On the heels of the SEC’s controversial clawback proposal (see this convenient Fact Sheet), Audit Analytics provides some context and color around the potential clawback exposure if the new rule is adopted as proposed based on an evaluation of NYSE and Nasdaq company restatements in 2014 that triggered Item 4.02 Form 8-K (non-reliance on previously issued financials) filings.
Interestingly, in 2005, 67% of the total restatements (including but not limited to NYSE/Nasdaq-listed companies) were Item 4.02 restatements – compared to just 24% in 2014. Of the 69 NYSE or Nasdaq companies that filed Item 4.02 Form 8-Ks in 2014, only four mentioned their restatement in the executive compensation section of their proxy statement, and only one actually clawed back compensation from the restatement period.
Pending the new rules, clawbacks would have been prompted either voluntarily or by SOX 304’s clawback provision, which is triggered by a restatement because of material noncompliance, due to misconduct, with financial reporting requirements under the federal securities claws. Although the proposed Dodd-Frank clawback rule is no-fault (i.e., does not require misconduct to trigger the clawback), the number of Item 4.02 Form 8-Ks among listed companies is an indicator of overall potential exposure.
Conflict Minerals Conundrum
Companies reportedly incurred about $709 million and six million staff hours last year to comply with the controversial conflict minerals rules, according to research by Tulane University and Assent Compliance. Additionally:
2014 Conflict Minerals Filings
– 90% of the 1,262 companies that filed conflict minerals reports purportedly couldn’t determine whether their products are conflict-free.
– Less than 24% of companies reached full compliance with the law.
– 2/3 didn’t describe their country of origin
– 43% failed to disclose their due diligence framework
See also this recent study by the American Action Forum revealing that from 2010 – 2014, the Dodd-Frank Act has imposed approximately $22 billion in costs and 61 million paperwork burden hours – including a combined $6 billion in costs for Conflict Minerals and Resource Extraction Issuers rulemaking. About 1/4 of the Act has yet to be implemented. See also this Chamber of Commerce blog illustrating Dodd-Frank’s effects in chart form.
We 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:
– CEO Succession: Moving Beyond Fundamentals
– Reaping the Benefits of Board Diversity
– GCs Cite Regulation & Compliance as Chief Concern
– (More) Audit Committee Agenda Items
– How to Brief the Board on IT Matters
Preliminary results of a joint survey between Financial Executives Research Foundation (FERF) and EY reportedly reveal that the majority of companies are taking actions voluntarily to improve their disclosure effectiveness pending the outcome of Corp Fin’s Disclosure Effectiveness initiative. Based on the survey, 83% of companies are focused on changes to their annual and interim filings rather than proxy statements or earnings releases at this point.
– 79.50% Reducing redundancies/more cross-references
– 76.90% Eliminating outdated information
– 76.90% Eliminating immaterial information
– 30.80% Less narrative disclosures in favor of graphs, charts and infographics
– 17.90% Greater use of technology
– 15.40% Holistic change approach
– 5.10% Other areas
The survey, which was launched in July, is planned to result in a report to be issued in late fall of this year. Stay tuned!
Access the comments submitted to Corp Fin to date on its Disclosure Effectiveness initiative here.
Form 10-K Word Counts Drop in 2014
FEI reports that word counts in the MD&As within the Form 10-Ks of the Fortune 50 – and footnotes – measurably decreased in 2014 compared to 2013. This is concurrent with the increased emphasis on improving disclosure effectiveness. Specifically, LogixData calculated 16,111 average words in 2014 – compared to 17,657 in 2013, which was up from 17,107 in 2012. However, it’s unclear at this point whether these reduced word counts equate to improved disclosure effectiveness.
Not surprisingly (at least from this lawyer’s point of view), participants in EY’s discussions on this topic last year cited litigation and compliance risks, competing disclosure objectives in accounting and SEC reporting standards, and the different needs of different investors as impediments to more effective disclosure.
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We 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:
– Tips for Building Your Board Pre-IPO
– Social Media & the Board
– DOJ Guidance: Internal Investigations & Other Charging Considerations
– DOJ Issues Cybersecurity Guidance
– Study: SOX 404 Penalizes Compliant Companies
On the heels of the recent Dupont-Trian proxy fight, wherein the vote of Dupont’s sizeable retail investor base proved to be decisive, this Brunswick Group report focuses on that scarcely evaluated, yet increasingly important, investor group – retail investors – concerning their views on activism. Importantly, companies, which have typically relied on their retail investors to support management, should understand the apparent trend toward retail investors’ familiarity and potential alignment with activist views.
Brunswick’s recent survey of just over 800 active retail investors revealed that the majority:
– Are aware of shareholder activism
– Think there needs to be a greater focus on shareholder value in corporate America
– Believe activists add long-term value
– Want to be informed during the campaign, and most trust third-party sources, and
– Are likely to vote if they care about an issue
While shareholder engagement has become mainstream, the focus of that engagement for most companies – outside of the annual meeting context – has been virtually exclusively on their major institutional investors. The results of this survey should prompt companies to consider broadening their comprehensive engagement efforts to actively include their retail investors.
Similarly, active retail investors should make a concerted effort to express their views in a mature and constructive fashion, i.e., as has been the case with many institutional investors, they should seek to learn how to effectively engage with companies, and only resort to confrontational tactics after other, more constructive approaches have failed.
Activism Trends & Preparedness
This recent Sidley article highlights key activism trends and corresponding response preparedness tips, which include the board keeping an open mind and evaluating each activist situation individually rather than preparing a semi-rote response playbook, as is frequently suggested.
Key stats include:
– Activists targeted more than 200 companies in 2014 – compared to about 120 in 2010.
– Activist funds now have more than $200 billion in assets under management and, as a class, they outperformed all other hedge fund strategies in 2014.
– Activists had a 73% success rate last year in placing their director nominees on targeted company boards – either through full-blown proxy contests or negotiated settlements.
– Activists won 197 board seats and were instrumental in replacing 19 CEOs in 2014.
See also this WSJ article noting an uptick in business school student interest in activism.
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We 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:
– The Many Benefits of Institutional Investor Engagement
– Building Effective Boards: Emerging Trends
– Cybersecurity: (More) Guidance for Directors
– Most Filers Adopt New COSO Internal Control Framework
– Shareholder Activism: Guidance for CFOs
This recently released NYSE Governance/Barker Gilmore survey, “GCs: Adding Value to the C-Suite,” examines the value of GCs as perceived by public company directors and CEOs.
Key findings include:
– 86% of CEOs and directors reported GC succession planning as a priority – but only 40% of those companies have a formal succession plan in place
– 90% of directors and CEOs expect internal GC succession candidates to be benchmarked against external talent
– More than half of company directors believe having a GC serving as an independent director on an outside board adds value to the company
– Nearly 90% of GCs also serve as the company’s Corporate Secretary
– Directors say GCs add the most value to board meetings by serving as ethical sounding boards and monitors of best practices
– Directors agree that their GC would most benefit from additional expertise in cyber security, social media, and crisis management
– Directors rate their GCs highly for their understanding of: (i) compliance/ethics; (ii) corporate governance; (iii) industry knowledge; (iv) risk oversight; (v) document retention; and (vi) guidance on shareholder engagement.
See also the results of the recently conducted Inside/Outside Counsel Relationship Survey, which revealed a number of perception and expectation gaps between inside and outside counsel – including this one:
Managing costs and expenses and timely bill processing provide the biggest disconnect between in-house and outside counsel in their working relationship.
Corporate respondents’ greatest challenge in working with outside counsel is unpredictability or improper management of costs and expenses.
Firm respondents cite delay in processing bills and unreasonable rate levels and staffing limitations as the biggest challenges in working with in-house counsel.
Strategic Succession Planning
This blog discusses a rarely practiced approach to succession planning that is worth sharing – i.e., succession planning for the “Pivotal Leadership Trio” (PLT) consisting of the board, CEO and the executive management team as a whole, rather than as distinct and unrelated categories. This concept is based on the logical notion that these three “pillars” are inter-related such that a change in one role impacts the dynamics of the PLT as a whole.
Author Johanne Bouchard makes the credible analogy to a sports team – where any change in players impacts the whole – and in a way that can vary the outcome significantly depending on who is out of the game, who the other players are at the time, and who is put in play as a replacement. The analogy makes sense, and makes this approach as applied to corporate succession planning worth consideration.
We 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:
– VC Trends: Seed & Early Stage Financings & More
– International Audit Regulators: Almost 50% of Inspected Audits Worldwide Deficient
– More on “Whistleblowers: SEC Brings 1st Confidentiality Agreement Case”
– Hefty Price of Executive Indiscretions
– How to Use a Board Meeting Consent Agenda
This new paper discusses the results of a survey of approximately 400 public and private company CFOs about earnings quality, with an emphasis on GAAP-conforming earnings misrepresentation (i.e., not fraud).
Key results include:
– CFOs say that the key characteristics of high quality earnings are sustainability, the ability to predict future earnings, and backing by actual cash flows. More specific features include consistent reporting choices through time, and minimal use of long‐term estimates. The factors that determine earnings quality are about half controllable (corporate governance, internal controls, proper accounting and audit function), and half noncontrollable or innate (nature of the business, industry membership, macroeconomic conditions).
– CFOs believe that in any given year 20% of companies intentionally misrepresent their earnings using discretion within GAAP. The magnitude of the typical misrepresentation is quite material – about 10 cents on every dollar. While most misrepresentation results in the overstatement of earnings, a full one‐third of firms that are misrepresenting are intentionally lowballing their earnings.
– Main consequences from poor earnings quality are investor confusion and lack of trust in management, leading to stock price declines and higher cost of capital. CFOs acknowledge that investor confusion could also result in higher bid‐ask spreads and lower analyst following but think that such effects are minimal for most sizable firms. In addition, firms with poor earnings quality frequently attract considerable short interest.
– CFOs provide a list of red flags (see Table 2, pg. 17) that outside observers like analysts and investors can use to identify poor earnings quality. Lack of correlation between earnings and cash flows is the top choice, followed by unwarranted deviations from industry or other peer norms. Presence of lots of accruals and one‐time charges, and consistently beating analyst forecasts, also score highly.
The chief motivations to misrepresent earnings are to influence stock price and in response to outside pressure to hit earnings benchmarks. Here is a relevant excerpt:
Most CFOs think there is unrelenting pressure from Wall Street to avoid surprises. As one CFO put it, “you will always be penalized if there is any kind of surprise.” As a result “there is always a tradeoff. Even though accounting tries to be a science, there are a hundred small decisions that can have some minor impact at least on short‐term results. So that is a natural tension, and one that, depending on the company, the culture, and the volatility of the company, can be a source of extreme pressure or it can be a minor issue.”
Replacing quarterly financial reports with less frequent updates was reportedly among the ideas suggested at the Institute of Corporate Directors’ recent conference in Toronto. The theme of the conference was short-termism. Quarterly reporting, aka, quarterly capitalism, is deemed to drive a short-term outlook and short-term behaviors, as companies repeatedly scramble to meet earnings expectations.
The Financial Post article notes the recent change in the UK by the FCA that allows companies to forgo mandatory quarterly reporting and report only twice a year. The UK’s largest asset manager, Legal & General, recently announced that it had sent a letter to each of the FTSE 350 company boards supporting the change and asking those companies to discontinue quarterly financial reporting:
“Reporting which focuses on short-term performance is not necessary to building a sustainable business as it may steer management to focus more on short-term goals and away from future business drivers… ‘For many businesses, we believe, reducing the time spent on frequent reporting could help management to focus more on long term strategies and articulate more on market dynamics and innovation drivers that will enhance their performance over time.'”
See also this FT article and my previous blog on earnings call practices.
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We 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:
– “Fresh Eyes” in the Boardroom
– Survey: Auditor Evaluations Falling Short
– Governance Roadshows for Mid-Caps
– Reframing the Board Succession Dialogue
– Adapting to Mainstream Shareholder Activism
Deloitte’s recently released 2015 M&A Trends Report reveals a booming, wide-reaching M&A environment spanning small, mid-sized and large public and private companies and private equity firms, multiple industry sectors, and domestic and overseas markets. The report reflects the results of an early 2015 survey of more than 2,000 public and private companies and over 400 private equity firms.
Noteworthy findings include:
– Strong interest in overseas expansion. Among private equity respondents, 85% indicated that their deals involve acquiring a company domiciled in a foreign market – up from 73% last year. And 74% of the corporates are investing overseas – up from 59% last year.
– 39% of corporates expect to tap into the robust M&A environment to pursue divestitures – up almost 25% from last year.
– 85% of corporates anticipate acceleration of – or at least sustaining – last year’s M&A pace; only 6% expect deal-making activity to decrease.
– 94% of private equity firms forecast average to very high deal activity – up from 89% last year.
– Private equity firms anticipate ramping up both add-on acquisitions and portfolio exits.
Note that global M&A value in the first half of this year reportedly hit an 8-year high – second only to the all-time record set in 2007.
Deloitte’s report also notes that the vast majority of corporate and private equity respondents said that their deals fell short of financial expectations. See my earlier blog on tips to achieve post-merger integration success.
Directors with Foreign Experience Linked to Improved Company Performance
This interesting paper discusses the results of a study about the impact of directors with foreign experience on company performance in emerging markets based on unique, but purportedly adaptable, data from Chinese markets.
The authors demonstrate these impacts associated with foreign directors on the board:
– Increased company valuation, productivity, and profitability
– Improved corporate governance, as evidenced by a decreased propensity to manage earnings (captured by estimated discretionary accruals)
– Greater likelihood of international acquisitions (suggesting a broader range of investment opportunities) and other indications of internationalization, e.g., increased exports and engagement of foreign investors for capital-raising
The authors note that these benefits associated with foreign directors on the board may be presumed to result from their exceptional talent or their foreign experience – but that evidence suggests foreign experience plays the greater role.
See also my earlier blog concerning the underrepresentation of directors with international experience on S&P 500 boards, and this tip from DuPont’s CEO: “Be Wary of the Jet-Lagged Director.”
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We 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:
– 2015 Challenges & Practical “To Dos”
– Gender Balance on Boards: Five Steps to Achieve Success
– Inside Baseball: Working for an Independent Auditor
– Japan: A Proposal to Allow Only Long-Term Investors to Vote
– What’s Up with IPOs?
Earlier this week, the Council of Institutional Investors (CII) issued these Proxy Access: Best Practices outlining its position on seven proxy access bylaw or charter provisions that companies use and which CII characterizes as troublesome. According to this WSJ article, none of the 32 companies that had implemented proxy access as of late June comply with all seven, i.e., each had at least one of the “troublesome” provisions.
Seven “Troublesome” Proxy Access Provisions
– Ownership threshold of 5%
– % or number of directors that may be elected could result in fewer than two candidates
– Aggregation of stockholders limited to specified number
– Lack of clarity on whether loaned shares count toward the ownership threshold
– Requirement to continue to hold shares after annual meeting
– Restrictions on renominations when nominee fails to receive specific % of votes
– Prohibition on third party compensation arrangements with proxy access nominee
In this blog, Gibson Dunn describes each of the provisions, along with CII’s position on what constitutes “best practices,” the treatment of the issue under Rule 14a-11, and data on prevailing practices among companies that have adopted proxy access.
ESMA Best Practice Principles: Chartered Secretaries Cite No Improvement in Proxy Advisor Practices
Hat tip to the Society of Corporate Secretaries & Governance Professionals for this blurb:
ESMA Publishes Responses on Shareholder Voting Rights to Best Practice Principles
Yesterday, the European Securities and Markets Authority (ESMA) published the responses received to its call for evidence on shareholder voting rights. ESMA had sought specific feedback from investors, proxy advisors, corporate issuers and other stakeholders on how they perceived the most recent proxy seasons since the Best Practice Principles for Providers of Shareholder Voting Research and Analysis (BPP) were initially published in March 2014.
Referencing its Summer 2015 Boardroom Bellwether survey, the Institute of Chartered Secretaries and Administrators’ (ICSA) comment letter noted that 58% of companies perceived the influence of proxy advisers on shareholder engagement with the company to be negative (only 14% cited a positive influence), and that its members have noticed no changes in the BPP signatories’ practices since the BPP publication other than a deterioration in the time given for issuers to respond to proxy advisor reports (in the case of at least one of the original signatories to the BPP).
The ICSA’s letter further indicates that the BPP has made no difference in improving issuer understanding of – or confidence in – the proxy advisory industry and that, although it may be premature to evaluate the impact of the BPP, additional measures would be necessary to achieve this, including requirements to, e.g., provide issuers with a minimum time to respond to reports before they are issued; take into account any errors identified by issuers and correct reports; clarify actions responsive to conflicts of interest; and disclose processes for checking report information.
Podcast: Survey Reveals GC’s Value to the Board/C-Suite
In this podcast, John Gilmore discusses the increasing value of the GC to the Board and C-Suite based on Barker Gilmore’s recent survey of CEOs and directors, including:
Why did you conduct this study?
What were the key findings relating to GC succession planning?
Why do you think so few companies have a GC succession plan?
What are some practice tips for sound GC succession planning?
According to a recent WSJ analysis, the SEC has more than doubled the typical fine against individuals over the past decade – responding, at least in part, to ongoing post-financial crisis pressure to crack down on potential bad actors.
For the first six months of fiscal 2015, the SEC levied more civil penalties than in any comparable period since at least 2005. Median fines on individuals were the highest since 2005 – with half of the fines exceeding $122,500, representing a 66% increase when adjusted for inflation. Although median fines against companies (as opposed to individuals) were down relative to prior periods, the number of fines was up – from 66 in the first half of last year to 103 for the comparable period this year.
The record is seemingly at odds with recent political (see, e.g., Sen. Warren’s letter and this New Republicarticle) and internal (see Aguilar and Stein) attacks on the strength (or alleged weakness) of the SEC’s enforcement program. Logically, it seems that both the number and dollar value of enforcement actions should be variable over time because they should be contextual – i.e., dependent on actual company and individual conduct, which is – to a great extent – influenced by risks, pressures, opportunities, economics, international crises, etc., in the larger macroenvironment within which companies operate. Perhaps lower fines and/or fewer actions ought to be viewed as a positive indicator rather than a sign of weakness.
See also Jeff Werbitt’s previous blog on Chair White’s response to Senator Warren’s attacks, the Chamber of Commerce’s recent report suggesting enhancements to the SEC’s enforcement program and SEC Enforcement Director Andrew Ceresney’s response, and Gibson Dunn’s mid-year securities enforcement update.
Securities Litigation Update: Steady State
Gibson Dunn’s mid-year securities litigation update reveals these key statistics and trends (among others) for the first half of 2015:
– Filing and settlement trends continue to reflect a “steady state” of several hundred case/year.
– The number of “merger objection” cases filed so far this year represents about 20% of total cases filed in the federal courts – on pace to meet or exceed last year’s level.
– Cases naming financial institutions as the primary defendants are at the lowest level in this decade–only 10% of new cases filed, compared to 40% in 2008 at the onset of the credit crisis.
– Median settlement values are less than half of the level of just three years ago – $5.2 million in the first half of 2015 vs $12.3 million in 2012.
– Average settlement amounts increased dramatically – from $34 million in 2014 to $64 million in the first half of 2015, fueled by two very large settlements.
– 60% of 2015 settlements were under $10 million, while roughly 20% were over $50 million.
– Median settlement amounts as a percentage of investor losses was only 1.3%, continuing to reflect a decades-long pattern of investor losses ≤ 3%.
We 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:
– Board Portals: Potential Downsides & Mitigation Tips
– Emerging Trends (Including Litigation) in ESG Reporting
– Few 10-K Amendments Triggered by Restatements
– Optimizing the CEO-Chair Relationship
– Emerging Growth Companies Dominating the IPO Market
SEC Chair White sought to quash increasing concerns – and temper a recent debate between Commissioners – about compliance officer liability in these recent remarks, wherein she indicated that the SEC did not intend to use its enforcement program to target compliance professionals, but rather only took enforcement action against them when “their actions or inactions cross a clear line that deserve sanction.” Her remarks presumably were responsive to last month’s debate between Commissioners Gallagher and Aguilar about whether the SEC is appropriately supporting (or inappropriately targeting) compliance officers on the heels of two recent enforcement actions against investment advisor compliance chiefs.
By way of background, in April, the SEC charged BlackRock’s then-CCO with violations of the 1940 Investment Company and Investment Advisers Acts for failing to report a conflict of interest-related compliance violation to the funds’ boards of directors and failing to adopt and implement certain compliance policies and procedures. In June, the SEC charged the CCO of SFX Financial Advisory Management Enterprises with violating the Advisers Act for causing the firm’s compliance failures by negligently failing to conduct certain reviews required by the firm’s compliance policies and perform an annual compliance review, and making a misstatement in SFX’s Form ADV. Commissioner Gallagher dissented in both cases.
In his recent remarks, Gallagher expressed concern that the enforcement actions put the onus on the CCOs to implement their firms’ compliance policies and procedures, and held them strictly accountable for failure to adhere to what is more appropriately a firm (rather than CCO) obligation. That being the case, these actions could disincentive CCOs (or prospective CCOs), thus ultimately harming the compliance function, which Gallagher described as “not only the first line of defense” but – for the vast majority of advisers – “the only line of defense.” Commissioner Aguilar disagreed, citing the SEC’s “relatively few” CCO-targeted enforcement actions over the past five years, which he claims have been limited to a handful of cases wherein the CCOs demonstrated specific types of egregious misconduct.
Although I’m not taking sides, I believe the potential for missignaling the compliance officer’s role and potential liability both within and outside of the financial services arena is real. As noted in one of my earlier blogs, based on a recent survey of more than 600 CCOs and other financial services compliance practitioners, most CCOs are worried about the threat of increasing personal liability for corporate misconduct. And a compliance lawyer reportedly advised that compliance officers outside that sector “should be paying close attention” (and I believe they are) “to what is happening in these cases, as other agencies could follow suit in their rulings and enforcement activities.”
While I think Chair White’s remarks were necessary in view of the public nature of this debate, I tend to doubt that they will reverse the trend toward increasing concerns among compliance professionals about potential personal liability for non-rogue behavior. Although when she talks, I believe that people generally listen (very carefully), I think all bets are off when it comes to concerns about personal liability – where actions tend to speak much louder than words.
Survey: Compliance Program Effectiveness Favors Dual GC/CCO Role
LRN’s recently released 2015 Ethics & Compliance Effectiveness Report, based on a survey and analysis of over 280 companies, reveals some particularly important findings about compliance program effectiveness. Most notably, among programs reporting directly to the CEO, those led by dual GC/Chief Compliance Officers are more effective than those led by standalone CCOs.
The study explains this surprising finding this way: “What we see suggests that the greater effectiveness of the GC/CECOs’ programs reflects the nature of the GCs’ interactions and other roles within their organizations…[G]enerally speaking, the dedicated CECO today has neither the corporate stature nor the internal relationships associated with the GC. In this light, building stature and cultivating key relationships may be seen as one of the dedicated CECO’s most important tasks, and the key to higher impact programs.”
Additional noteworthy findings include:
– Programs where the CCO reports to the CEO or the board are noticeably more effective than are those reporting to the GC.
– It is increasingly common for the CCO to report directly to the CEO and – to a lesser, but noteworthy, extent (14%) – to the board or a board committee (typically the audit committee). And while a direct reporting line to the GC remains the most common structure (41%), it is no longer true of a majority of programs.
– Top-performing programs conduct assessments more frequently and use more metrics than those ranked in the bottom fifth.
– Companies whose codes of conduct emphasize corporate values, and whose employees are likely to look to the code when faced with a decision or dilemma, tend to be associated with higher program effectiveness.
– Program effectiveness ranks highly in those companies where members of the C-Suite often address ethics and compliance issues in staff meetings, operational reviews and similar settings.
In a related and interesting development on compliance program effectiveness, Reuters reports that the DOJ is hiring a compliance expert to assist in evaluating whether companies’ compliance programs are “robust…or mere window dressing” for charging decision-making purposes.
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We 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:
– Many Companies Still Using Old COSO Internal Controls Framework
– An Alarming Liability Award Against Non-Profit Organization’s D&Os
– A Bad Mix: Small Cap Exchanges & Larger Tick Sizes
– Germany Sets Gender Quota in Boardrooms
– ISS Study: Board Practices & Refreshment Studies
Our August Eminders is Posted!
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On the heels of the recent widely reported, fabricated Avon bidthat revealed flaws in the Edgar system, the Business Roundtable, CAQ, FEI and Chamber of Commerce recently filed this joint Edgar-focused comment letter in connection with the SEC’s Disclosure Effectiveness initiative.
The letter suggests a number of near-term Edgar improvements pending implementation of longer-term enhancements and SEC rulemaking. The recommendations focus on consolidating and updating current Edgar search features by improving their visibility and organization, and additional enhancements – including improvements to the company search page, filings detail screen and output functionality. Recommendations are detailed and well-illustrated in the letter’s “Appendix A” via mock-ups of existing web pages accompanied by additional commentary.
The business coalition’s suggestions dovetail nicely with Corp Fin Director Keith Higgins’ remarks at last month’s SEC Advisory Committee on Small & Emerging Companies meeting, wherein he reportedly characterized full Edgar Modernization as a 10-year process, but noted that there are things the Commission can do in the interim to make information more easily available to investors.
See also this recent letter, where Senate Judiciary Committee Chair Charles Grassley sought responses from SEC Chair White to multiple questions concerning Edgar processes and vulnerabilities, and this Compliance Week article.
Edgar Gets an Upgrade – No Longer Supports 2013 GAAP
As noted in this Accounting Today article, the SEC’s recently upgraded Edgar will no longer support 2013 GAAP or XBRL:
The Securities and Exchange Commission has upgraded its EDGAR online system for financial filings and will no longer support an older version of the U.S. GAAP financial reporting taxonomy. The SEC said Tuesday that it upgraded EDGAR on Monday to Release 15.2 and it no longer supports the 2013 U.S. GAAP financial reporting taxonomy and the 2013 EXCH taxonomy for XBRL, or Extensible Business Reporting Language. The SEC staff is strongly encouraging companies to use the most recent version of taxonomy releases for their XBRL exhibits to take advantage of the most up-to-date tags related to new accounting standards and other improvements.
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We 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:
– Delaware Chancery Addresses the New Delaware Ratification Law
– Study: Boards Increasing in Size to Add Women Directors
– Insider Trading Policy/Program Considerations
– SASB Standards Cheat Sheet: Interactive Materialty Map
– Managing Political Spending Disclosure Pressures