Last week, Corp Fin tweaked a number of the Securities Act Rules CDIs to reflect the amendments to Rules 147 & 504, the repeal of Rule 505, & to make non-substantive changes that correct outdated references. It also gave the axe to several Reg D CDIs that do not directly relate to the SEC’s current rules.
Here’s the tally of CDIs that were substantively updated or withdrawn:
Section 257. Rules 503 and 503T– Filing of Notice of Sales
– CDI 257.08
Section 258. Rule 504 — Exemption for Limited Offerings and Sales of Securities Not Exceeding $5,000,000
– CDI 258.03
– CDI 258.04 (withdrawn)
– CDI 258.05
– CDI 258.06
Section 659. Rule 505 – Exemption for Limited Offers and Sales of Securities Not Exceeding $5,000,000
– CDI 659.01 (withdrawn)
Corp Fin also made non-substantive changes to 22 Securities Act Rules CDIs. These CDIs don’t have updated dates – but are now marked by an asterisk (*) to indicate that they’ve been modified.
Check out this blog from Cydney Posner for more details on the CDIs with substantive changes.
Transcript: “Secrets of the Corporate Secretary Department”
We have posted the transcript for our popular webcast: “Secrets of the Corporate Secretary Department.”
Tomorrow’s Webcast: “Cybersecurity Due Diligence in M&A”
Tune in tomorrow for the DealLawyers.com webcast – “Cybersecurity Due Diligence in M&A” – to hear Andrews Kurth Kenyon’s Jeff Dodd, Lowenstein Sandler’s Mary Hildebrand and Cooley’s Andy Lustig discuss how to approach cybersecurity due diligence, and how to address and mitigate cybersecurity risks in M&A transactions.
This guidance is huge. For example, I am reading the interpretive guidance on sampling – and it appears to be far more expansive than what I’ve heard consultants have been recommending. In fact, I immediately lengthened the time allotted for the “sampling” panel during our upcoming comprehensive “Pay Ratio & Proxy Disclosure Conference” given that the standard for using sampling is now basically “not unreasonable & not in bad faith.” Over on CompensationStandards.com, Mark Borges has blogged his initial analysis.
I think a lot more folks are going to be using sampling than before. And you will want to hear how to do it. Our “Pay Ratio” conference is just three weeks away!
So the interpretive release lays out the SEC’s views on the use of reasonable estimates, assumptions and methodologies – as well as the statistical sampling permitted by the rule. It also clarifies that companies may use appropriate existing internal records in determining whether to include non-US employees & in identifying the median employee – and provides guidance as to when widely-recognized tests may be used to determine whether workers are employees.
Corp Fin’s guidance on calculating pay ratios supplements the interpretive release. Topics addressed include:
– Ability of companies to combine the use of reasonable estimates with statistical sampling or other reasonable methodologies
– Examples of various sampling methods & the permissibility of using a combination of sampling methods
– Examples of situations where registrants may use reasonable estimates
– Examples of other reasonable methodologies & the permissibility of using a combination of reasonable methodologies
– Hypothetical examples of the use of reasonable estimates, statistical sampling & other reasonable methods
Finally, Corp Fin also updated the Reg S-K CDIs addressing pay ratio to reflect changes wrought by the new interpretive release:
– Revised CDI 128C.01 was updated to add a reference to the new interpretive release – which clarifies that CACMs can be formulated with internal records that reasonably reflect annual compensation, even if the records don’t include every pay element, such as widely distributed equity
– New CDI 128C.06 addressing the permissibility of referring to a pay ratio as an “estimate” was added
– Withdrawn CDI 128C.05, which addressed classification of a worker as an independent contractor v. an employee was withdrawn
Next Wednesday’s Webcast: “Pay Ratio Workshop – What You (Truly Really) Need to Do Now”
– Mark Borges, Principal, Compensia
– Ron Mueller, Partner, Gibson Dunn
– Dave Thomas, Partner, Wilson Sonsini
– Amy Wood, Partner, Cooley
Register Now: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register today.
– Broc Romanek
Last night, SEC Chair Jay Clayton issued a statement on cybersecurity disclosing a 2016 hack of the SEC’s Edgar system. Here’s an excerpt:
In August 2017, the Commission learned that an incident previously detected in 2016 may have provided the basis for illicit gain through trading. Specifically, a software vulnerability in the test filing component of our EDGAR system, which was patched promptly after discovery, was exploited and resulted in access to nonpublic information. We believe the intrusion did not result in unauthorized access to personally identifiable information, jeopardize the operations of the Commission, or result in systemic risk. Our investigation of this matter is ongoing, however, and we are coordinating with appropriate authorities.
The statement did not indicate how long hackers may have had access to nonpublic information. A few years back, Broc blogged about “When Will the SEC’s EDGAR Get Hacked? (Or Has It Already?)” – and noted that if Edgar was ever hacked, the SEC hopefully would let us know.
Edgar’s test filing system represents an attractive target for hackers. Test filings are routinely made by public companies in order to verify that the system will accept a live filing of their documents – but are not publicly available. An intruder able to access those materials would have an advance look at SEC filings in essentially final form.
A July 2017 GAO report on the SEC’s information security practices said that the agency had improved the security controls over its key financial systems. However, the report also noted that the SEC had not fully implemented 11 recommendations from a 2015 GAO audit. These recommendations included “consistently protecting its network boundaries from possible intrusions, identifying and authenticating users, authorizing access to resources, auditing and monitoring actions taken on its systems and network, or encrypting sensitive information while in transmission.”
Cybersecurity is a high priority item for the SEC, and this event – along with the Equifax fiasco – is likely to only increase the emphasis on cyber issues. So it’s worth reading Jay Clayton’s statement in its entirety. The disclosure of the intrusion was part of a much broader statement addressing the SEC’s efforts on cybersecurity – both internally, and in its regulatory & enforcement programs. Doug Chia at “The Conference Board” has blogged some thoughts on the implications of the hack – and on the SEC’s disclosure about it.
Governance: Want Less Litigation? Hire a Lawyer as CEO
This “Harvard Business Review” article says that if boards of companies operating in high-risk environments want to reduce litigation & manage it better, they should make their next CEO a lawyer:
We found that lawyer CEOs were not only associated with less litigation but, conditional on experiencing litigation, were also associated with better management of litigation. So companies run by lawyers, if sued, spent less on litigation and did better — they settled less often when sued and lost less often when cases went to court.
Before you dust off your resume & throw your hat in the ring for the next CEO opening, it turns out there’s a reason that lawyers represent less than one-tenth of S&P 1500 CEOs:
We found that CEOs with legal training were associated with higher firm value, but only in a subset of firms, specifically, in high-growth firms and firms with large amounts of litigation. Outside of this setting, however, the effect of CEOs with legal training on firm value was negative. So companies in, say, the pharmaceuticals and airlines industries performed better when run by lawyer CEOs, all else being equal, while companies in, say, printing and publishing performed worse.
The authors speculate that the difference has to do with lawyers’ risk averse nature – it’s a positive in companies that face a lot of regulatory & litigation risk, but a negative in other settings. So, don’t quit your day job just yet.
Financial Reporting: Accounting for Disasters
This pales in comparison to the devastating human toll that our nation and our neighbors have experienced in the unprecedented series of hurricanes, wildfires & earthquakes that we’ve seen over the past several weeks – but for public companies, there’s also a financial reckoning that has to be made.
This Deloitte memo highlights the financial reporting implications of disasters for entities reporting under U.S. GAAP – which can include accounting for asset impairments, income statement classification of losses, insurance recoveries, and additional exposure to environmental remediation liabilities.
I was excited to get my “feet wet” by editing the new 2018 Edition of the popular “Proxy Season Disclosure Treatise.” It just came back from the printers – and you can order now so that you receive it hot off the press! This “Detailed Table of Contents” lists the numerous topics so you can get a sense of the Treatise’s practical nature.
It’s huge – 33 chapters & 1650 pages! And so lovable that even a small child can enjoy it, as borne out by this 30-second video:
Links to Exhibits: Where To Put The Exhibit Index
When the SEC amended its rules to require links to exhibits, it also amended Rule 102(d) of Regulation S-T & Rule 601(a)(2) of Regulation S-K to require the exhibit index to “appear before the required signatures in the registration statement or report.” We’ve been getting lots of questions about what this means: Does a separate list still need to precede the exhibits themselves?
Thankfully, Bass Berry’s Jay Knight contacted the SEC’s Office of Chief Counsel – and updated his blog to reflect the Staff’s informal answer to this question:
It’s permissible to combine the exhibit table with the exhibit index and only present one list of exhibits with hyperlinks, and a separate exhibit index is not required.
I think this is a good, practicable outcome and should dispense with the notion of having two lists of exhibits. Here’s an example of the approach applied on an 8-K.
Equifax Data Breach: Securities Class Action Liability?
Last week, Broc blogged about the possible “insider trading twist” in the Equifax data breach. That, along with an alleged 17% decline in Equifax’s stock price following news of the breach, might provide unusually strong fodder for a securities class action.
At least one of these lawsuits has been filed – and more will likely follow. Check out this analysis from Kevin LaCroix:
The recent Equifax securities class action lawsuit arguably represents the exceptional case where the company’s share price declined significantly after the announcement of the data breach. The share price decline following Equifax’s data breach announcement undoubtedly reflected the fact that the company’s business model depends on maintaining the confidentiality of the customers’ sensitive financial information. The sheer magnitude of the breach likely was also a factor; although the Equifax breach is not the largest data breach of all times, it may represent one of the highest profile breaches involving sensitive personal information.
The alleged insider trading may also make the Equifax case more attractive to prospective litigants. To be sure, the company has claimed that the officials were not aware of the breach when they traded. In addition, the sales themselves are relatively small and reportedly only involve small portions of the officials’ holdings. Nevertheless, the plaintiffs undoubtedly will try to argue that the officials sought to capture trading profits by trading in their shares before the news of the breach was publicly released.
The fact that the insider trading took place after the breach had been discovered but before the breach was publicly disclosed highlights the danger involved when a company delays publicly disclosing that it had sustained a cybersecurity incident. The company’s press release states that the company delayed disclosing the breach while it conducted a forensic examination of the breach to determine its scope. One of the issues that undoubtedly will be examined in great depth in the wake of Equifax’s data breach disclosure is the question of how quickly companies should disclose information about the breach, particularly if the cause, scope, and seriousness of the breach is unknown when a company discovers that it has been hacked.
How the Equifax case ultimately will fare remains to be seen; in particular it remains to be seen whether the specifics of the plaintiffs’ allegations are sufficient for the case to survive motions to dismiss. Notwithstanding the lack of success plaintiffs typically have had with data breach-related shareholder derivative lawsuits, Equifax may seek to file derivative lawsuits against company officials as well.
The potential insider trading aspect of this situation also highlights the need for well-implemented pre-clearance & special blackout procedures. Take a moment to participate anonymously in our “Quick Survey on Blackout Periods.” We have over a dozen related survey results posted in our “Insider Trading” Practice Area – as well as other resources, like this timely Dorsey memo.
For those registered for the upcoming “Pay Ratio & Proxy Disclosure Conference,” we have just posted this invaluable set of course materials: The “Pay Ratio Employee Considerations” Guide. For many companies, the biggest issue related to the new pay ratio rule is how to message employees who might be angry about how their pay relates to the pay ratio median – not to mention the CEO’s pay package.
We decided to release these course materials early since so many are grappling now with the type of issues addressed in this “How to” manual. This topic will be addressed numerous times during the two days of the upcoming “Pay Ratio & Proxy Disclosure Conference” in mid-October – and it will also be addressed in our third pre-conference webcast coming up next week (on Wednesday, September 27th).
We decided to release these course materials early since so many are grappling now with the type of issues addressed in this “How to” manual. Just like the upcoming “Pay Ratio & Proxy Disclosure Conference” in October will comprehensively address these – and many more – issues. This comprehensive pay ratio event is one that you can’t afford to miss. Also remember that our third pre-conference webcast is September 27th.
Register Now: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register today.
Sustainability Reporting: Internal Controls
The push for sustainability reporting continues to gain momentum – see last month’s blog about the G20 recommendations. But one largely unresolved question is how to go about verifying the data that would be included in this type of disclosure. This 55-page white paper examines how to use COSO’s internal controls framework to improve confidence in sustainability performance data. Here’s a teaser:
Sustainability performance (or related nonfinancial data) has unique characteristics. It is less tangible and more qualitative than financial performance data—although sustainability data is often quantifiable, as reported by companies in sustainability and corporate social responsibility (CSR) reports. It is also more forward-looking, covering multiple time periods, and often more manually sourced.
To improve confidence in sustainability performance data, a different “lens” on assurance and materiality may need to be taken relative to financial data, with professional judgment at the forefront. We believe the COSO principles on effectiveness—controls that are present, functioning, and integrated—could apply to all types of performance data, including sustainability, using professional judgment.
Yet “sustainability” has many—and often confusing or conflicting—definitions. Is it sustainability of the enterprise, thereby impacting reputation and “license to operate”? Is it about specific sustainability measures like climate control or deployment of human capital? Does it capture ESG measures? Is it all of the above?
Despite the confusing and sometimes conflicting lexicon, which we don’t attempt to solve in this paper, there is one important commonality: Sustainability performance data, combined with financial data, is important for the organization to manage and to (voluntarily) communicate its value-creation capacity and capability to global stakeholders.
Say-on-Frequency: Remember to File Your “Decision” 8-K/A!
Many companies held a “say-on-frequency” vote in 2017. If you fall in that category and haven’t already disclosed your frequency decision – now’s the time! Here’s an excerpt from this Davis Polk memo:
If the company does not report its decision in the initial Form 8-K, the due date for the Form 8-K/A is the earlier of 150 days after the annual meeting and 60 days before the next Rule 14a-8 shareholder proposal deadline, as disclosed by the company in its proxy statement. This deadline is rapidly approaching for many companies that held annual meetings in May 2017.
Failure to comply with these Form 8-K deadlines results in a loss of Form S-3 shelf eligibility. In 2011, many companies overlooked the requirement to disclose their decision on the frequency of say-on-pay votes, assuming that since the shareholder advisory vote matched the board’s recommendation, no further disclosure was necessary. Because the SEC staff recognized that many companies simply hadn’t understood this disclosure requirement, the staff routinely granted waivers of the shelf eligibility defect. It is not yet clear how the staff will handle similar waiver requests this year.
It’s big news – although not surprising if you’ve been paying attention. On Friday, at the ABA Annual Meeting, Corp Fin Director Bill Hinman said that the SEC won’t be delaying the implementation of pay ratio (as always, speaking for himself & not the Commission). Bill also mentioned that Corp Fin would be issuing guidance on the pay ratio rules at some point in the near future. It’s still possible that Congress could delay – or repeal – the pay ratio rule. But I wouldn’t make that bet…
We decided to release these course materials early since so many are grappling now with the type of issues addressed in this “How to” manual. Just like the upcoming “Pay Ratio & Proxy Disclosure Conference” in October will comprehensively address these – and many more – issues. This comprehensive pay ratio event is one that you can’t afford to miss. Also remember that our third pre-conference webcast is September 27th.
Register Now: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register today.
Comment Letters: Corp Fin’s New “SWAT”
Here’s the intro from this blog by Stinson Leonard Street’s Steve Quinlivan:
The Office of the Inspector General has issued an evaluation of the Division of Corporation Finance’s disclosure review and comment process. The report begins with a description of the Division’s comment process. Perhaps the most interesting part is the report notes that the Division is developing a new system to improve and streamline certain aspects of the disclosure review process. The new system is called the System for Workflow Activity Tracking, which is referred to as SWAT.
SWAT will automate certain aspects of the review process such as providing notifications of filing review status to other review team members. In addition, according to Division officials, SWAT will generate a draft comment letter based on comments input into and approved within the system. The reviewer or another designated member of the relevant Assistant Director’s staff will review and revise the draft letter to ensure that it meets the Division’s policies for format, tone, and content. Once the draft letter is approved, a final comment letter will be generated within SWAT.
Small & Emerging Companies: Final Report From SEC’s Advisory Committee
Last week, the SEC’s “Advisory Committee on Small & Emerging Companies” held its 22nd – and final – meeting. At least with that Committee name. Per Chair Clayton’s opening remarks, the 6-year-old Committee is going to morph into the “Small Business Capital Formation Advisory Committee” – and the SEC is also creating a new “Office of the Advocate for Small Business Capital Formation.”
According to this Cooley blog, the Committee recommended that the SEC continue to address three main topics:
1. Facilitating Exempt Offerings: This includes a recommendation for regulatory certainty & clarifying guidance for finders, private placement brokers and platforms. The Committee also wants the “accredited investor” definition to capture as many households as possible, while remaining simple to interpret & apply.
2. Reporting Companies: The Committee recommended that smaller reporting companies get the accommodations afforded to emerging growth companies and that the cap for smaller reporting company status be raised.
In addition, the Committee recognized the benefit of board diversity and recommended that the SEC require companies to disclose not just their diversity policy, but directors’ diverse characteristics – as self-reported by directors.
3. Market Structure: Insufficient liquidity is an ongoing concern for smaller companies. The Committee wants the SEC to move forward with creating a separate secondary market for accredited investors to trade small-cap equities – as well as federal preemption for Tier 2 Reg A issuers that are current in ongoing reports.
The Committee also recommended ongoing analysis of tick size – wider trading increments may encourage more support for small & mid-cap equities and improve liquidity.
There are changes afoot in the investment industry. According to this AlphaSense blog, nearly 40% of US equity assets are now held in “passive” funds, and 20% of US equity assets are now using sustainability strategies in investment decisions.
And while most of us have been beating the corporate governance drum for a long time, these converging trends emphasize that there’s an IR opportunity and financial impact. Here’s an excerpt:
The “new” type of activist campaign focuses on corporate governance, and tends to be more successful because the topics align with the proxy voting guidelines of passive institutions. Proxy contests can also benefit from the presence of passive investors because they may be looking to sell poorly performing stocks in their portfolios.
Investors are increasingly interested in expanded communications to include sustainability goals and performance discussions, a.k.a. extra financial, non-financial and other intangible measures.
Between 20-30% of companies have made shifts in their IR strategy as a result of the increase in passive investors and the increasing attention to sustainability. There’s an opportunity for those who can reach this audience.
What aspects of the company’s sustainability story are unknown, unrecognized or misunderstood, that could contribute to value creation if told in compelling and meaningful IR messaging? Where might aspects of ESG be germane to expanded mainstream investor interest and communications? How might developing ongoing relationships with passive investors and sell-side analysts increase shareholder value, not only by increasing demand for the company’s publicly traded equity and debt, but also by decreasing the risk of rogue shareholder votes?
State Street’s Climate Disclosure Guidance
Check out this new “climate disclosure guidance” from State Street. It’s aim is to help investors in “high-impact” sectors – oil, gas, utilities & mining – be able to evaluate climate risk preparedness and business sustainability risks. Consistent disclosures would be a step in the right direction.
State Street also expects companies in “high-impact” sectors to address climate risks in their board committee charters.
1. For our employee determination date, we’re using:
– October 31st (or equivalent for non-calendar year companies) – 26%
– November 30th (or equivalent for non-calendar year companies) – 7%
– Fiscal year end – 36%
– Some other date – 31%
2. When it comes to “CACM,” we’re using:
– Base salary – 24%
– Total cash compensation – 15%
– Total gross compensation – 21%
– Taxable wages – 25%
– Some other measure – 15%
– No CACM, using annual total compensation instead – 0%
3. When it comes to using the de minimis exemption, we’re:
– Yes, we’re using the exemption – 14%
– No, we’re not using the exemption – 51%
– Don’t know yet – 35%
4. When it comes to excluding employees of acquired entities, we’re:
– Yes, we’re excluding – 4%
– No, we’re not excluding – 28%
– We don’t have acquired entities – 48%
– Don’t know yet – 20%
We decided to release these course materials early since so many are grappling now with the type of issues addressed in this “How to” manual. Just like the upcoming “Pay Ratio & Proxy Disclosure Conference” in October will comprehensively address these – and many more – issues. This comprehensive pay ratio event is one that you can’t afford to miss. Also remember that our third pre-conference webcast is September 27th.
Register Now: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register today.
Proxy Season: ISS Corporate Solutions Notes 8 Key Trends
Last week, ISS Corporate Solutions issued a press release detailing 8 key trends for the latest proxy season. Here they are:
1. Shareholder proposals seeking more disclosure on climate change preparedness fared well in 2017, and three such proposals—at Exxon Mobil, Occidental, and PPL Corporation — received majority shareholder support.
2. Proxy access proposals topped the chart of the most commonly filed shareholder proposals, and most of the proposals to adopt proxy access that went to a vote received majority support.
3. Taken as a group, political contributions and lobbying proposals were the second most frequently filed shareholder proposals in 2017, and saw a slight uptick from 2016.
4. There was a spike in the number of directors receiving low levels of support from shareholders; 102 directors at S&P 500 companies, or 2.4 percent, received less than 80 percent shareholder support during proxy season, the highest figure since 2011.
5. Median CEO pay at S&P 500 companies rose by 7%.
6. 2017 was the second time that most companies held votes on the frequency of say-on-pay proposals. While shareholders preferred annual say-on-pay votes at 80 percent of companies in 2011, they preferred annual votes at well above 90 percent of companies this year.
7. Despite the increased shareholder interest in annual say-on-pay votes, the median say-on-pay vote result at Russell 3000 companies remained quite high—96.4 percent, a slight uptick from 2016’s median outcome of 96%.
8. Shareholder rights continue to receive focus. One example is companies’ steady march from plurality vote standards in uncontested director elections to majority vote standards.
Proxy Season: How Retail & Institutional Investors Voted
This 6-page memo from Broadridge & PwC takes a closer look at common shareholder proposals for this proxy season – and highlights that institutional investors drove approval of trending ESG issues. For example, institutional investors voted 66% of their shares in favor of climate change proposals, compared to 13% support among retail shares.
Last week, there was a promising development for Regulation A+ – the House passed the “Improving Access to Capital Act,” which would allow reporting companies to use Reg A+. But wait, there’s more! Under this bill, Exchange Act periodic reports would also satisfy the reporting requirements for Tier 2 offerings. Remember, Tier 2 offerings can raise up to $50 million in a 12-month period.
Smaller public companies that are not listed on Nasdaq or the NYSE, and are therefore subject to state securities regulation in respect of their capital raising activities, may find Regulation A+ especially attractive, because an offering under Tier 2 of Regulation A+ is preempted from state securities regulation other than the potential requirement to make a notice filing, consent to service of process, and pay a filing fee.
Meanwhile, Jay Knight & William Lay of Bass Berry have put together this nice set of FAQs on Reg A+ offerings…
Do Audit Tensions Cause “Material Weaknesses”?
A few weeks ago, John blogged about the correlation between late-season auditor dismissals & “bad apples” – companies with restatements, material weaknesses & delistings. This “Audit Analytics” white paper goes further, to suggest that auditor tensions might contribute to the negative events (also see this Compliance Week article).
According to the research, the events associated with higher likelihood of a material weakness in the same year include:
– Changing auditors – and reporting disputes with the former auditor – increases the probability of a material weakness by 12.74%
– Reporting a reissuance restatement or filing two or more financial restatements in the calendar year increases the probability by 19.61%
– Receiving a significant vote against auditor ratification increases the probability by 24.02%
It appears something is seriously amiss here. The study seems to conclude that if the auditors and management get along, the auditors are not near as likely as to report a problem to investors. But if the find themselves at odds, a scorned auditor is willing to tell all. What might be more likely is that companies are firing auditors when there’s a disagreement over a material weakness finding – and the dismissal is reported before filing the annual report.
Survey Results: Compliance Training Still Not a Priority…
As reflected by this 54-page report from Navex Global, despite the flurry of recent scandals, companies aren’t investing in more training – and in some cases, are investing less! Here’s some of the survey’s notables:
– 25% still don’t have a dedicated budget for compliance training (same as last year)
– 93% aren’t even attempting to show a return on investment from training (which helps explain why so little investment is being made)
– Directors are getting trained less than last year – down to 44% compared to 58% last year. Only 17% of new directors are getting training – and only 25% of directors get cybersecurity training.
– Retaliation concerns are lower than expected at 20%
The silver lining is that 31% are actually taking data from their policy/incident management systems – and combining it with training data to create more savvy & efficient programs.
Tune in tomorrow for the webcast – “Non-GAAP Disclosures: Corp Fin Speaks” – to hear Mark Kronforst, the Chief Accountant of the SEC’s Division of Corporation Finance and Dave Lynn of TheCorporateCounsel.net and Jenner & Block provide practical guidance about what to do now with your non-GAAP disclosures given Corp Fin’s CDIs and a year’s worth of Staff comment letters on the topic.
According to “The Conference Board’s” “CEO Succession Practices” report – which analyzes succession events among the S&P 500 – companies are becoming much more communicative about CEO succession plans:
Compared with a year earlier, in 2016 boards were 30 percent less likely to announce that the transition was effective immediately.
Communication practices more commonly include providing earlier notice of the CEO succession event, including the description of the role performed by the board of directors in the CEO succession process, and offering more details on the reasons for the transition.
Check out this handy infographic from Heidrick & Struggles for other notable findings, which include:
– Struggling retailers & wholesalers are driving a record-high succession rate for companies with low TSR.
– Stable succession rates of better-performing companies may indicate that increased scrutiny over executive pay and performance has started to produce results.
– Only six of the 63 CEO positions that became available in the S&P 500 in 2016 were filled by a woman.
– One out of 10 CEO successions in 2016 were navigated by an interim CEO, a role once used only in situations of emergencies and unplanned transitions.
– Only 6.4 percent of the successions in 2016 involved the immediate joint appointment of the new CEO as board chairman, as proxy advisors and the investment community increasingly demand independent board leadership.
More on “The Mentor Blog”
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’s a sampling of entries:
– Boards: Portfolio Managers as New Directors
– LSE: Changes AIM Rules to Reflect “Market Abuse Regulation”
– PwC Violates Auditor Independence Standards – Yet Again
– US Foreign Bond Issuers: Fed Cracks Down on Form SLT Reporting
– Delaware Supreme Court Affirms Chancery’s Lack of Damages Award as Remedial Discretion
