Over on the “Mentor Blog,” I recently blogged about how to handle a director who wanted to take notes at a board meeting. Jon Cohen of Snell & Wilmer had this awesome response to my post: “I had a ‘discussion’ with a director of a client who insisted on taking, and retaining, detailed notes of board meetings. When he couldn’t be easily dissuaded, I offered him this custom-made note pad. After that, we had a much better discussion.”

In the March-April issue of “The Corporate Counsel” print newsletter – which was mailed a few months ago – check out our own analysis of note-taking during board meetings, as well as our comprehensive analysis of board minutes & resolutions…

“Celebrity” Directors: Sometimes Not a Good Thing

Recently, I blogged about how Shaq should be considered a legitimate director despite his celebrity status. I was reminded by some members that sometimes a celebrity director is not that hot an idea. Here’s one story that a member sent in:

We had a client about twenty years ago whose CEO was a buddy of a former NFL player and they put him on the board. This ex-NFL guy wasn’t the sharpest knife in the drawer. To make a long story short, the poopy hit the proverbial fan with the company, with all sorts of potential for people to second-guess board decisions. It’s at this point that the ex-NFL guy is talking to one of my partners and says, “Boy, I’m glad I’m only a celebrity director. The real directors are in a tough spot here, aren’t they?” My colleague broke it to him gently.

Happy Anniversary Baby! 17 Years of Blogging & Counting

A few weeks ago marked my 17th anniversary – 17 years! – of my blither & bother on this blog (note the “DealLawyers.com Blog” is nearly 16 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 amongst the longest as a blogger – lawyer or otherwise…

And “double thanks” for John & Liz joining our team a few years ago. It’s been great to have such wonderful people to work with – and they certainly can blog as well as me, or anyone else out there!

– Broc Romanek

Yesterday, SEC Chair Clayton issued this statement indicating that a roundtable on short- and long-term management of companies will be forthcoming. The date & agenda are not yet known. This follows the SEC’s “request for comment” in December about the nature, content and timing of earnings releases & quarterly reports…

By the way, Chair Clayton will also host a roundtable of former SEC Chairs during the SEC’s 85th anniversary “program & dinner” coming up on June 3rd. This kind of roundtable normally would be fascinating, but I think a lot of alumni are going to that thing to catch up with each other & won’t be too interested in programming. But what do I know…

The SEC is Questioned Over Lag Bringing Volkswagen Case

Here’s the intro from this WSJ article:

A federal judge sharply questioned why securities regulators took so long to sue Volkswagen AG over its bond offerings, years after other government agencies resolved litigation over the auto maker’s diesel-cheating scandal. U.S. District Judge Charles Breyer on Friday suggested the SEC’s March 2019 lawsuit makes it look like a “carrion hawk that simply descends when everything is all over and sees what it can get from the defendant,” according to a transcript provided to The Wall Street Journal.

The judge also ordered the SEC to provide a timeline on when it learned of each fact behind its case — and explain its legal reasoning behind waiting to file the suit—before he would let the case move forward.

Collecting Fines: The Challenges the SEC Faces

Here’s the intro from this WSJ article:

Wall Street watchdogs often tout the fines they levy on alleged wrongdoers. Yet much of that money is never collected. The SEC over the five years ending in 2018 took in 55% of the $20 billion in enforcement fines set through settlements or court judgments, according to agency statistics. During the prior five years, from 2009 through 2013, the SEC collected on 60% of $14.6 billion.

And in 2018, the commission collected just 28% of almost $4 billion. That rate—the lowest in a decade—was due in part to an unusual $1.7 billion settlement with the Brazilian oil company Petrobras that may never require payment to the SEC. The SEC has struggled for years to get defendants to pay more of their fines, although some are almost certain to avoid payment forever. That includes people who went to prison on related criminal charges, or people behind Ponzi schemes who spent the funds they took from defrauded investors.

Meanwhile, this study shows that the SEC’s enforcement actions against companies remain at near-record levels despite the government shutdown…

– Broc Romanek

In my self-anointed role as “keeper of the weird” for some of the notables related to the SEC, it’s high time that I share this story. When the SEC announced – fifteen years ago – that it was moving its headquarters from 450 Fifth Street to 100 F Street, I got sentimental & started to inquire about what would happen to the massive letters that comprised the main signage above the entrance of the old HQ. Somehow I reached a facilities person that was the guy for this purpose.

I sent him an email asking whether I could obtain the letters when they were taken down. As you can see from this picture, there were 43 letters bolted into the wall – I was gonna distribute a letter to each of my friends that had worked at the agency with me:

I was surprised when I soon heard back that I would indeed be receiving the letters when they came down. Joy! A few months later, I knew the SEC’s move was complete & the letters had come down. I emailed my guy. Nothing. Tried again a few weeks later. Radio silence. One last try. Nada. I gave up.

A few months later, I emailed the guy because I was feeling sadistic. Amazingly, the guy immediately responded that if I came down right away, he would be happy to share. I was on the way! When I got there, I didn’t receive all 43 letters – but I did receive this nice collection:

So I got that going for me. Since the letters were attached to marble tile, the mounting bolts are four inches long. As Warren Buffett once responded to me when I asked him to speak at our executive pay conference, “If you don’t ask, you don’t receive. And sometimes even if you ask, you still won’t receive.” In this case, I did indeed receive…

Warren Buffet Says Many “Independent Directors” Aren’t

Here’s the intro from this “Directors & Boards” article:

Warren Buffett, the chairman and CEO of Berkshire Hathaway Inc. who’s known as the Oracle of Omaha, slammed independent directors for being too focused on their paychecks, and not on keeping the CEO in check. “You don’t get invited to be on boards if you belch too often at the dinner table,” Buffett said at the company’s annual meeting in Omaha, Neb.

“I’ve been on 20 public company boards; I’ve seen a lot of corporate boards operate. The independent directors, in many cases, are the least independent,” he explained. If directors get about $250,000 a year, and that’s an important part of their income, he added, “they’re not going to upset the apple cart.” The incentive for those directors, he continued, is to go along with the CEO. That way, if the CEO of another company calls about that director, he or she will be described as having never raised any problems. “How independent is that?”

Also see John’s blog about Delaware’s Chief Justice Leo Strine thoughts on the role of independent directors…

– Broc Romanek

It was twenty years ago today
Sgt. Pepper taught the band to play
They’ve been going in and out of style
But they’re guaranteed to raise a smile
So may I introduce to you
The act you’ve known for all these years
Sgt. Pepper’s Lonely Hearts Club Band

Can’t believe it’s been twenty years since I last left the SEC as a Staffer. At the time, I was working for a SEC Commissioner. So my “going away” party was held in the SEC’s “Closed Commission Room.” That’s the room where the Commissioners meet to discuss & vote upon the agency’s enforcement actions. Very cool.

That party was quite different than when I left the SEC after my first tour of duty – that one was morning juice & coffee for the dozen or so people in my “branch.” Both types of parties were beautiful in their own way. Anyway, I thought I would excerpt a blurb from this blog about why working at the SEC is such a special experience:

Although some aspects of each ‘going-away’ party at the SEC varies depending on the circumstances, the constant is that a supervisor(s) makes some kind remarks – and then the person leaving speaks. That alone is quite powerful and something that I haven’t experienced at my numerous other jobs during my career. These are not big drinking events. In fact, they traditionally are done on the SEC’s premises at the end of the workday and they end by 6 pm. So they are short & simple – they are a stark reminder that everyone that works at the SEC is on the same team…

Always Have a Vacation on the Calendar

Thought I would borrow the title from my blog yesterday on “Broc Tales” to note that I’m starting a 5-week sabbatical this Monday – completely unplugged. Starts to make up for all the missed vacations over the years to my dear wife…

SEC IDs: Old School Style

Just found my SEC ID from my 1st tour of duty at the SEC back in the late ’80s:

– Broc Romanek

Since digital assets are in the news in the wake of Corp Fin’s big announcement a few days ago, I couldn’t resist this: Given that I maintain “The World’s Largest List of Flintstones Characters,” I was drawn to the debate over whether the Flintstones lived in a bitcoin & blockchain world. Here’s the intro from this Financial Times’s article:

There’s a lot of sense in Nouriel Roubini’s column for Project Syndicate on ICO flimflam and it’s all undone by one big mistake: “The fact that everyone within a given country or jurisdiction uses the same currency is precisely what gives money its value. Money is a public good that allows individuals to enter into free exchange without having to resort to the kind of imprecise, inefficient bartering on which traditional societies depended.

That is precisely where the ICO charlatans would effectively take us – not to the futuristic world of “ The Jetsons,” but to the modern Stone Age world of “ The Flintstones” where all transactions occur through the barter of different tokens or goods. It is time to recognize their utopian rhetoric for what it is: self-serving nonsense meant to separate credulous investors from their hard-earned savings.”

No. This is wrong. The Flintstones has a currency. Clams.

Clam shells are subdivisory units of the sand dollar, which commonly trades for goods and services either in the form of a flower-like token or a paper bill that closely resembles the US dollar. The Flintstones franchise gives a clear and consistent representation of a fiat monetary system where shells and sand dollars themselves have no intrinsic or representative value, but exist within a sophisticated economy that includes a banking system, a shadow banking system and an insurance system. Clams function as the system’s standardised, centralised, universally accepted, frictionless, low latency and fully fungible stores of value.

Meanwhile, according to this article, a guy was cited for speeding in a neighborhood while he donned a Fred Flintstone costume and was driving a real-life “footmobile”…

Poll: Vote for Your Favorite Flintstones Characters

It’s never too late to vote in my long-standing poll about which Flintstones character you like best. Nearly 10,000 votes have been cast over the years – right now, Fred barely leads over Barney, with Wilma & Betty tied for third. Then, there’s Dino, Bamm-Bamm, Great Gazoo, Mr. Slate, Pebbles and Arnold the Paper Boy. And many more. Vote anonymously now – you can’t let Mr. Slate beat Pebbles!

– Broc Romanek

This ABA Journal piece talks about the ethics laws and how they may – or may not – apply to lawyers who write on blogs as ghostwriters. I am certainly not well-versed in the ethics laws – but ghostwriting blogs wouldn’t seem to be much different than the myriad of other writings that junior lawyers do on behalf of senior lawyers, without much recognition? Law firm memos, legal briefs, articles published in print publications. You name it.

I’m not saying that the practice of “not giving credit where perhaps credit is due” is a good one. I am just saying that it’s fairly rampant. And it can be a complex issue. For example, a junior lawyer writes the first draft of something – and then a senior lawyer makes heavy edits. Co-authors, right? Anyway, perhaps it all doesn’t matter that much…

Ghostwriting Blogs? Does It Matter?

I say that perhaps it doesn’t matter because most legal blogs still miss the mark. They read like law firm memos – impersonal & cold. So they don’t connect with readers (meaning they are less likely to be read – and if they are read, quickly forgotten). I’ve been giving advice for years about how to blog – here’s an excerpt from this piece I wrote over a decade ago (see pages 8-9):

A much bigger concern than coming up with stories is whether you can find your blogging “voice.” This is the concept of blogging content that is written in a style far-removed from the style used to draft sterile press releases. I’m not suggesting that you write “unprofessionally” either. Rather, it’s a bit more informal than what you do for official corporate communications.

You may be a good writer, but blogging is a different kind of writing – it requires dynamic content with an active voice and punchy prose, knowing when (and how) to use links, and more. If you can’t do this, I wouldn’t bother blogging because you won’t earn trust if you can’t connect with your audience by making it seem like it’s coming from you and not a soulless company. Look at other blogs and see the ones that you like best. And I think you will know what I mean…

Transcript: “Conduct of the Annual Meeting”

We have posted the transcript for our recent webcast: “Conduct of the Annual Meeting.”

– Broc Romanek

Yesterday, Corp Fin issued guidance – in the form of this “announcement” – about the new rules & procedures for exhibits that contain immaterial, competitively harmful information. This guidance is in the wake of the new Fast Act rules (see this horde of memos) that permit companies to file redacted material contracts without applying for confidential treatment of the redacted information provided the redacted information (i) is not material and (ii) would be competitively harmful if publicly disclosed. Those rules become effective upon their publication in the Federal Register, which is expected today.

Here’s a few things to know:

1. Mark Exhibit Index, Provide Statement on Exhibit Cover & Use Brackets for Redaction – You must mark the exhibit index to indicate where redaction occurs, include a prominent statement on the exhibit cover and use brackets within the exhibit to show exactly where redaction occurred.

2. Corp Fin Will Check for Compliance With New Rules – Corp Fin intends to check for compliance with the new rules, using a separate chain of comments from the regular comment process. This includes Corp Fin’s review of the redacted information, which may lead to comments asking for substantiation of immateriality/competitive harm claims. Conclusion of the review process will result in Corp Fin sending a letter to that affect.

3. Edgar Will Only Reveal Bare-Bones of CT Review – Edgar will publicly reveal that Corp Fin initially made a confidential treatment inquiry – and then that its review has been closed. Corp Fin will not upload comments issued during its CT review onto Edgar – so these comments won’t be publicly available.

4. Your Registration Statement Won’t Be Declared Effective Until Exhibit Issues Resolved – As has been the case in the past, acceleration requests will be acted upon only after any comments relating to the redacted exhibits are resolved.

5. If You Have a Pending CTR, You Can Switch to New Rules – If you currently have a confidential treatment request pending, you may – but are not required – withdraw your pending CTR and rely on the new rules. If you don’t withdraw, Corp Fin will continue to process your CTR under the old rules.

6. You Can Still File CTRs Under the Old Rules – The new rules have not changed your ability to request confidential treatment under Rule 406 or Rule 24b-2. If you file a CTR under the old rules, Corp Fin will process them that way.

7. How to Get More Corp Fin Guidance – Here’s where you can send your questions to Corp Fin about this new rule: RedactedExhibits@sec.gov.

Glass Lewis Will Distribute Your Feedback: But It Will Cost Ya…

I blogged recently that Glass Lewis is piloting a new “Report Feedback Statement” that will allow companies & shareholder proponents to express how their opinion differs from what’s in Glass Lewis’ research. Glass Lewis has now published FAQs – and this Morrow Sodali memo highlights how much you’ll have to shell out for the service:

Companies and/or shareholder proponents do not have to be Glass Lewis clients in order to use the RFS service. However, both issuers and shareholder proponents must purchase the relevant annual meeting report (at a cost ranging from $750 to $5,000, depending on size of the issuer) and pay a $2,000 fee for the distribution of the RFS comments.

And if you’re going to participate, don’t forget to also check out the Glass Lewis “Etiquette Guide,” which clarifies that only publicly available & legally vetted info should be shared in the RFS. In addition, it instructs everyone to use the “appropriate level of decorum & civility” – ah, the times we live in…

March-April Issue of “The Corporate Counsel”

We recently mailed the March-April issue of “The Corporate Counsel” print newsletter (try a no-risk trial). The topics include:

1. Board Minutes: Best Practices for Everyone’s Least Favorite Task

– Why Do Minutes Matter?
– The Importance of Setting the Stage: Agendas & Board Materials
– Putting Pen to Paper: Drafting the Minutes
– Address Director Notes to Preserve Minutes as the Definitive Record
– What About the Corporate Secretary’s Notes and Draft Minutes?
– Five Key Takeaways About Your Board Minutes

2. Now, Therefore, It Is RESOLVED: Drafting Board Resolutions

– Broc Romanek

Over the years, I’ve shared stories about Evelyn Y. Davis, who recently passed away. Here’s an excerpt from Carl Hagberg’s “Shareholder Service Optimizer” with some of Carl’s own stories:

Evelyn Davis was at the very first shareholder meeting I ever attended – at the then-new, post-merger Manufacturers Hanover Trust Company. A callow youth in the mid-1960s, I was pressed into duty because I was good at long-division. The only ‘calculators’ back then, other than human ones, were mechanical monsters that weighed about 75 pounds and made ear-shattering noises as they literally ‘spun their wheels’ to come up with percentages. “From the moment Evelyn Y. Davis grabbed the mike, in the old American Stock Exchange auditorium, I knew this was a business I wanted to stick close to.”

Davis had just begun to branch out from her first-career – and what a first impression she made on the audience. All of them were in their best business attire, as was the custom then. She was wearing a tight black sweater with a plunging neckline, a mini-skirt that was 10 or 11 inches long at most, black net stockings, thigh-high black boots, and a short chinchilla jacket.

Her opening remarks were to fawningly compliment the Chair – and to ask if she could come up on stage, sit on his lap, and give him “a big juicy kiss.” Our then Chairman, Jeff McNeill, was an incredibly strait-laced, old-school Southern Baptist, with a big old-fashioned Florida drawl – and when he recovered himself sufficiently to politely demur, she turned on him with a vengeance, peppering him with one question after another, never pausing to wait for the answer, which was her usual habit at all meetings. Her loud, sarcastic-sounding tone that she favored during the first half of her career. After a few minutes, people in the audience began to shout, “Sit down! Shut up! Go home!”

“You’re all just jealous of me” she yelled. The audience was totally stunned into silence – but I was totally hooked – on shareholder meetings that is.

Shaq Becomes a Director. Does It Matter?

Hat tip to Sempra Energy’s Lenin Lopez for pointing out this Form 8-K filed by Papa John to announce that NBA Hall-of-Famer Shaquille O’Neal has become a director for the company (here’s the press release). According to this article, Shaq will become much more than a director – he’ll become the face of the brand (with a marketing agreement) and owner of nine franchises in the company.

I’m only bothering to blog about this because old-timers may recall that Dr. J was often held up as the example of how some directors were overboarded. Since Dr. J had a successful private investment firm, he was perhaps targeted unfairly since many sat on too many boards back then. Since then, overboarding has become rare as attention to this issue has curbed it – and many athletes have had fruitful second careers and would be good fits for boards. Shaq certainly fits the mold as he has long had pursuits outside the basketball world, including even when he was playing. Just like LeBron does now. His new TV show – the “Million Dollar Mile” – looks like it will do okay…

A question in Shaq’s case is whether he could really be considered an “independent” director since he will be the face of the brand, etc. In it’s Form 8-K, the company notes that it doesn’t consider Shaq to be “independent” under Nasdaq’s listing standards…

A Farewell to Cooley’s Bill Godward

Over five years ago, I taped a podcast with Cooley’s Bill Godward. He was still going into the office at age 100. And he was amazing – so wonderful to hear stories of what practicing law was like 70 years ago. I’m sad to note that Bill has passed away at age 105 – here is a nice memoriam from Cooley…

Our April Eminders is Posted!

We have posted the April issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

– Broc Romanek

I dig it, man! I don’t think of myself as someone that likes trivia games – nor do I commute since I work at home. But after playing “Drivetime” just once, I was hooked. Same with my wife. It’s a mobile app that you play while you drive (and you can also play when not driving if you’re so inclined).

Here’s five things to know:

1. Feels like a traditional “morning commute” radio show. Drivetime uses professional voice actors (with personality & humor) as their hosts, akin to radio show hosts. The Drivetime hosts – always two at a time as they verbally jab back & forth – provide interesting facts & color commentary as they deliver the trivia questions.

2. So here’s the twist on the traditional show format: you’re a participant (ie. interacting) in the show because you’re answering trivia questions that the hosts throw out.

3. You answer questions by talking to your phone (which can be resting on the seat next to you, etc.). Most questions are multiple-choice. But occasionally there are open-ended ones. You earn points along the way depending on how well you answer the questions (values increase as the questions become harder).

4. Each time you play Drivetime, you compete against someone else (actually, three other commuters because there are three segments on the show; you compete against a new person during each segment). Either the app chooses another commuter for you (“good luck next time, Jared”) – or you can adjust your settings to go head-to-head against your friends that also have downloaded the app. You’re told how you’re progressing in the competition as you go.

Love the British dude who indicates whether you’re winning, losing or in a tie. He’s a synthetic voice known as “Miles.”

5. The bottom line – the experience is a combination of entertainment & a game. Next level stuff.

Studies show that if you’re engaged mentally while driving, there’s less risk of being in an accident (if you’re doing so in a “hands-free” manner). So Drivetime arguably makes your drive safer. Learn more in this Voicebot podcast with Drivetime’s CEO Niko Vuori…

Transcript: “Audit Committees in Action – The Latest Developments”

We’ve posted the transcript for our recent webcast: “Audit Committees in Action – The Latest Developments.”

What If the SEC’s Adopting Releases Were in Video Format?

In this ‘Bass Berry’ blog, Jay Knight notes how the FASB recently released a video explaining a new accounting standard. He wonders if the SEC would consider doing something similar. Since the FASB video is only 90-seconds long, perhaps the SEC could – but would it be worth it?

Here’s an anonymous poll so you can provide your thoughts:

– Broc Romanek

Last summer, Liz blogged that Broadridge was redesigning its “Vote Instruction Form” in response to Corp Fin feedback and to provide a better user experience. The new design is now in effect – and available along with other resources on Broadridge’s website. Here’s the enhancements:

– Company name more prominent
– Larger, more identifiable control number
– Voting instructions specific to agenda
– Voting section separated for clarity
– No abbreviations of shareholder proposals

Second Circuit Holds “General Statements of Regulatory Compliance” Not Actionable

As noted in this ‘Cleary Gottlieb’ memo, the Second Circuit – in Singh v. Cigna – issued yet another strong decision rejecting the tactic of a company being sued after it announced bad news or corporate mismanagement based on general statements made by the company about its compliance with regulatory requirements or its own ethics policies and procedures.

Transcript: “Conflict Minerals – Tackling Your Next Form SD”

We have posted the transcript for our recent webcast: “Conflict Minerals – Tackling Your Next Form SD.”

– Broc Romanek