Many state bars have a calendar year-end deadline for obtaining required CLE credits. If you’re like me, that means you frequently find yourself scrambling in December to complete your CLE requirement. That crunch can result in lawyers signing up for some pretty strange last-minute courses. For example, a friend and former colleague of mine who’s an M&A lawyer spent a few hours last New Year’s Eve attending an online CLE program on “Litigating Truck Accidents in Ohio.” Hey, like they say, beggars can’t be choosers.
I think many of us have found ourselves in a similar position when we’re up against a CLE deadline, so we thought that helping our members avoid spending their New Year’s Eve listening to irrelevant CLE programs would make the perfectly holiday gift – and that’s exactly what we’ve done. Effective immediately, each of our 2023 webcasts is eligible for on-demand CLE credit!
Is there any fine print? Don’t be silly – of course there is. In order to qualify for CLE credit, you must follow the following instructions:
– Watch the recorded program by clicking “Access On Demand Program/Earn CLE Credit” on the webcast homepage. You must watch the entire program and may not skip ahead or close the video player screen.
– When the program has concluded, you’ll need to click the link at the bottom of the video player, “Click Here to Access the Form,” and enter your state and license information.
– If you have questions about CLE Credit, please visit our CLE FAQ page or contact our CLE provider: CEU Institute, accreditation@ceuinstitute.net.
All approvals for CLE credit are at the discretion of the state bar based on content and deadlines. Pending state bar approvals, these courses will be eligible for credit for two years. The CLE provider for these events, CEU Institute will seek CLE credit for the webcast in applicable states. All credits will be subject to each state’s decision on accreditation. A CLE certificate will be sent if/when approved by that state.
We are always looking for ways to enhance the benefits of membership in TheCorporateCounsel.net, and hope you’ll agree that offering easy access to high-quality, relevant, on-demand CLE programs makes a membership in TheCorporateCounsel.net even more valuable! If you are not a member, email sales@ccrcorp.com or sign up online today and get access to on-demand CLE and all of our other resources.
Shearman & Sterling recently released its 2023 Corporate Governance & Executive Compensation Survey. Among other topics, the survey reviews disclosure practices among the largest 100 US public companies concerning executive departures, which have been the subject of closer attention following the McDonald’s enforcement proceeding earlier this year. Here are some of the key findings:
– Of the executive officer departures disclosed in Forms 8-K filed by the Top 100 Companies during the period reviewed, none characterized the executive officer’s exit as being a result of the “mutual agreement” or “mutual decision” of the company and the executive officer. However, a survey of these disclosures reveals that describing an executive officer’s departure as “mutual” in other ways remains a common practice.
– Although the sample size and the period of review is limited, the fact that none of the Top 100 Companies used historically common phrasing to characterize the termination may be an indicator of the beginning of a shift in disclosure practices.
– Separation payments were disclosed in connection with 23% of executive officer terminations, with 17% of executive officer retirements disclosed describing amounts paid to executive officers in connection with their retirement, including six companies that described new agreements executed in connection with the executive officer’s retirement.
– Separation payments were also described with respect to one of the terminations characterized as a termination without cause, one termination characterized as an involuntary separation and approximately half of the other termination descriptions identified. In certain of the disclosures, the company expressly indicated that the circumstances of the executive officer’s termination of employment were consistent with a “qualifying termination” under the company’s existing executive severance plan or the executive officer’s employment agreement.
– There was no indication that any new entitlements were not disclosed. In this set of termination disclosures, there does not appear to be any perceivable shift in approach, which suggests that companies are not expanding disclosure to cover an explanation of why they determined to make (or not make) payments under existing entitlements.
The survey also noted a number of interesting findings in other areas. For example, it found a 25% increase in the number of Top 100 Companies with a director specifically identified as having cybersecurity experience, and a 42% jump in disclosure of director-specific diversity information.
Earlier this year, I blogged about pending legislation that would repeal foreign private issuers’ exemption from Section 16 of the Exchange Act. Yesterday, Alan Dye provided an update on the bill’s status on the Section16.net Blog. He says that legislation is dead, at least for now:
I said in this earlier blog that I would try to get to the bottom of how a proposal to rescind the SEC’s Section 16 exemption for insiders of foreign private issuers found its way into the National Defense Authorization for 2024, which passed the U.S. Senate on July 27, 2023. The proposed rescission was not in the House bill and was dropped in conference, so it’s not going to be enacted this year, if ever. For those interested in what the proposal is about, though, read on.
The proposal was originally introduced in the Senate in 2022, as a standalone bill entitled the Holding Foreign Insiders Accountable Act. The bill was intended to address trading abuses identified by former Commissioner Robert Jackson (now at NYU law school) and Wharton professors Bradford Levy and Daniel Taylor in an April 2022 paper entitled “Holding Foreign Insiders Accountable.” The authors examined trading by insiders of certain foreign private issuers, particularly Russian and Chinese issuers, and concluded that insiders of many of those companies avoided trading losses by selling their company stock shortly before significant declines in its price. In an opinion piece they wrote for the Wall Street Journal, Senators Kennedy and van Hollen said that American investors absorb most of the losses avoided by foreign insiders and that subjecting those insiders to Section 16 would alert investors to insider sell-offs and give American law enforcement agencies better ability to identify insider trading.
The bill went nowhere in 2022 but was re-introduced in 2023 and later merged into the National Defense Authorization Act for 2024.
We’ve posted the transcript for our recent “SEC Enforcement: Priorities and Trends” webcast featuring Hunton Andrews Kurth’s Scott Kimpel, Locke Lord’s Allison O’Neil, and Quinn Emanuel’s Kurt Wolfe. The webcast covered:
SEC Enforcement Activities in 2023 and Priorities for 2024
Monetary and Non-Monetary Penalties
Accounting and Disclosure Actions
Actions Targeting Gatekeepers
Whistleblower Developments and Trends
Self-Reporting and Cooperation Credit
Coordination with DOJ Investigations
Our panelists referred to the SEC’s fiscal 2023 as “the year of the whistleblower” and stressed “how successful the [whistleblower] program continues to be” as “it really is driving enforcement investigations and enforcement actions [and] changed the way that the SEC originates cases and pursues cases.” They linked this back to the SEC’s recent Rule 21F-17 enforcement actions that “strike at efforts to chill whistleblowers.” Scott Kimpel said, “that’s why the SEC does it. They want the word to spread. They don’t want to have to keep bringing those cases. They would prefer for companies to change their language.”
If you are not a member of TheCorporateCounsel.net, email sales@ccrcorp.com to sign up today and get access to the full transcript – or sign up online.
The SEC adopted its human capital disclosure rules in 2020, and this Gibson Dunn memo reviews the results of a survey of S&P 100 Form 10-K disclosures since the rules were adopted. Overall, the survey found that companies were generally tailoring the length & topics covered in their disclosures and those disclosures were becoming slightly more quantitative in some areas. Here are some of the key takeaways concerning disclosure trends during the most recent year:
– Length of disclosure. Forty-eight percent of companies increased the length of their disclosures, four percent of companies’ disclosures remained the same, and the remaining 48% of companies decreased the length of their disclosures (with the decreases generally attributable to the removal of discussion related to COVID-19).
– Number of topics covered. Twenty-two percent of companies increased the number of topics covered (with the categories seeing the most increases being diversity statistics by race/ethnicity and gender, employee mental health, monitoring culture, talent attraction and retention, and talent development), while 34% decreased the number of topics covered (the majority of which were attributable to the removal of disclosures related to COVID-19), and the remaining 46% covered the same number of topics.
– Breadth of topics covered. The prevalence of 16 topics increased, seven decreased, and four remained the same. The most significant year-over-year increases in frequency involved the following topics: quantitative diversity statistics on gender (60% to 65%), employee mental health (46% to 50%), culture initiatives (22% to 26%), efforts to monitor culture (60% to 64%), and talent attraction and retention (90% to 94%). The most significant year-over-year decrease involved COVID-19 disclosures, which declined in frequency from 69% to 34%. Other year-over-year decreases involved discussion of governance and organizational practices (56% to 51%) and diversity targets and goals (23% to 19%).
– Most common topics covered. The topics most commonly discussed this most recent year generally remained consistent with the previous two years. For example, diversity and inclusion, talent development, talent attraction and retention, and employee compensation and benefits remained four of the five most frequently discussed topics, while quantitative talent development statistics, supplier diversity, community investment, and quantitative statistics on new hire diversity remained four of the five least frequently covered topics.
The memo also addresses industry trends in human capital disclosure, the potential for new rulemaking and the IAC’s recommendations to the SEC concerning that rulemaking, Staff comments on human capital disclosure, and the implications of recent SCOTUS cases on corporate DEI programs and related disclosures.
The last time we blogged about the Payroll Protection Plan loan program, the SBA Inspector General was reporting that the levels of fraud in the program were truly mind-blowing. Since that’s the case, it’s probably not surprising that according to this McDermott Will memo, many PPP borrowers find themselves ensnared by red tape when it comes to trying to get their loans forgiven, and many of those whose loans have previously been forgiven are now facing audits. This excerpt addresses the predicament of borrowers who have won appeals of SBA denials of forgiveness:
Some businesses are facing an increasingly common predicament: They appealed an unfavorable Final Decision to the [SBA’s Office of Hearings & Appeals]. The OHA granted their appeal, agreeing with the borrower that the SBA’s decision was based on clear error. The OHA then remanded the loan back to the SBA to conduct a new review, and the business is forced to wait for months for the SBA to act on the loan.
Other borrowers are in a similar situation after filing an appeal with the OHA only to have the SBA withdraw the challenged Final Decision and place the loan back under review with no further communication from the SBA regarding the status of the loan. These businesses have been waiting and waiting for months—and in some cases more than a year—for the SBA to issue a new decision.
The memo says that once a Final Decision has been withdrawn, the borrower faces what feels like a “black hole” of SBA review. It suggests that the problem stems from both a lack of resources & a lack of a sense of urgency on the part of the the SBA to resolve outstanding loans in a timely manner. On another happy note, the memo says that there’s been an uptick in audits of borrowers who have had their loans forgiven years ago. The most significant issues in these audits are whether the borrower correctly calculated its initial PPP loan amount and whether the borrower was “small” enough to qualify for the loan.
With the 2024 proxy season just around the corner, many companies are considering potential updates to their D&O questionnaires. This Bryan Cave memo identifies areas where questionnaires may need updating. This excerpt addresses a potential tweak that may be necessary to address the universal proxy rules:
Under the new universal proxy card rules that became effective in 2023, a company may be required to include a dissident’s nominees on its proxy card and, in turn, the dissident may be required to include the company’s nominees on the dissident’s card. In light of this possibility, companies should review the consent language in their D&O questionnaires to ensure it includes the consent of the director or nominee to be included in the company’s proxy materials, as well as a nominee in a dissident’s proxy materials, should that become applicable.
The memo says that other topics that may need attention in D&O questionnaires this year include cybersecurity and human capital management expertise, Section 16 reporting, Rule 10b5-1 plans, and board diversity information.
Yesterday, Glass Lewis announced the publication of its 2024 Voting Guidelines. We’ll be posting memos in our “Proxy Advisors” Practice Area. Here are excerpts from the intro highlighting some of the key changes:
Material Weaknesses – When a material weakness is reported and the company has not disclosed a remediation plan, or when a material weakness has been ongoing for more than one year and the company has not disclosed an updated remediation plan that clearly outlines the company’s progress toward remediating the material weakness, we will consider recommending that shareholders vote against all members of a company’s audit committee who served on the committee during the time when the material weakness was identified.
Cyber Risk Oversight – In instances where cyber-attacks have caused significant harm to shareholders, we will closely evaluate the board’s oversight of cybersecurity as well as the company’s response and disclosures. Moreover, in instances where a company has been materially impacted by a cyber-attack, we believe shareholders can reasonably expect periodic updates from the company communicating its ongoing progress towards resolving and remediating the impact of the cyber-attack. These disclosures should focus on the company’s response to address the impacts to affected stakeholders and should not reveal specific and/or technical details that could impede the company’s response or remediation of the incident or that could assist threat actors.
In instances where a company has been materially impacted by a cyber-attack, we may recommend against appropriate directors should we find the board’s oversight, response or disclosures concerning cybersecurity-related issues to be insufficient or are not provided to shareholders.
Board Oversight of Environmental and Social Issues – Given the importance of the board’s role in overseeing environmental and social risks, we believe that this responsibility should be formally designated and codified in the appropriate committee charters or other governing documents. When evaluating the board’s role in overseeing environmental and/or social issues, we will examine a company’s committee charters and governing documents to determine if the company has codified a meaningful level of oversight of and accountability for a company’s material environmental and social impacts.
Board Accountability for Climate-Related Issues – Beginning in 2024, Glass Lewis will apply this policy to companies in the S&P 500 index operating in industries where the Sustainability Accounting Standards Board (SASB) has determined that the companies’ GHG emissions represent a financially material risk, as well as companies where we believe emissions or climate impacts, or stakeholder scrutiny thereof, represent an outsized, financially material risk.
We will assess whether such companies have produced disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We have further clarified that we will also assess whether these companies have disclosed explicit and clearly defined board-level oversight responsibilities for climate-related issues. In instances where we find either of these disclosures to be absent of significantly lacking, we may recommend voting against responsible directors.
Clawback Provisions – In addition to meeting listing requirements, effective clawback policies should provide companies with the power to recoup incentive compensation from an executive when there is evidence of problematic decisions or actions, such as material misconduct, a material reputational failure, material risk management failure, or a material operational failure, the consequences of which have not already been reflected in incentive payments and where recovery is warranted. Such power to recoup should be provided regardless of whether the employment of the executive officer was terminated with or without cause. In these circumstances, rationale should be provided if the company determines ultimately to refrain from recouping compensation as well as disclosure of alternative measures that are instead pursued, such as the exercise of negative discretion on future payments.
Other policy changes address executive stock ownership guidelines, proposals concerning equity awards to shareholders, NOL pills and control share acquisition statutes. Glass Lewis also adopted clarifying amendments to its policies on board responsiveness and interlocking directorates.
By the way, don’t forget that ISS’s peer group review & submission window for most companies opens on Monday, November 20th. Check out Liz’s blog on CompensationStandards.com for more details.
I think it’s fairly common for people involved in internal investigations to feel uncertainty about the investigatory process and to have concerns about whether that process conforms to best practices. If you find yourself worrying about these issues, this recent blog from “Compliance & Ethics: Ideas and Answers” may be helpful. It identifies areas of inquiry that should be considered in evaluating investigation processes. This excerpt provides some examples:
– Are there written guidelines governing how investigations will be assigned? Are they logical and appropriate? Are they followed in practice?
– Is there a written investigations protocol, and does it include those elements that are necessary to facilitate robust investigations? Some of the elements that are typically included in investigations manuals include:
– Professionalism standards that govern the investigations process, such as a discussion of the importance of impartiality, competency, confidentiality, and non-retaliation.
– Step-by-step guides for each aspect of investigations, including intake procedures, preliminary analysis of the allegation, assigning investigations, opening a case file, creating an investigative plan, reviewing documents, whom to interview and how to do so, preparing interview notes, assessing and determining findings, preparing a final report, responding to the complainant and subject, and closing out the case.
– Samples and outlines of investigation documents, such as reports of interviews, reports of investigation, and sample communications with interviewees, complainants, supervisors, and subjects of investigations.
– Are there protocols that govern how evidence can be collected (e.g., required approvals before electronic data is accessed) and when and how litigation or investigation holds will be issued?
– Are there clear guidelines governing when to get the Legal Department involved and the steps to be taken when conducting an inquiry under the attorney-client privilege?
The blog says that, ultimately, an effective assessment of an investigation’s process seeks to determine whether it is being conducted independently, objectively and impartially, whether the investigators have the access to the people and documents they need, and whether the investigator is qualified to conduct the investigation.
The PCAOB recently proposed amendments to its rules governing when an individual accountant will be deemed to have contributed to a firm’s primary violations of professional standards. This excerpt from Dan Goelzer’s blog on the proposal summarizes its implications:
The Public Company Accounting Oversight Board has proposed to amend its rule governing the liability of a person associated with an accounting firm whose conduct causes the firm to violate a professional standard. The Board’s proposal would lower the level of conduct that can result in an individual’s “contributory liability” for a firm’s violation from recklessness to negligence.
If the change is adopted, the PCAOB would be able to bring disciplinary proceedings against an individual auditor (and potentially bar him or her from public company auditing) for failing to exercise reasonable or ordinary care. Under its current rules, the Board would have to show that the individual’s conduct was intentional or reckless, not merely negligent.
The proposal is unlikely to be welcomed by your friendly neighborhood auditor. Most audit firms have a black belt in “CYA” and already go to extraordinary lengths to protect themselves during the course of an audit engagement. Lowering the bar for enforcement actions against individual accountants will undoubtedly spur increased efforts on their behalf to protect their firms & themselves.
When you consider the possibility that a change like this could come on the heels of the adoption of the PCAOB’s demanding NOCLAR proposal, it sure looks like dealing with your outside auditors could become an even more difficult, painstaking, and expensive process in the near future.
