It’s been several years since I saved Thanksgiving, so as we prepare for summer’s official sendoff, I thought it was high time for me to once again share my culinary insights in order to help you enjoy a better Labor Day cookout. Today’s topic is the quintessential American late summer food – corn on the cob – and how you can make it even more delicious.
Corn on the cob has long been a staple of many Labor Day cookouts. There are a couple of reasons for this. First, when many of us older folks were kids, fresh corn was only available during the late summer, so you needed to eat it while you could. Second, even though corn’s available all summer now – which by the way is a sure sign that Western Civilization is advancing, not decaying – most of the local varieties are at their absolute best around the end of August.
I bet many of you folks cook corn on the cob the way your mom did. You peel the corn, make a half-hearted effort to remove the silks, and then plunge it into a big pot of boiling water, cover it and let it boil away for 15-20 minutes. If your mom was a real gourmet, she probably even poured some milk into the pot to help sweeten the corn. People still do that today, but thanks to the kind of sophisticated biotech wizardry that even the folks who came up with Captain America’s Super-Soldier Serum would envy, the corn that’s available today is usually sweeter than a Snicker’s bar.
This traditional recipe produces a very satisfactory – if a bit soggy – ear of corn. But many of us have discovered that there’s a better way. If you want an ear of corn that is easier to prepare and has a delectable combination of smokiness and sweetness, then the grill is your answer. Here’s how you do it.
– First, peel the outer layers of the husk off of the corn. Some people think you need to go down to just the last layer or two, but you don’t and you shouldn’t. You want some of that husk left on to protect the corn from the heat. One of the best things about this recipe is that there’s no need to clean out the silks. Some of the online recipes tell you to remove them because they’ll supposedly burn, but I’ve never had that happen & they’ll come off easier than you can imagine once the corn’s done.
– Next, fire up your grill. I’ve done this on both a gas and a charcoal grill and it works well on either. Personally, I’m a Big Green Egg guy so I like charcoal. You need a pretty hot grill – 400 – 450 degrees or so.
– While the grill’s heating up, dump your ears of corn into a pot of cold water and let them soak until you need them. This is important. You want them good and wet.
– Once the grill’s heated, arrange the ears around the outside of the grill if you’re using charcoal. If you’re using gas, turn off the flame on one side and put the corn on that cool side. You can use this indirect method with a charcoal grill too if you’re more comfortable with it.
– Cook the ears for 12-15 minutes a side, depending on your grill. Keep the grill cover closed. You can periodically turn them if you want, but I usually just let them cook and flip them to the other side after the 12 minutes are up. Don’t be scared if some of the husks get burnt. Think of them as your heat shield.
– Once they’re done, cover them with foil until you’re ready to eat. When you are, just grab an ear and pull the husk off. You’ll need to give it a twist at the bottom in order to get it off. Just grab the silks and they’ll come right off like they never do when you boil them.
At this point, your ears of corn are the ultimate butter delivery vehicle just as God intended them to be. Don’t worry if some portion of your ear of corn looks burnt – trust me, you’ll find that to be the best tasting part. I also promise you that once you grill your corn, you’ll never go back to boiling it again. Have a safe and happy holiday! Our blogs will be back on Tuesday.
As the law firm memos on the Inflation Reduction Act’s 1% excise tax on stock repurchases continue to roll in, we’re learning that there are a lot of unknowns about how it will apply to specific situations. For example, there are a number of uncertainties associated with its application to accelerated share repurchase (ASR) programs.
In an ASR program, a company typically enters into a “forward” contract with a broker-dealer and makes an upfront payment to the dealer. The dealer in turn borrows the company’s shares in the market and delivers them to the company (the shares typically have a value of between 70-85% of the company’s upfront payment). The dealer then buys shares in the open market to repay the borrowed shares during an agreed upon time period. At the end of that period, the company will either receive additional shares or return some of the shares (or cash) to the dealer.
ASR programs are a pretty complicated way to repurchase shares, and this excerpt from a Wilson Sonsini memo says that determining how the excise tax applies to ASR programs isn’t a layup either:
The form of the ASR is that a repurchase occurs on the prepayment date to the extent of the 70-85 percent delivered at the time, which would be subject to an excise tax if it occurs on or after January 1, 2023. This treatment is consistent with the fact that the delivered shares are canceled upon delivery and are generally not considered issued and outstanding (e.g., they are removed for purposes of calculating earnings per share). A second repurchase would occur on the termination date if the dealer delivers additional shares. If, on the other hand, the company delivers additional shares to the dealer, this would be an additional issuance. If the termination date is in the same taxable year as the prepayment date, the adjustment / netting rules described above should apply to reduce the excise tax on the initial repurchase.
However, if the termination date is in a different taxable year, the additional issuance would not offset the initial repurchase, although it could perhaps net against other repurchases in the year of the termination date. It is not clear how a delivery of cash by the company would be treated for purposes of the excise tax. Alternatively, it is possible that the excise tax would not apply until the number of shares that is repurchased is fixed, i.e., upon settlement on the termination date. In that case, an ASR that terminated on or after January 1, 2023, would be subject to the excise tax in its entirety based on the amount of stock finally repurchased, even if the ASR was executed prior to January 1, 2023 (unless regulations issued by the Secretary of the Treasury provide a grandfathering exception).
If it makes you feel better, the M&A folks are dealing with a whole bunch of interpretive issues as well, and I blogged about some of those last week over on DealLawyers.com.
SecuritiesDocket.com recently flagged a Capitol Account article about a new public interest law firm called the “Investor Choice Advocates Network.” ICAN was formed by former SEC enforcement lawyers & first caught the public’s eye when it persuaded Elon Musk & Mark Cuban to join in an amicus brief seeking SCOTUS review of the SEC’s “neither admit nor deny” settlement policy. This excerpt from the article summarizes ICAN’s purpose:
Despite the innocuous name, they plan to use the group to shine a spotlight on what they see as SEC overreach – partly by weighing in on important appellate cases, but also by offering free legal services to defendants caught up in investigations. A number of those probes could be in the cryptocurrency area where the SEC has been busy.
ICAN is the brainchild of Nick Morgan, a partner at Paul Hastings in Los Angeles. The idea was spurred, he says, by watching numerous people being railroaded into settling cases with the SEC rather than taking them to court where they had a decent shot at winning. For those of limited financial means, and no company or insurance firm picking up the tab, there’s really no choice, he says.
The Division of Enforcement has a job to do, but I think it’s hard to argue that there’s not a need for quality pro bono representation to help level the playing field in enforcement actions targeting individuals and businesses with limited resources. The article compared ICAN’s teaming up with Musk & Cuban on the SCOTUS brief to “the teaming up of the Penguin, Riddler, Catwoman and the Joker – with a mission of going after the regulator.” Given ICAN’s purpose, comparing this team of SEC enforcement alums to legendary comic book characters seems to be right on the money – but I have a very different set of those characters in mind.
If you’re searching for a resource to help bring a new public company director or officer up to speed on ESG issues and the expectations of various constituencies, this Goodwin presentation may be just what you’re looking for. It provides an overview of the current ESG environment, addressing topics that include who’s driving the emphasis on ESG, legal & regulatory developments, fiduciary duties, ESG disclosures, proxy season highlights, investor and proxy advisor perspectives, and ESG & executive comp. It closes with a discussion of what companies should do now. Here’s an excerpt from that part of the presentation:
– Ensure the board is receiving the information it needs to meet its fiduciary duties by providing the board with information about material ESG risks and opportunities
– Assess what systems and controls may be needed so that the appropriate legal and compliance monitoring systems are in place to manage ESG risks
– Tailor ESG disclosures to provide the information sought by investors and to align with investor-favored ESG rating and reporting frameworks
– Review disclosure controls and procedures to ensure ESG disclosures are subject to appropriate review, especially when such disclosures appear in SEC filings
– Consider whether ESG factors should be part of executive compensation measures in order to incentivize proper management of ESG risks and opportunities
Earlier this year, HanesBrands disclosed that it had been the victim of a ransomware attack. In its second quarter earnings release, the company disclosed that the attack had a “negative impact on second-quarter net sales, adjusted operating profit and EPS of approximately $100 million, $35 million and $0.08, respectively.” Over on Radical Compliance, Matt Kelly takes a look at the company’s disclosures and observes that they pretty much checked all of the boxes when it comes to the SEC’s disclosure expectations. He then segues into a discussion of the most challenging issue companies face when confronted with a cyberattack – assessing whether it’s material in the first place:
An attack that cuts net sales by 6.2 percent is material (any loss greater than 1 or 2 percent would be), but we’re looking at that number in hindsight. When a company first discovers that a ransomware attack is afoot, you most likely don’t know how severe the damage will be. You need to monitor the disruption as it unfolds, until it crosses some materiality threshold.
Well, think about what that means. You’d need to understand the value at risk from a cyber disruption. You’d need careful analysis of which systems are mission-critical, and the “hourly rate” of their importance, so to speak, so you can keep a running tally of the financial losses. For example, you’d need to be able to say something along the lines of, “For every minute our fulfillment system is off-line, we lose $3,300 in orders.” Do the math, and after three weeks a disruption like that would cost you $100 million in sales.
After only one week, however, that disruption would already have cost $33 million in lost sales. For a company with $1.6 billion in total sales, that would be a loss of roughly 2 percent — and plenty of people would say a 2 percent loss to net sales is material. So our hypothetical company would need to file a disclosure about the incident four days after it crossed that threshold, rather than eight or 10 weeks later in the next earnings release.
I only picked those numbers to give an example that roughly fits the losses HanesBrands suffered; everyone following along will need to use whatever numbers make sense for your own business. The underlying math, however, still holds. Under certain circumstances, a ransomware attack could cost you so much money that very quickly it’s material and needs to be disclosed to investors double-quick.
Matt says that given the speed with which a cyberattack can blossom into something very material to the business, compliance and risk management teams have to ask several questions in order to ensure that the company is prepared to make this assessment: “For example, has your company identified its mission-critical, revenue generating systems? Has it modeled out the estimated revenue per hour those processes generate? Have you consulted with finance and accounting teams so that everyone has a clear understanding of the financial threshold for a material loss?”
A recent Bryan Cave blog says that 20 years after its collapse, WorldCom still has plenty of lessons to offer internal and outside counsel, and one of those lessons relates to the application of the attorney-client privilege. The blog draws from reports issued by former US Attorney General Richard Thornburgh, who served as the bankruptcy court examiner overseeing the case. This excerpt notes how the examiner was able to access virtually all documents that he sought, even those that were privileged:
As a threshold matter, it’s worth noting that virtually all documents sought by the Examiner had to be produced for review, including detailed notes taken by internal counsel and other privileged communications. With the consent of the Company (under the supervision of the bankruptcy trustee), the Examiner obtained a court order providing that the delivery of such documents and other information, including emails, would not constitute a waiver of the attorney-client or other privilege. As a result, all communications with or notes recorded by counsel became available for review by the Examiner.
Counsel should remain mindful that ultimately, the attorney-client privilege belongs to the client and may be waived by the client. A company may consent to production of privileged communications, even without a non-waiver order as was entered in WorldCom. When a company files for bankruptcy, management of the company may shift from its prior executives to a bankruptcy trustee, who may view the waiver issue differently than prior management. In such situations, privileged communications may end up being produced to the government or private plaintiffs.
In other words, the attorney-client privilege belongs to the corporate client, and there may be an entirely new cast of decisionmakers when it comes to decisions about that privilege once a company enters bankruptcy.
The blog also addresses some of the factors identified in the examiner’s reports as leading to the governance breakdown at WorldCom. These include the fragmented reporting lines in the company’s law department and the failure to provide the board with appropriate advice concerning its fiduciary duties for material transactions.
While many organizations are slowly returning to in-person meetings, digital events continue to grow and will likely continue to be a big part of the landscape in the post-pandemic era. This recent Q4 blog offers up some thoughts on best practices for digital “Investor Days” or “Capital Markets Days” (CMDs), including things like the use of pre-recorded messaging, and entertainment and production values.
All those topics are familiar ones to most companies after more than two years of virtual events, but the blog also had some interesting things to say about the content of presentations. Here’s an excerpt reminding companies of the need to distinguish the content presented at a CMD from the more short-term focused content typically presented in an earnings call:
Presentation is key, though content is still very much king. With so much information readily available and so much misleading noise about, directly providing investors with the most relevant and accurate story from the source is critical to underpin a successful CMD. Because the CMD is not always an annual event, the content needs to be relevant and resonate with investors for an extended period of time. Remember that this event is unlike results day, where you update information every quarter. Rather, the CMD is the stage for communicating both the short and mid-long term investment value of the organisation.
Last week, Dave blogged about whether companies are likely to ask stockholders to approve officer exculpation charter amendments & how stockholders will react if they do. If you’re thinking about proposing such an amendment at your next annual meeting, this Freshfields blog offers up some sample language for such an amendment and, in this excerpt, raises some important points to consider when gauging the likely reaction of institutional investors & proxy advisors:
One open question is how institutional shareholders and proxy advisory firms will react to proposals to amend the charter in this manner. The answer, in the case of listed companies, may depend on:
– the other elements of the corporation’s governance profile and the extent to which there may already be tension with shareholders over governance;
– the extent to which the corporation otherwise engages in best practices relating to its executive officers, including their compensation, diversity, and skillsets;
– the relationship between management and the shareholders, including the extent of shareholders’ confidence in management’s stand-alone plan and their assessment of recent performance;
– management’s approach to shareholder engagement and its ability to articulate effectively in off-cycle meetings with shareholders in the coming months the rationale for putting forward this proposed charter amendment at the next annual meeting; and
– the effectiveness of the articulation of the rationale for this charter amendment in the proxy statement for the meeting at which the amendment will be voted on and in related solicitation conversations.
The blog says that there’s a strong policy rationale for these charter amendments and that it makes sense for institutional investors & proxy advisors to support them, but it also acknowledges that getting these constituencies to sign-off on such an amendment will require “thoughtful and deliberate” efforts on the part of companies when engaging with stockholders.
If you’re thinking about an officer exculpation amendment, then you’re probably also thinking about what your proxy disclosure and the text of that amendment might look like. Thanks to Daniel Rubin’s Twitter feed, we’ve found an example. Nasdaq-listed SWK Holdings filed a definitive proxy statement on July 18th asking its stockholders to, among other things, amend its certificate of incorporation to exculpate officers to the fullest extent permitted by law. Here’s an excerpt describing the reasons for the proposal:
As part of its continuing review of the elements of our corporate governance standards and practices, the Governance and Nominating Committee concluded that the current exculpation and indemnification provisions in Article VIII of our Certificate of Incorporation should be updated to, among other things, reflect developing law. Legislation has been proposed that, if enacted, would enable a corporation to include in its certificate of incorporation a provision exculpating certain officers from liability for breach of the duty of care in certain actions.
Such a provision would not exculpate such officers from liability for breach of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or any transaction in which the officer derived an improper personal benefit. Nor would such a provision exculpate such officers from liability for claims brought by or in the right of the corporation, such as derivative claims.
Taking into account the narrow class and type of claims that such officers would be exculpated from liability for, and the benefits the Governance and Nominating Committee believed would accrue to the corporation from providing such exculpation, the Governance and Nominating Committee recommended to the Board of Directors an amendment to the Certificate of Incorporation to provide such exculpation to the fullest extent permitted by law.
According to the company’s August 10th Form 8-K (which includes the text of the amendment). its stockholders overwhelmingly approved the proposed amendment. Steve Haas also pointed us in the direction of this Form 8-K filing from Snap, which includes the text of an officer exculpation charter amendment that its Class C stockholders approved by written consent. Snap didn’t solicit consents from public stockholders, so there’s no sample disclosure to go along with this.
I wouldn’t draw a lot of conclusions about stockholder support at other public companies from either SWK or Snap’s action. Two investment funds control nearly 80% of SWK’s stock, while voting control of Snap rests in the hands of its founders who hold the Class C stock.
Last week, the SEC issued its first fee rate advisory for fiscal 2023. Although the last several years have seen significant decreases in the filing fees for registration statements & certain other transactions, the advisory says those fees will increase next year from $92.70 per million to $110.20 per million – or nearly 19%. As always, the new rate will apply effective October 1, 2022, which is when the SEC’s new fiscal year begins.
