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."
As noted in its Form 8-K, Hologic is the 2nd company holding its annual meeting in 2014 to fail to gain majority support for its say-on-pay with only 34% voting in favor (down from 65% last year).
With 74 say-on-pay failures in ’13 – more than most folks predicted in last year’s poll – what will this year bring? Please take part in this anonymous poll:
survey services
March-April Issue: Deal Lawyers Print Newsletter
This March-April Issue of the Deal Lawyers print newsletter includes:
– A History Lesson: The SEC’s Office of Mergers & Acquisitions
– A Look Back: Regulation M-A & The “Five-Business” Day Rule
– Still Risky Business: Unlicensed M&A Advisors After the Six Lawyers Letter
– The Board’s Evolving Role in Shareholder Communications
– When You’re Selling the Company, Are You Selling the Attorney-Client Privilege Too?
– “Dual Track” Structure Remains Useful to Strategic Acquirors: Even After DGCL Section 251(h)
If you’re not yet a subscriber, try a 2014 no-risk trial to get a non-blurred version of this issue on a complimentary basis.
Shareholder Proposals: Chevedden Wins Another Lawsuit!
Last week, I blogged about how John Chevedden had won two lawsuits involving his shareholder proposals over the past week. Make that now three – as John has won this “proposal by proxy” decision in a lawsuit filed by Chipotle in a federal district court in Colorado…
John is included in this 1-minute video explaining who “shareholder proponents” are:
Last week, Corp Fin issued a revised statement that lays out its framework for how it considers waiver requests for situations that otherwise might render a company ineligible to qualify as a “well-known seasoned issuer.” Corp Fin decided to tweak the framework after its experience to date…
Wanna Know the SEC Chair’s Schedule? You Can…
One of the stranger things posted on the SEC’s website is a list of all of SEC Chair White’s public meetings for last year. It was just posted under the heading of “Frequently Requested FOIA Documents.” I hadn’t focused on this before but former Chair Schapiro also had her meetings for two of her years in office posted too.
Why are people making FOIA requests for what seems like such mundane information? Anyways, not a whole lot of excitement in Chair White’s days. Lots and lots of meetings with staff. As someone who no longer likes meetings, I can feel Chair White’s pain…
Meanwhile, this Reuters article claims that weak trial witnesses is holding back the SEC…
Bylaws Battle: Dissident Director Compensation
Get up to speed in the battle over whether investors should be able to compensate directors in this 2-minute video:
Here’s news from this blog by Davis Polk’s Ning Chiu:
The NYSE has posted its annual letters to its domestic listed and foreign listed companies on its website, with timely reminders of several key annual meeting deadlines and important regulations for U.S. companies, including:
– Broker search cards must be sent at least 20 business days before the record date for annual meetings (10 calendar days for special meetings);
– Notification to the Exchange at least 10 calendar days in advance of all record dates set for any purpose. Any changes will require another 10-day notice;
– Recommendation of a 30-day interval between the record date and meeting date
– Three copies of proxy materials must be sent to the Exchange when they are first sent to shareholders; and
– Annual CEO affirmations are due 30 days after the annual meeting, and interim affirmations are required within 5 business days after the triggering event.
In addition, the letter reminds companies of the Exchange’s recent changes to the compensation committee independence standards, its timely alert policy, and transactions requiring supplemental listing applications and shareholder approval, especially those that may affect voting rights. Companies are strongly encouraged to use egovdirect.com, the Exchange’s complementary website, for notification such as the reporting of dividends, shareholders’ meetings and shares outstanding; submission of news releases; and changes to directors and officers. According to the letter, the website enables companies to compare their corporate governance programs against any subset of their NYSE-listed peers and also includes a Director Lookup feature, which allows companies to easily access a full list of directors from public and non-public companies, which may be helpful in recruiting.
The Exchanges’ letter to foreign private issuers contain much of the same reminders with respect to record dates, submission of proxy materials, written affirmations, supplemental listing applications, the use of egovdirect.com and the Exchange’s timely alert policy. Foreign listed companies that do not distribute proxies in accordance with U.S. rules are also reminded of the requirement to post a prominent undertaking on its website to provide all holders the ability, upon request, to receive a hard copy of the complete audited financial statements free of charge and to issue a press release announcing the annual report filing, including the company’s website address and alerting shareholders how to receive a free copy of the audited financial statements.
Conflict Minerals: Guidance for IPSAs
Certain companies subject to the conflict minerals rules requirement must commission an independent private sector audit, or IPSA, of certain sections of the conflict minerals report. A few weeks ago, as noted in this blog, The Auditing Roundtable issued this guidance for IPSAs.
More on “The Mentor Blog”
I continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Target & the SEC’s Cybersecurity Guidance
– It Might Cost You $39K to Crowdfund $100K Under the SEC’s New Rules
– History Lesson: Securitization of Future Earnings
– SEC Grants Second Rule 506 Bad Actor Waiver
– Wisdom from the Past: Lloyd Cutler
Reversing a steady stream of courtroom losses, John Chevedden has won two lawsuits involving his shareholder proposals over the past week. Jim McRitchie has blogged about both the EMC and Omnicom outcomes. The EMC judge didn’t write up a decision – but here is the transcript that includes his findings. And here’s the Omnicom decision.
Here’s a blog from Davis Polk’s Ning Chiu that explains the decisions in more detail:
A string of corporate success in court cases seeking the exclusion of shareholder proposals, one of which we recently discussed here, has ended with two wins for the defendants.
In deciding Omnicom vs. Chevedden, the U.S. District Court in the Southern District of New York granted Chevedden’s motion to dismiss the complaint. The Court was persuaded that since Chevedden had promised the company not to sue if it rejects his shareholder proposal, and the possibility of SEC investigation or action is remote, the threat of injury was not “actual or imminent” as necessary to grant the company’s declaratory judgment motion. The company had argued otherwise since it must still decide whether or not to include the proposal in its proxy, including facing all the legal consequences of that decision.
The Court did not address the substance of the proposal, which had sought to prohibit the company from obtaining interim vote tallies during proxy solicitation. The SEC staff recently decided that a number of other companies may exclude the proposal on the grounds of vagueness, because the resolutions allowed preliminary voting results to not be available for solicitations made for “other purposes,” but would be available for solicitations made for “other proper purposes.” Omnicom had decided to file suit rather than seek a no-action letter.
The Omnicom decision comes on the heels of a similar finding by the U.S. District Court in the District of Massachusetts in a case brought by EMC on a shareholder proposal asking for an independent chair. Unlike Omnicom, EMC had filed suit after the SEC staff decided the company could not exclude the proposal. Like others, EMC also argued that notwithstanding Chevedden (and also Jim McRitchie’s) agreement not to sue the company if it decided to exclude the proposal, the company faced the possibility of lawsuits from other shareholders or enforcement action from the SEC.
This Court decided that even if there was evidence of a “genuine risk” of such action, declaratory judgment would not bar those suits because those parties would not be collaterally stopped by such a declaration. The Court also noted that dealing with the matter on declaratory judgment, where the company has not presented all of its arguments to the SEC first, would be “reversing the statutory scheme,” and depriving the SEC of its role, as the SEC provides shareholders with a “relatively inexpensive opportunity to get claims disputes resolved.”
Media coverage of the suits included reference to Chevedden’s memorandum to the courts that the “corporate bar has taken notice of this opportunity to create a mismatch in legal firepower between a large publicly traded company and a small shareholder it would like to crush because he has submitted a proposal that management opposes,” with a “let’s do an end run around the SEC and sue Chevedden’ strategy…suing Chevedden from sea to shining sea and drowning him in a barrage of lawsuits.” Chevedden claims that “In January, 2014 alone, in wolf pack fashion, four different public companies sued Chevedden in four different district courts…which may be a record in lawsuits in one month brought by different large corporations against one small individual defendant.”
18 Cool Things About Coke’s ’14 Proxy Statement
Here’s a two-minute video I made featuring 18 great ways that Coca-Cola has made its just-filed proxy statement usable (with Labrador’s help):
By the way, the vast disparity in the quality of corporate IR web pages continues to baffle me. I still think the SEC needs to regulate a bare minimum. For example, some companies post stand-alone PDFs of their glossy annual reports – but not their proxy statements. And many post neither as stand-alone docs – they are just available on EDGAR. Hard to find for some investors. That’s one for the SEC’s disclosure reform project…
As noted in this WSJ article: “Investor adviser Institutional Shareholder Services Inc. is set to change hands for the third time in seven years, according to people familiar with the matter, amid debate about the firm’s sway over governance in corporate America.
Insight Venture Partners, a New York private-equity and venture-capital firm that was an early investor in Twitter Inc., is the likely winner of an auction of ISS run by current owner MSCI Inc., people familiar with the matter said Monday. Terms of the potential deal and its timing couldn’t be learned. People close to the sales process had said earlier that ISS could fetch around $300 million, which would be considerably less than it has sold for in the past.”
Yesterday, the SEC charged AgFeed Industries with accounting fraud – this is the company that I blogged about recently involving a director whistleblower…
The European Proxy Advisors: Best Practice Guidelines
Last week, a group of European proxy advisors published “Best Practice Principles for Shareholder Voting Research.” This was after the European Securities and Markets Authority conducted a consultation and its final report found “no clear evidence of market failure in relation to how proxy advisors interact with investors and issuers.” At the end of last year, I taped this podcast with Sarah Wilson of Manifest about the nature of the proxy advisor situation in Europe…
The SASB’s Sustainability Disclosure Standards
In this podcast, Dr. Jean Rogers – the SASB’s CEO – explains the SASB and the development and objectives of its sustainability standards, including:
– What is SASB, and why was SASB created?
– What are the issues and industries covered by SASB’s disclosure standards for the Financials sector?
– What do corporate governance & securities law professionals need to know about SASB standards for SEC disclosure purposes?
– How many more sets of industry disclosure standards are forthcoming? Are there any other projects going forward?
I’m very excited to announce the launch of my newest site – CorporateAffairs.tv! Well before Dave & I dabbled in silly videos years ago, I’ve wanted to build a site focusing solely on video. CorporateAffairs.tv provides free videos – all of them short in length – that fall within one of three categories: educational, news or entertainment. And I built the site myself! Let me know what you think.
Early Bird Rates – Act by March 14th: Huge changes are afoot for executive compensation practices with pay ratio disclosures on the horizon. We are doing our part to help you address all these changes – and avoid costly pitfalls – by offering a special early bird discount rate to help you attend these critical conferences (both of the Conferences are bundled together with a single price). So register by March 14th to take advantage of the 33% discount.
Here is a 45-second video to remind you of the special nature of our conferences…
Recently, a member asked how the EU’s mandatory auditor rotation might impact multinational companies based in the US (note that mandatory rotation appears dead (for now as noted in the item below) for US companies that operate only domestically). The EU rules have not yet been finalized – but here’s how they might impact multinationals:
The rotation requirement is limited to statutory audits of “public interest entities” (PIEs) in the EU. That could include some EU operations of US multinationals, with the biggest effect likely in financial services, because of the way PIE is defined, which is to include:
– EU companies listed on EU regulated markets (but not US companies just because they’re dual listed)
– Credit institutions (banks) and insurance undertakings (whether or not listed)
– Other entities that an individual EU Member State may choose to designate as a PIE (scope not yet known)
For example, a US company’s EU subsidiaries that have debt or equity listed on an EU exchange might have to change their statutory auditor, and so might a US company’s EU licensed banking or insurance entities. But it will vary by industry and company whether the requirement to rotate those statutory auditors will drive rotation of the auditor of the US consolidated entity.
The rotation interval is 10 years, but Member States may allow for an extension of up to 20 years if the company tenders the audit after the first term – or up to 24 years under a joint audit system (currently only required in France). And there are some transition periods. The EU is expected to finalize this in April.
The bottom line for US multinationals? I think that the EU’s mandatory requirement will come into play only if a large portion of their consolidated operations are in the EU. Some multinationals are already rotating statutory auditors in other countries that require rotation (eg. Brazil) without any effect on the consolidated audit. As for the EU’s phase-in, note that no company would need to rotate before 2020. Thanks to Bob Lamm for his help on this one!
This GAO report notes that Uncle Sam has material weaknesses in internal controls…
Mandatory Audit Firm Rotation is Dead in the US (For Now)
Here’s a note from former PCAOB Board Member Dan Goelzer, who is now at Baker & McKenzie:
On February 6, PCAOB Chairman James Doty told the SEC that the Board was no longer pursuing the idea of requiring mandatory audit firm rotation. Chairman Doty made his comments at a public meeting of the SEC at which the Commission considered and approved the PCAOB’s $258 million 2014 budget. In response to Commissioner questioning, he stated: “We don’t have an active project or work going on within the Board to move forward on a term limit for auditors.” He added that the Board was continuing to look at other ways of strengthening auditor independence and skepticism.
As described in the July 2013 Update, the PCAOB originally floated the possibility of requiring public companies to periodically change auditors (e.g., every 10 years) in a 2011 concept release. The idea attracted strong opposition, particularly from audit committees and public companies, and, in July 2013, the House of Representatives passed a bill that would have precluded the PCAOB from requiring rotation.
Comment: Mandatory rotation may not be completely dead. Chairman Doty appears to remain personally committed to the idea, and, in the event of a major U.S. audit failure, he might seek to revive it. Moreover, as discussed in the January 2014 Update, Europe is moving forward with a mandatory 10-year rotation requirement. U.S. policy-makers will likely closely follow the perceived success or failure of that initiative.
Webcast: “The Top Compensation Consultants Speak”
Tune in tomorrow for the CompensationStandards.com webcast – “The Top Compensation Consultants Speak” – to hear Mike Kesner of Deloitte Consulting, Blair Jones of Semler Brossy and Ira Kay of Pay Governance “tell it like it is. . . and like it should be.”
At the top. Right up there. At age 26, Kevin Roose accomplished the top item on my bucket list. Being a guest on “The Daily Show.” Yep, he was interviewed by J Stew. Good for him.
Actually, Kevin is a great guy as you’ll be able to tell during this podcast during which I pepper him with questions about what it was like to follow around 8 young I-bankers for three years – as well as a bunch of questions about being on “The Daily Show” (here’s a 3-minute video of that portion of the podcast if you want to share with your non-securities law friends).
– What led you to write this book? How long did it take?
– How would you compare it to “The Wolf of Wall Street”?
– How were you able to recruit young Wall Streeters to follow? Did any of them balk over the three years?
– Which part was the most fun to research? Can you tell us an anecdote from the book that you love?
– The least fun?
– Can you describe the Kappa Beta Phi party that you crashed?
– What do you think should be the lessons learned from it?
– Any surprises in the reactions you have received since it’s been published?
And here are the questions that I asked Kevin about his appearance on “The Daily Show” with Jon Stewart:
– How did you learn that you would be on “The Daily Show”?
– Were you allowed to bring a guest?
– Did the “Green Room” have a window? Booze?
– Did you meet Jon before the live interview? Did you field questions from the audience after the taping?
– Did they validate parking?
– Have any of your friends tried to snake some items from your gift bag?
Kevin Roose: Top Six Things He Answered on Reddit’s “Ask Me Anything”
For those not familiar with Reddit, they host cool “AMA” (Ask Me Anything) sessions and Kevin recently participated in one. Here are the 6 “Q&As” that I liked the best (so I didn’t cover the same ground on my podcast):
Q: On “The Daily Show,” you were privy to the coveted post-interview lean-in. It happens on all the great talk shows with people like Bono or Jennifer Hudson. After he shakes your hand, the music starts and the camera zooms out, Jon Stewart leans in and tells you some secret information that only celebrities know. Everyone’s dying to know…what do they say during the lean-in?
A: I was too freaked out and nervous to remember exactly, but we’d had a conversation during the interview about his days as a bartender, and when he leaned in he told me some story from his bartending days about Wall Street customers that I’m sure would have been crude and and hilarious if I’d been sentient at the time.
Q: How did the bankers you talked to react to the Occupy Wall Street protests? What were some of their personal opinions on it?
A: That was a fascinating thing. Some of them dismissed the protests. But more than a few were really shaken by them. I remember one Goldman guy saying, “It feels so weird to be on this side of things.” You have to remember that there were 22- and 23-year-old bankers. They had friends in the Occupy movement. And they weren’t so far removed from the real world that they couldn’t feel guilt for taking part in such a vilified industry.
Q: Now that you’re out in the bay area covering tech as well, what are some of the differences you’ve noticed between young tech workers and young wall streeters?
A: Well, I think the groups are blending somewhat. But Silicon Valley is a much more earnest, idealistic subculture. There’s a greed there, but it’s buried beneath ten or twelve layers of do-gooder rhetoric.
Wall Streeters, on the other hand, tend to be more forthright about what their job is (making money). And the young ones tend to be a little more morally conflicted, in my experience, because they don’t have that pillow of saving the world to rest their heads on at night.
Q: Do you think the changes you see in Wall Street and finance are sustainable or will the Wall Street of the future revert back to parts of the pre-crash era? As an adrift mid-twenty year old, it was refreshing to see other twenty year olds – even those that make $200k — hold similar worries. Do you still keep up with any of the people you wrote about?
A: I think parts of Old Wall Street might revert (the size of the bonuses, for example). But I don’t think the culture will ever go back to the Liar’s Poker-era days. It’s a vastly different, vastly more boring financial industry than it was back in the 1980s, or even in 2006.
I do keep up with the people I wrote about. They’re great.
Q: Hey dude, haven’t checked out the new book yet, but I really liked Unlikely Disciple, and dug your NY Mag article. Keep up the great work! What’s the strangest fact you’ve uncovered in your research for Young Money?
A: It’s not really a strange fact, but I learned a fascinating amount about how young bankers try to game Seamless (the lunch-ordering thing). There’s a great article on Fast Company that goes into detail about how bankers use their Seamless allowances to get beer, cigarettes, and groceries for their apartments. These guys are the best and the brightest!
Q: Hey I saw you on the daily show last night! I was just curious as to what the bankers you followed around thought of this book. Were they angry or indifferent towards you releasing this book to the public?
A: Well, they weren’t angry, because I had their full participation from the start. They knew it was coming.
I hope they like it! One of them said to me that reading it gave him PTSD – that reliving his analyst days was really, really, painful, now that he’s gotten to a better place.
What Swag Does “The Daily Show” Give to Guests?
Here’s a pic that Kevin posted of the items in the gift bag that he received:
A lot going on down at the US Supreme Court for those in our field. In addition to the SLUSA case I blogged about earlier, here are 4 other developments just this week:
1. Halliburton’s Oral Arguments – The “biggie” is the Halliburton Co. v. Erica P. John Fund fraud-on-the-market case that I have been blogging about. Yesterday was oral arguments – here’s a transcript. And here’s a nice recap of the oral arguments from Reuters – and a summary from the Washington Post, another one from Reuters and one from Bloomberg (and one from the D&O Diary Blog – and here are recaps from Sullivan & Cromwell, Ropes & Gray and King & Spalding. Here is a list of the briefs submitted so far.
2. Decided Private Company Whistleblower Case – In addition to these memos that I’ve posted in our “Whistleblowers” Practice Area, Morrison & Foerster’s Daniel Westman & Jeremy Ben Merkelson write: A 6-3 ruling in Lawson v. FMR held that workers of private firms that contract with publicly traded companies are protected by federal whistleblower laws. If they see something, they can say something with the same impunity as direct employees – and can be subject to the same rewards. In reversing a First Circuit decision, the Supreme Court majority held that whistleblower provisions of the Sarbanes-Oxley Act cover employees of private contractors and even subcontractors that are hired by publicly traded companies. The case at issue involves the mutual fund industry, where nearly all individual funds “are structured so that they have no employees of their own but are managed by independent investment advisors. The Court’s holding extends far beyond the mutual fund industry to cover other contractors, including law and accounting firms.
3. Granted Cert on Omnicare – SCOTUS granted certiorari and will review Omnicare v. Laborers District Council Construction Industry Pension Fund next term. As noted in SCOTUS Blog, the issue is: “Whether, for purposes of a claim under Section 11 of the Securities Act of 1933, 15 U.S.C. § 77k, a plaintiff may plead that a statement of opinion was “untrue” merely by alleging that the opinion itself was objectively wrong, as the Sixth Circuit has concluded, or must the plaintiff also allege that the statement was subjectively false – requiring allegations that the speaker’s actual opinion was different from the one expressed – as the Second, Third, and Ninth Circuits have held.” Learn more in this blog by Lane & Powell’s Claire Loebs Davis.
4. Denied Cert on Sun Capital – SCOTUS denied certiorari to review Sun Capital Partners III v. New England Teamsters & Trucking Industry Pension Fund, a July 2013 decision by the First Circuit that held a private equity fund was a “trade or business” under ERISA’s controlled group rules and, as a result, could be held jointly & severally liable for the pension obligations of a bankrupt portfolio company.
The Upcoming Reform of the Uniform Unclaimed Property Act
Since 1954, the Uniform Law Commission has promulgated a Uniform Unclaimed Property Act as a way to abolish the common law on abandoned property. This Act has been updated every 10-15 years – and it’s now been nearly 20 years since its last revision in 1995. So its due for a revision – and this “Issues Document” lists 76 issues that the drafting committee has requested comments by April 22nd.
Independence Intersection of Compliance Officers & GCs
In this podcast, Jeff Kaplan of Kaplan & Walker explains the latest developments in how boards oversee compliance programs, including:
– Based on a recent Wall Street Journal article, the issue of whether the compliance officer should report to the general counsel continues to be the considerable focus of regulators and companies. Where do you come down on this?
– When it comes to administrative reporting, is there a middle ground – meaning something between skipping the GC altogether and giving them unfettered discretion in supervising the compliance officer?
– Are there other areas where you think some companies may be going overboard?
– Compliance programs have now been mainstream for a while – do you have any other recommendations for keeping a program fresh?
When I read this article entitled “Should GCs Be on the Board? GCs Say Yes,” I began to write a rebuttal – but decided to not be so negative. But then a few weeks later, well-respected Ben Heineman – former GC of General Electric – weighed in with his views. I agree wholeheartedly with Ben. The old saying of “a doctor who treats himself has a fool for a patient” seems applicable.
Remember last week when I blogged about Fortune’s “exclusive preview” of part of Buffett’s letter. According to this article, that excerpt got slightly changed in the final version of the letter…
Don’t forget my 80-second video entitled “Annual Shareholder Meetings: Far-Flung Locations? Why?”…
Webcast: “Conduct of the Annual Meeting”
Tune in tomorrow for the webcast – “Conduct of the Annual Meeting” – to hear Melissa Caen of the Southern Company; Shelly Dropkin of Citigroup; Carl Hagberg of The Shareholder Service Optimizer and Wendy Mahling of Xcel Energy explain how they handle the many challenges of running an annual shareholders meeting.
