may constitute material information for companies within each industry. Although designed to support the disclosure of financial sustainability information, that is, financial information regarding environmental impacts caused and incurred, by public companies in required annual and periodic filings (on Forms 10-K, 20-F, and 10-Q), these standards could be easily adapted for use in IPO registration statements for companies with sustainability objectives.
The Global Impact Investing Network’s Impact Reporting and Investment Standards (IRIS) provide a significantly broader set of performance measurement metrics across a very broad set of very specific social, environmental and other public benefit objectives. The metrics in the IRIS library could also be used to articulate public benefit objectives and standards for measuring an impact-driven company’s progress in promoting such objectives in a registration statement to give investors a clear understanding of the company’s success in promoting its impact goals. It is possible that the SEC may eventually adopt rules requiring impact-driven companies to state their objectives, standards for measuring progress and self-assessment of success in meeting the stated objectives as part of the disclosure requirements for such companies, although given the breadth and distinctness of possible impact missions it is unlikely the SEC will seek to establish specific standards that must be measured and disclosed.
Benefit Corporations, Public Benefit Corporations and their counterparts in other states reflect investors’ and managements’ increasing appreciation of social impact and other values beyond the maximization of strictly financial stockholder value. As these types of corporations eventually become listed reporting companies, we can expect rule making by the SEC, as well as accounting standards boards, to provide guidance on the kinds of new material information needed for these kinds of corporate entities to fulfill their unique duties.
– For most directors except for standing CEOs, maximum number of public company boards that a director can sit on before being considered “overboarded” reduced from six to five.
– There will be a one-year grace period until 2017, giving directors and companies sufficient time to make any changes in advance of the 2017 proxy season.
– During 2016, ISS research reports will highlight if a director is on more than five public company boards, but adverse voting recommendations will not be issued under this new overboarding policy unless the current maximum of six boards is exceeded.
– For CEOs, the current overboarding limit will remain at two outside directorships.
For board actions that significantly reduce shareholder rights without approval by shareholders (so-called unilateral board actions), the policy is being updated to distinguish between (1) unilateral board adoptions of bylaw or charter provisions made prior to or in connection with a company’s IPO and (2) unilateral board amendments to those documents made after the IPO.
On executive pay and transparency, the “Problematic Pay Practice” policy will be updated to add “Insufficient Executive Compensation Disclosure by Externally Managed Issuers (EMIs)” to the list of practices that may result in an adverse voting recommendation on executive compensation. This will apply when an EMI fails to provide sufficient disclosure to enable shareholders to make a reasonable assessment of compensation arrangements for the EMI’s named executive officers.
Director Compensation: Delaware Emphasizes Importance of Corporate Formalities in Facebook Case
The litigation against Facebook for their director compensation raised a question of first impression: whether a disinterested controlling stockholder can ratify a transaction approved by an interested board of directors by expressing assent informally, instead of using one of the prescribed methods under Delaware corporate law, and be able to shift the standard of review from entire fairness to the business judgment presumption.
The board’s decision to approve the compensation of outside directors in 2013 was governed by the entire fairness review as a self-dealing transaction. After the filing of the lawsuit, which we previously discussed here and here, Mark Zuckerberg, who controlled over 61% of the voting power, approved the compensation in a deposition and with an affidavit. The company argued that these actions were enough to ratify the compensation and thereby shift the standard of review to the business judgment presumption.
The Court of Chancery of the State of Delaware disagreed in this opinion. Stockholder ratification of a self-dealing transaction must be accomplished formally by a vote at a stockholder meeting or by written consent. In denying the company’s motion for summary judgment, the court concluded that even a single controlling shareholder cannot ratify an interested board’s decision without adhering to the corporate formalities spelled out in Delaware corporate law.
A decision by interested directors about their own compensation will be reviewed as a self-dealing transaction under the entire fairness standard, but can gain the protection of the business judgment rule if a fully informed disinterested majority of stockholders ratifies the transaction. Under Section 228 of the DGCL, unless the charter otherwise restricts, any action that may be taken at any annual or special meeting of stockholders may be taken by majority stockholder consent without a meeting, notice or a vote. However, notice of the written consent (the taking of the action) must be provided to non-consenting stockholders to ensure some level of transparency.
Due to the potential for abuse, Delaware courts have traditionally adhered strictly to the technical requirements that signify stockholder approval. This court noted that if affidavits are considered sufficient as ratification, that could eventually lead to “Liking” a Facebook post of a proposed corporate action as being enough to express approval.
Interview: CEO Who Raised All Salaries to $70k
If case you didn’t catch the recent episode of “The Daily Show” where Trevor Noah interviews Dan Price – the CEO of Gravity Payments – who discusses why he raised all salaries to $70k or more. It’s fascinating – and certainly should give one pause when thinking about whether a CEO who already makes $5 million per year needs another raise…
Recently, I noticed that the SEC posts lists about how each SEC Commissioner voted during closed Commission meetings. The matters discussed – and voted upon – during these closed meetings typically consist of enforcement proceedings (see my “SEC Enforcement Handbook” for analysis about the stages of an investigation that require Commissioner action).
This was the first time that I noticed this type of list posted on the SEC’s website – but apparently they aren’t new since I found this list of final Commissioner votes since ’06 (it’s possible that the compilation is newer than ’06). The lists are fairly crude and hard to navigate – but that’s because they are uploads of paper documents that the SEC’s Office of Secretary maintains (see how they’re manually marked).
Some of the hardcores out there may know that a tally of how each Commissioner voted has always been available to those that sought them – at least since 1967. They have been available in the SEC’s Public Reference Room since ’67, the year that FOIA was enacted by Congress. Here’s the language from the CFR that makes them public:
(2) Records available for public inspection and copying; documents published and indexed. Except as provided in paragraph (b) of this section, the following materials are available for public inspection and copying from 10 a.m. to 3 p.m., E.T., at the public reference room located at 100 F Street, NE., Washington, DC, and, except for indices, they are published weekly in a document entitled “SEC Docket” (see paragraph (e)(8)(ii) of this section):
(i) Final opinions of the Commission, including concurring and dissenting opinions, as well as orders made by the Commission in the adjudication of cases;
(ii) Statements of policy and interpretations which have been adopted by the Commission and are not published in the FEDERAL REGISTER;
(iii) Administrative staff manuals and instructions to staff that affect a member of the public;
(iv) A record of the final votes of each member of the Commission in every Commission proceeding concluded after July 1, 1967;
I’ve never been an ardent reader of the SEC Docket, so I’m not sure for how long it listed a tally of SEC Commissioner votes. I imagine it might have until the SEC started posting them online as reviewing online versions of the Docket from the last few years reveals that tallies haven’t been included recently.
I will soon be blogging about the Public Reference Room – and how it has shrunk over the years. Before EDGAR, it’s importance can’t be overstated. Interestingly, there are vestiges of the Public Reference Room littered throughout various documents of the SEC even today. For example, the Division of Trading & Markets hasn’t changed the boilerplate in SRO rule filing notices that says the actual application is available for review in the Public Reference Room. I’m pretty sure that isn’t true these days…
Do you think the “Public Reference Room” and the “Conventional Reading Room” are the same? The latter is mentioned on this FOIA page. I’ve never heard of a “conventional” reading room. How would it differ from an “unconventional” reading room? Perhaps dimly lit…
The SEC’s 4th Annual Whistleblower Report: 4000 Tips
A few days ago, the SEC’s Office of the Whistleblower published its 4th annual report for its activities of for the past year (see this memo). The highlights include:
– 4000 whistleblower during the 2015 fiscal year, an increase of 30% over 2012
– Paid more than $54 million to 22 whistleblowers since 2011
– Paid $37 million in 2015 fiscal year alone
– Nearly 50% of award recipients were current/former employees (of which 80% relayed their concerns internally before reporting to the SEC)
– 20% of award winners submitted their information anonymously to the SEC through counsel
– 20% of the awards were reduced because of an unreasonable reporting delay
SEC Chair White gave this testimony a few days ago on the SEC’s 2017 budget request (the Corp Fin stuff is summarized in this blog)…
Swingers: Training By Animation for Section 16(b) Liability
Use this 3-minute animation by Brooks Pierce’s David Smyth to train your staff about Section 16(b) short-swing liability:
A few days ago, Corp Fin Director Keith Higgins delivered this speech entitled “Executive Compensation: Looking Beyond the Dodd-Frank Horizon.” It’s definitely worth reading – and an easy read. It looks ahead to the SEC’s Disclosure Effectiveness project and it covers the executive pay disclosure waterfront (see Mark Borges’ blog on it), including:
DOJ Updates US Attorneys’ Manual for Yates Guidance
A few days ago, the DOJ revised the chapter on the “Principles of Federal Prosecution of Business Organizations” in the United States Attorneys’ Manual – commonly known as the “Filip factors” – to incorporate previously announced “Yates” guidance addressing the accountability of individual employees in civil and criminal investigations of corporate wrongdoing. The new policies require that to receive any cooperation credit, a company “must identify all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority, and provide to the Department all facts relating to that misconduct.” The new policies also clarify issues relating to the attorney-client privilege, timely self-reporting, foreign data privacy restrictions, and the prosecution of individuals.
SEC Enforcement: Self-Reporting Required for Deferred Prosecution or Non-Prosecution Agreement
At a recent conference focused on FCPA matters, Andrew Ceresney, Director, SEC Division of Enforcement, focused on the benefits of self-reporting and cooperating with the SEC on FCPA matters. Mr. Ceresney noted that the Enforcement Division has determined that going forward, a company must self-report misconduct in order to be eligible for the Division to recommend a deferred prosecution agreement or non-prosecution agreement to the Commission in an FCPA case. He also stated he was hopeful that this condition on the decision to recommend a DPA or NPA will further incentivize firms to promptly report FCPA misconduct to the SEC and further emphasize the benefits that come with self-reporting and cooperation.
While it is now known where the SEC stands, in reality the Enforcement Division’s position just implements historical practice. In each FCPA case where the SEC has previously entered into a DPA or NPA, the company involved self-reported the violations, and then provided significant cooperation throughout the investigation.
Without much fanfare, Glass Lewis posted its “Guidelines for the 2016 Proxy Season” on Friday, which includes a summary of the changes to its policies for the upcoming proxy season on pages 1-2. I say it was done “quietly” because I see no mention of it on the Glass Lewis blog or GL’s home page…
By the way, page 5 of the Glass Lewis policy updates includes a link to this 26-page “Shareholder Initiatives Guidelines” from earlier this year. There is no change in their look at proxy access on a case-by-case basis….
Dave & Marty’s “Pay Ratio Puppet Show”
Due to popular demand, we have posted the full 5-minute pay ratio puppet show that Dave & Marty performed at our recent “Proxy Disclosure Conference” on CorporateAffairs.tv. Check it out and then participate in the anonymous poll below:
Poll: Dave & Marty’s “Pay Ratio Puppet Show”
I find Dave & Marty’s pay ratio puppet show to be…
The D.C. Circuit issued a per curiam order denying the petitions of the SEC and Amnesty International for a rehearing en banc in Natl Assoc. of Manufacturers v. SEC, the conflict minerals case. No member of the court even requested a vote. The order leaves standing the decision of the three-judge panel, decided in August of this year (see this PubCo post). In that case, the panel, by a vote of two-to-one, reaffirmed its earlier decision, concluding that the requirement in the conflict minerals rule to disclose whether companies’ products were “not found to be DRC conflict free” amounted to “compelled speech” in violation of companies’ First Amendment rights.
Will the SEC file a petition for cert? Given that the panel viewed the more lenient standard of review for compelled commercial speech under the First Amendment (announced in Zauderer v. Office of Disciplinary Counsel) to be applicable only to disclosures in connection with voluntary advertising or product labeling — a position the SEC asserted in it brief “was unprecedented” — it would seem surprising for the SEC to let the panel decision remain without a further challenge.
Also see this Cooley blog entitled “Is a lot more at stake in the conflict minerals case than the conflict minerals disclosure rules?” – and this Elm Sustainability alert. It’s unclear whether Corp Fin now needs to act – they have been saying that the April 2014 statement by Keith Higgins continues to be operative. But maybe now that will change…
A few years ago, it looked like the SEC’s Enforcement Division was on the verge of bringing at least one climate change disclosure cases as a number of companies responded to informal inquiries. But nothing has resulted from those investigations so far. As noted in this blog by Kevin LaCroix, perhaps a state attorney general will be the first to bring an action in the end. Here’s an excerpt from the blog:
However, in the past week, the service of a subpoena on Exxon Mobil Corp. by New York Attorney General Eric T. Schneiderman has raised the possibility that an enforcement action against the energy giant relating to its climate change-related disclosures may be in the works. The Attorney General’s action also raises the question whether other companies and industries could also be targeted. These possibilities highlight possible corporate climate change-related enforcement and liability exposures.
In a November 5, 2015 press release, Exxon acknowledged that it had received a subpoena from the New York Attorney General “for production of documents relating to climate change.” The service of the subpoena follows a series of articles in the Los Angeles Times about the company’s climate change-related disclosures. The articles, and similar articles that appeared on the Inside Climate News website, suggest that Exxon knew of the climate change risks from fossil fuel use from its own research since the 1970s, yet extensively funded politicians and campaigns that expressed doubt over climate change science.
Don’t forget to tune in today for the webcast – “How to Draft Meaningful Sustainability Reports” – to hear Lou Coppola of the Governance & Accountability Institute, Kate Kelly of Bristol-Myers Squibb and Pam Styles of Next Level Investor Relations explain the keys to drafting sustainability reports that are meaningful to investors & other constituents and a “how to” list of things you should be aware of when drafting.
Found: Roving Billboard Tarnishing the SEC
A while back, I urged anyone that spotted the roving billboard that is lobbying against the SEC to take a picture. Someone forwarded this article that includes this pic:
