I’m really excited about our “Proxy Disclosure & 20th Annual Executive Compensation” Conferences – and not just because I’ve finally got a speaking part & am no longer the Fredo Corleone of TheCorporateCounsel.net. We’ve got a terrific lineup of expert speakers on 19 different panels over a 3–day period, and with potential implications of the SEC’s ambitious regulatory agenda continuing to loom large in the minds of public companies & their advisors, you can’t afford to miss this year’s conferences! But if you want to take advantage of our “early bird” registration deal for these essential conferences, you need to act now, because early bird registration ends on May 31st.
The Conferences are virtual, September 20th – 22nd. You can bundle registration with the “2nd Annual Practical ESG Conference” that’s happening virtually on September 19th, for an additional discount. Register online by credit card – or by emailing sales@ccrcorp.com. Or, call 1.800.737.1271. Here’s a reminder of the benefits of attending:
– The Conferences are timed & organized to give you the very latest action items that you’ll need to prepare for the flurry of year-end and proxy season activity. Why spend time & money tracking down piecemeal updates to share with your higher-ups & board – all while you’re under a deadline and have other pressing obligations, increasing the risk of mistakes – when you can get all of the key pointers at once?
– Unlike some conferences, the on-demand archives (and transcripts!) will be available at no additional charge to attendees after the event, and you can continue to access them all the way till July 2024. That means you can continue to refer back to the sessions as issues arise. Again, saving time & money.
– Due to new SEC rules, the shareholder proposal environment, the increasing emphasis on risk oversight and pressures that companies are facing from both ends of the political spectrum, the performance of boards, individual directors and – thanks to Delaware’s latest spin on Caremark, individual officers – will be subject to greater & greater scrutiny in the coming proxy seasons. That could affect director elections, as well as your company’s ability to raise capital, and your directors’ and officers’ exposure to derivative claims. Our expert panelists will be sharing practical action items to protect your board & officers – and risks to watch out for. Facing a low vote for any director is a nightmare scenario, even if you’re not the target of a proxy contest. This event will empower you to avoid that situation.
According to a recent survey by Compliance Week & FTI Consulting, third party risk management (TPRM) tops the list of priorities for corporate compliance officers this year:
Compliance Week and FTI Consulting polled 151 legal and compliance decision-makers as part of an online survey benchmarking the use of technology in compliance conducted between February and March. Respondents to the survey largely represented the technology (13%), banking (13%), healthcare (10%), and manufacturing (7%) sectors. The survey asked respondents to choose all that applied from a list of top-of-mind risk areas they expected to require additional focus this year. TPRM was indicated by 62% of overall respondents, far ahead of litigation/regulatory exposure (45%); anti-bribery, anti-corruption (ABAC), anti-money laundering (AML), and fraud (38%); and environmental, social, and governance (ESG) matters (38%).
Survey respondents noted that TPRM is always a compliance priority, because of the lack of control over third parties compared with other areas of compliance risk that companies face. In keeping with the overall emphasis on TPRM, the survey also says it’s the top priority for employing compliance technologies, with 55% identifying TPRM as an area where compliance-related technologies were utilized.
Join us tomorrow at 2 pm eastern for the webcast – “Managing the New Buyback Disclosure Rules” – to hear Era Anagnosti of DLA Piper, Robert Evans of Locke Lord, Allison Handy of Perkins Coie, and Dave Lynn of Morrison Foerster and TheCorporateCounsel.net, address the new disclosure requirements and discuss their implications for public companies.
Members of this site are able to attend this critical webcast at no charge. If you’re not yet a member, try a no-risk trial now. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. The webcast cost for non-members is $595. You can sign up by credit card online. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.
We will apply for CLE credit in all applicable states (with the exception of SC and NE which require advance notice) for this 1-hour webcast. You must submit your state and license number prior to or during the program using this form. Attendees must participate in the live webcast and fully complete all the CLE credit survey links during the program. You will receive a CLE certificate from our CLE provider when your state issues approval; typically within 30 days of the webcast. All credits are pending state approval.
In a recent Soundboard Governance blog, Doug Chia notes the top investor complaint with VSMs is the possibility that companies may be gaming the Q&A session by “cherry picking” the questions they answer in order to avoid the hard ones. The blog compares the different ways that two companies – “Hatfleld” and “McCoy” – handled their virtual annual meetings, and says that Hatfield did a pretty good job when it came to the transparency of its Q&A session:
It’s essential for companies to show its investors during the VSM Q&A session that they are trying to be as transparent as possible. One way Hatfield did this was by having all questions come in live by phone and letting each caller speak once their line was opened by the operator, like they do on talk radio. Based on the questions I heard, it didn’t seem like the company was screening the calls. (One caller opined that the entire accounting profession is a fraud!)
The members of management answered the questions on the spot in a way that didn’t sound scripted. Some of those answers were less than satisfying, but that’s going to happen whether the meeting is in-person or virtual-only. Another way Hatfield tried to convey transparency was by stating in its proxy statement that they would post answers to any pertinent questions not addressed during the Q&A session on their website sometime after the meeting.
The blog acknowledges that the limitations of the VSM format make it difficult to fully address investor concerns about the Q&A session’s transparency, but says that Hatfield handled investor Q&A much better than “McCoy” – which dealt with two questions that Doug submitted so poorly that he no longer feels skeptical about investor concerns that some companies are gaming the Q&A session at VSMs.
Doug’s blog is worth reading by anyone involved in planning a VSM, but I do have one minor quibble that may reflect the fact that Doug’s a bit younger than I am. He chose to use Hatfield & McCoy as pseudonyms for the two companies that served as his examples of good and bad VSM practices – but I think any of my fellow boomers would’ve seen Goofus & Gallant as the more obvious choice!
On Friday, the SEC announced that Mellissa Campbell Duru had been named Deputy Director for Legal and Regulatory Policy in the Division of Corporation Finance. Mellissa is an SEC veteran, but most recently served as a senior counsel for Covington & Burling. This excerpt from the SEC’s press release provides more information on her background:
At Covington & Burling, Ms. Duru worked in the Securities & Capital Markets practice, advising clients on securities regulation, capital markets transactions, and strategic corporate governance planning. She also served as a Vice Chair of the firm’s Environmental, Social, and Governance practice. Ms. Duru served at the SEC from 2004 to 2021, including as a Counsel to then-Commissioner Kara Stein, Special Counsel in the Division of Corporation Finance’s Office of Mergers and Acquisitions, and Cybersecurity Legal and Policy Advisor in the Division of Examinations. During her tenure, she also served as an SEC Brookings Institute Legislative Congressional Fellow in the Office of U.S. Senator Jack Reed. She began her SEC career in the Division of Corporation Finance’s Disclosure Review Program.
Mellissa fills the position previously held by Erik Gerding prior to his appointment as Director of Corp Fin earlier this year.
A recent SEC Institute blog points out that there are three changes from the SEC’s 2020 overhaul of the MD&A disclosure requirements that have become frequent topics for Staff comments:
– Critical accounting estimate disclosures
– Quantitative and qualitative disclosures about material changes
– Meaningfully addressing liquidity and capital resources
The blog suggests that one reason for this may be simple fact that a lot of companies simply aren’t updating their disclosures to comply with the new requirements, noting that “old and obsolete beliefs that disclosure changes will attract negative attention from the SEC create resistance that is difficult to overcome,” even when it comes to complying with new disclosure requirements. The blog also offers up some links to its prior commentary on these topics to help companies understand what the Staff is looking for when it comes to MD&A disclosures.
The Delaware Chancery Court’s recent decision in Hyde Park Venture Partners Fund III, L.P. v. FairXchange, LLC, (Del. Ch.; 3/23), serves as a reminder that a corporation’s ability to assert the attorney-client privilege as the basis for withholding information sought by a former director is very limited.
The Hyde Park case involved a discovery dispute in an appraisal proceeding following a sale of the company that had been approved by the board in the face of opposition from an investor-designated director. To give you an idea of how contentious things were, the director was excluded by the board from participating in discussions about the surprise offer that the company received from the buyer after he called for a market check to be conducted and was removed from the board one day after making a books & records demand.
The company asserted the attorney-client privilege against the investor as to information generated during the designated director’s tenure. The Chancery Court disagreed, and this excerpt from a Troutman Pepper memo on the case explains Vice Chancellor Laster’s reasoning:
Delaware law treats the corporation and the members of its board of directors as joint clients for purposes of privileged material created during a director’s tenure. Joint clients have no expectation of confidentiality as to each other, and one joint client cannot assert privilege against another for purposes of communications made during the period of joint representation. In addition, a Delaware corporation cannot invoke privilege against the director to withhold information generated during the director’s tenure. Delaware law has also recognized that when a director represents an investor, there is an implicit expectation that the director can share information with the investor.
In this case, the board designee and other board members were joint clients, and therefore, inside the circle of confidentiality during the designee’s tenure as a director. During the board designee’s tenure as a director, he received numerous communications from the company and its counsel. The company, therefore, had no expectation of confidentiality from the board designee and cannot assert privilege against him or his affiliates.
The company also failed to implement any of the three exceptions to asserting privilege against directors. First, there was no contract governing confidentiality of discussions between the company, its counsel, and the board. Second, the board did not form a transaction committee. Third, the board designee did not become adverse to the company until after he sent his books-and-records request at which point the company was able to exclude the director and the investor that appointed the director from the privileged materials.
The memo says that the key takeaway from the decision is that companies seeking to assert the privilege against a former director (or the investor who designated that director) must be prepared to establish the three exceptions identified in Vice Chancellor Laster’s opinion.
Goodwin recently published an updated version of their Form 10-Q Checklist for the 2nd Quarter of 2023. The first several pages address the new 10b5-1 plan-related disclosure mandates and some other potential disclosures that you should consider as you prepare your 2nd quarter 10-Q. This excerpt discusses the disclosure implications of the disruptions in the banking sector:
Review MD&A (Part 1, Item 2) and Risk Factors (Part 2, Item 1A) for financial and business-related disclosure about direct or indirect effects of actual events or reasonably foreseeable future events related to disruptions in the banking industry or financial services sector such as events involving limited liquidity, defaults, non-performance or other adverse events or developments. These could include not only impacts on the company but also impacts on banks and other financial sector companies with which the company has direct or indirect relationships, the company’s customers, suppliers and other counterparties, or the financial services industry generally.
Examples of potential disclosure topics cited by the checklist include, among others delayed or lost access to amounts available under credit facilities, limitations on access to deposits and other cash management vehicles, potential covenant breaches and cross-defaults, and expenses associated in obtaining replacement LOCs and other credit support arrangements.
Yesterday on PracticalESG.com, Lawrence blogged about COSO’s recently issued framework for internal control over sustainability reporting. Here’s the intro:
Anyone who has kept up with our blogs here knows that I am huge proponent of establishing a system of internal controls for ESG data/disclosure similar to those for financial reporting. Internal controls help to ensure the validity, accuracy and – ultimately – the credibility of ESG information reported by companies. This is critical not only for the company but also for the entire “ecosystem” that has developed around ESG disclosures including investors, rating organizations and the media.
Last month COSO – the Committee of Sponsoring Organizations – published its framework for internal controls over sustainability reporting (ICSR). COSO dates back to the 1980s and created a framework for internal controls for financial reporting (ICFR) known as Internal Control – Integrated Framework (ICIF) that became popular when the Sarbanes-Oxley Act went into effect in 2002. That framework was revised in 2013 which formed the basis of the new ICSR.
In addition to Lawrence’s blog, members of PracticalESG.com have access to a bunch of resources on disclosing ESG performance in its “Disclosing ESG Performance” subject area. ESG-related disclosures are just one of many ESG issues that are on the front burner and aren’t like to go away anytime soon. In today’s environment, you need the kind of practical guidance and in-depth ESG-related resources that PracticalESG.com provides. If you don’t already subscribe, there’s no time like the present to fix that! Subscribe today online or by contacting sales@ccrcorp.com.
Be sure to check out PracticalESG.com’s new showcase page on LinkedIn!
I’m not a big fan of Taylor Swift’s music, but I’m a huge fan of her judgment. In contrast to all the celebs who were highly compensated shills for FTX & have ended up on the receiving end of lawsuits from investors stung by the company’s collapse, The Daily Beastreports that Swift had the brains to ask a few questions before accepting a staggering $100 million offer from FTC to do the same:
Swift was reportedly in talks for a contract worth more than $100 million for Sam Bankman-Fried’s business in the months leading up to FTX’s monumental collapse in November, but the partnership never came to fruition—unlike deals the exchange signed with the likes of Tom Brady, Shaquille O’Neal, Larry David, and others. Attorney Adam Moskowitz, who is now handling a class action lawsuit against FTX’s celebrity promoters, claimed the defendants failed to actually look into the legality of what the company was doing before signing up to big money partnerships. “The one person I found that did that was Taylor Swift,” Moskowitz said on The Scoop podcast. “In our discovery, Taylor Swift actually asked them, ‘Can you tell me that these are not unregistered securities?’”
Ultimately, Swift’s due diligence paid off, because she turned down the offer & isn’t on the receiving end of a class action lawsuit. So now, her brand’s intact, and she can look all the Swifties out there in the eye & say that she turned down a fortune from FTX because “I knew you were trouble.”
This has nothing to do with the securities laws, but since I’m blogging about Taylor Swift I thought I’d point you in the direction of this brand new Duke Law Journal article provocatively titled “Murder and Money: The Dark Side of Taylor Swift.” If that’s not clickbait, I don’t know what is.
