Recently, Broadridge reported an increase in virtual meetings in 2016 – see this list of who’s holding them. Of 187 virtual meetings, 80% were “virtual-only” – compared to 67% in 2015. And of the 44 companies that held a hybrid meeting in 2015, 12 of them switched to virtual-only in 2016. Just one company switched from virtual-only to hybrid.
We’ve blogged before about opposition to virtual-only meetings – from New York’s Comptroller and from CII – but we’ve also heard from companies that have escaped criticism by proactively discussing the costs & benefits with shareholders.
In response to widespread adoption of proxy access – and the possibility that some companies may be including provisions that impair proxy access utility – CII has updated its “best practices” for implementing these bylaws (originally issued in 2015).
The 8-page chart weighs in on newly-identified provisions, recognizes where CII’s preferences deviate from prevailing market practices, and explains why CII opposes the following provisions:
– Requirements for nominators to hold stock after the annual meeting
– Restrictions on re-nominations
– Limitations on nominees’ third-party compensation arrangements
– Automatic suspension of proxy access for all shareholders in the event of a proxy contest
– Unlimited indemnification requirements on nominating shareholders
Here’s CII’s member-approved policy:
Companies should provide access to management proxy materials for a long term investor or group of long-term investors owning in aggregate at least three percent of a company’s voting stock, to nominate less than a majority of the directors. Eligible investors must have owned the stock for at least two years. Company proxy materials and related mailings should provide equal space and equal treatment of nominations by qualifying investors.
To allow for informed voting decisions, it is essential that investors have full and accurate information about access mechanism users and their director nominees. Therefore, shareowners nominating director candidates under an access mechanism should adhere to the same SEC rules governing disclosure requirements and prohibitions on false and misleading statements that currently apply to proxy contests for board seats.
Transcript: “12 Strange Things in the Securities Laws”
We’ve posted the transcript for our popular webcast: “12 Strange Things in Securities Laws.” Here’s what we covered:
1. The Section 4(a)(3) Dealer’s Exemption
2. Sometimes Rules Don’t Mean What They Say
3. Transactional Registration & Control Securities
4. How Small Non-Executive Officer Shareholders Can Be Section 16 Reporting Persons
5. The Trust Indenture Act – What Is It?
6. The Need to Know Some GAAP
7. “Legal” Insider Trading
8. Tender Offers for Minority Stakes in Private Companies
9. Statutory Underwriters” and “Public Offerings”
10. A Lot of What Goes Into SEC Filings Isn’t Dictated by Rules or Staff Guidance
11. The Case of the Missing Fourth Quarter
12. Federal and State Filing Notice “Requirements”
If we didn’t get to your favorite “strange thing” – drop us a line!
Proxy access “fix-it” proposals – which ask companies with mainstream proxy access bylaws to make them more shareholder-friendly – were prevalent during this proxy season. We don’t expect the trend to go away anytime soon – we’ve already seen two versions of the proposals & a third is now on the map!
Companies have been seeking no-action relief to exclude the proposals as “substantially implemented” – but Corp Fin denied many requests. Now a new “fix-it” proposal has emerged, and was also required to be included in the company proxy statement. Here’s a teaser from Ning Chiu’s blog:
Like the later season proposals, this type also asks that a company amend the restrictions on the size of the nominating group, but this time from 20 shareholders to an unlimited number of shareholders, and without any other proposed revisions.
The SEC staff recently rejected a company’s request for no-action relief on the basis of substantial implementation, after extensive correspondence between the parties involving 5 letters from the issuer and what must be an unprecedented 21 letters from the proponent. The volume of correspondence likely led to the staff’s taking more than three months from receipt of the initial no-action letter to publish a decision.
In other proxy access news, a different company changed its aggregation limit to 50 to negotiate a withdrawal on a similar proposal.
So although the proposals that went to a vote have been averaging less than 30% support among shareholders, they aren’t without risk…
Comments are due this month. If approved by the SEC, parts of the new standard will be effective in 2018.
Name Change: “NYSE MKT” Is Now “NYSE American”
To the delight of “MKT” haters, the NYSE’s previously-announced rebranding to “NYSE American” is now effective, with most of the website now revamped.
The name change was accompanied by other updates designed to facilitate trading in small & mid-cap companies, including expanded trading hours and assignment of an “electronic designated market maker) – with quoting obligations – to each listed security. Hat tip to Goodwin Procter’s John Newell for alerting us to this development!
We’ve blogged many times about the debate over dual-class share structures. Investors have been voicing concern since Snap’s IPO in March.
Last week, FTSE Russell was the first index to announce that it will exclude Snap & other “dual-class” companies that afford minimal voting rights to shareholders – including existing constituents who don’t conform to the new requirements within 5 years. Yesterday, S&P Dow Jones followed suit with an even more sweeping announcement – however, existing constituents are grandfathered in and not affected.
Here’s the nitty-gritty on Russell’s new policy:
– To be listed on FTSE Russell indexes, more than 5% of a company’s voting rights must be held by unrestricted shareholders (as defined by FTSE Russell).
– For potential new constituents, including IPOs, the rule will apply starting with their September semi-annual and quarterly reviews.
– For existing companies, the rule will apply starting September 2022, thus affording a five-year grandfathering period. About 35 companies would need to increase public voting rights to avoid exclusion.
– The rate at which the hurdle is set, along with its definition, will be reviewed in the light of subsequent developments on an annual basis.
– Companies like Facebook & Alphabet – which have multi-class structures but afford more than 5% of voting rights to shareholders – can still be included.
And for S&P’s policy:
– Effective immediately, the S&P Composite 1500 and its component indices – S&P 500, S&P MidCap 400 and S&P SmallCap 600 – will no longer add companies with multiple share class structures.
– Existing index constituents are grandfathered in and are not affected by this change.
– The methodologies of other S&P and Dow Jones branded indices – including S&P Global BMI, S&P Total Market and indices for particular market segments – remain unchanged at this time.
Both indices conducted surveys on this topic a few months ago. Russell’s survey results showed that 68% of responding investors wanted the index to require some minimum threshold for the percentage of voting rights in public hands. Their final rule will be published at the end of this month – and may incorporate additional feedback that Russell receives following its announcement. As noted in this blog, MSCI has made a similar proposal.
If a company is excluded from the indexes, it’s harder – or impossible – for some fund managers to buy its stock. But it appears that many institutional investors favor exclusion – as it aligns with their policies to support “one share, one vote” proposals.
SEC Commissioners: Will Robert Jackson Be Nominated?
John blogged a few weeks back about Hester Peirce being (re-)nominated as a SEC Commissioner. Now it’s rumored that Columbia Professor Robert Jackson would be nominated to fill the open Democrat slot on the SEC’s Commission. I would stress that this is merely a rumor.
Here’s an excerpt from this WSJ article by Andrew Ackerman:
If Mr. Jackson is nominated, Senate lawmakers would likely seek to speed up his confirmation by pairing him with Hester Peirce, a Republican tapped earlier this month to fill another SEC vacancy. Both would join an SEC down to just three members: Democrat Kara Stein, Republican Michael Piwowar, and Jay Clayton, the chairman, who is an independent.
Mr. Jackson has written on securities topics such as executive compensation and corporate governance. In 2014, he helped uncover a flaw with the SEC’s corporate-filing system that allowed hedge funds and other rapid-fire investors to gain access to certain market-moving documents ahead of other users of the system. The SEC pledged to correct the flaw.
A 2015 research paper he co-wrote suggests corporate insiders might trade on material, nonpublic information before their companies are required to publicly report the information. He is also among a group of 10 academics to petition the SEC in 2011 to require public companies to disclose their political-spending activities.
Our August Eminders is Posted!
We’ve posted the August issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!
It’s hard to believe that Sunday was the 15th anniversary of SOX. Around here, we aren’t just dwelling on the “Sarbanes-Oxley Blues” – we’re also sharing personal reflections on the landmark law. Here are mine:
I was a college junior when Enron & WorldCom imploded & my accounting friends lost their Arthur Andersen offers. Despite massively changing the oversight framework for financial reporting, I don’t recall SOX being discussed in my business classes – or during my following years in law school.
When I became a bright-eyed law firm associate, it felt like SOX had always existed. The rules seemed natural to me: Why wouldn’t the CEO & CFO read SEC filings & certify their accuracy? Why would anyone other than independent directors oversee financial reports? Is there anything more suspenseful than monitoring the 404(b) phase-ins & exclusions – a tradition that lives on even today?
I’m more realistic after 10+ years of explaining – and helping in-house counsel explain – the reasons for SOX & related rules to execs who weren’t always keen on “independent oversight” or “transparent disclosure.” This EY memo suggests that financial reporting has improved. But executives continue to gamble with misleading & opaque financial calculations – and it’s clear that SOX didn’t save us from a “check-the-box” mentality. We keep playing the same game by different rules – forgetting the main principles.
Broc’s 10¢ on Sarbanes-Oxley
Broc has these five random thoughts about Sarbanes-Oxley:
1. I never liked calling it “SOX” – and I really disliked those that called it “Sar-Box.”
2. As I’ve blogged before, Sarbanes-Oxley was somewhat of a surprise at the time because the legislative bill seemed dead. Then WorldCom collapsed & Congress passed the legislation in a hurry. In this blog, Lynn Turner notes that there was some thought put into the bill.
3. It’s interesting to recall what the top issues were initially. In August 2002, the biggest concern involved CEO/CFO certifications and the mechanics of how those newfangled things worked, which really weren’t fully ironed out for several months. With a smile, I remember the chaos as I put together a last-minute teleconference regarding certifications (just two-days notice) and we had an incredible turnout as the first batch of certs were due to be filed the next week. It was wild, man. Better than Woodstock.
Can you imagine that internal controls were nowhere on the radar screen at the time? In fact, my March 2003 webcast on the topic (which I appropriately labeled then as a “sleeper,” thanks to a memorable conversation with John Huber) remains the most sparsely-attended webcast I have held in my 15 years of hosting them. Look back at the law firm memos drafted right after SOX was passed and you will not find anyone predicting that Section 404 was something formidable. That was because we all only had the bandwidth to tackle the numerous new requirements that were applicable immediately – and Section 404’s implementation seemed so far away.
4. Sadly, Mike Oxley passed away a few years ago. It was a thrill to interview Mike at our conference. A true gentleman. You could see why the people in his hometown voted him into Congress. Mike had six “hole-in-ones” during his lifetime. Six!
5. Way back then, I light-heartedly created a character named “Billy Broc” Oxley in jest. Dave was “The Animal” Sarbanes. We made short funny videos for a feature called “The Sarbanes-Oxley Report.” My favorites remain “Bad Hair Day” – and “Billy Broc’s Dream.” The margins were fabulous…
John’s 10¢ on SOX
John has these random thoughts about Sarbanes-Oxley:
Enron, WorldCom, Tyco – I can remember when these were some of the most respected and admired companies in America. I think that’s what made the corporate scandals of the first years of the 21st Century so shocking. These guys were the bluest of the blue chips, and the revelation of their greed and corruption was a cold slap in the face to investors and ordinary Americans. The scandals fundamentally changed the way a lot of people thought about American corporations and those who ran them.
And that begat Sarbanes-Oxley, an entirely necessary statute for which I have no love whatsoever. Yes, corporate governance changes had to be made, and there’s a lot – particularly in the area of internal controls – that Sarbanes Oxley set in motion that has benefitted corporations and investors. But a big price has been paid too.
The exponential growth in demands made on directors in the name of “good governance” has left them with less and less time to focus on the business. Boards have become more bureaucratic and internally focused. Consultants and governance experts have multiplied. Corporate governance flavors of the month have proliferated and become “must haves.” Disclosure documents have become increasingly full of trivial information that’s costly to generate.
Too often, I think, investors and companies have drunk the Kool-Aid without really examining the underlying principles. For instance, I wonder, in 50 years, if people will still think it was a good idea to require a majority of the board of the world’s largest corporations to be comprised of outsiders, with no prior experience in the company’s business? In an environment where directors who make compensation decisions are only liable for “waste”, is 40 pages of executive comp disclosure really good for much more than providing CEOs with a chance to pour over competitors’ disclosures and come up with a detailed wish list of their own?
And don’t get me started on the Governance Industrial Complex. . .
But in the end, corporate tool that I am, I still have to concede that Cassius was right – “the fault, dear Brutus, is not in our stars, but in ourselves.” We’re sleeping in the bed that we made.
Pay Ratio Conference: Discounted Rate Ends Today, Friday
Last chance to register at a reduced rate for our comprehensive “Pay Ratio & Proxy Disclosure Conference.” The discount expires at the end of today, Friday, July 28th. New Corp Fin Deputy Director Rob Evans will open the event.
It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. And in addition to the October Conference, you gain access to three pre-conference webcasts. And a set of “Model Pay Ratio Disclosures” in both PDF & Word format.
Register Now – Discount Ends Today, Friday: 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 by July 28th to take advantage of the 10% discount.
The “Big News” first. We just calendared a webcast – “Non-GAAP Disclosures: Corp Fin Speaks“ – featuring Corp Fin’s Chief Accountant Mark Kronforst & Dave Lynn. They will discuss what companies are doing – and should be doing – in the wake of the first year’s worth of Corp Fin comment letters since last year’s CDIs.
Anyway, some may be inclined to grumble about how Corp Fin is scrutinizing the way companies use undefined non-GAAP terms, but I think most people would prefer that scrutiny to the NY US Attorney’s approach – sending a CFO to jail for using an undefined non-GAAP term in an allegedly fraudulent way.
Adjusted funds from operations – “AFFO” – is a widely used non-GAAP metric among REITs, but the Staff hasn’t provided any guidance on how it should be calculated. Last month, the former CFO of American Realty Capital Partners was convicted of fraud for the way in which his company used this metric – an outcome that this Forbes article says amounted to “rule-making for the SEC on materiality by criminal indictment and conviction.” Here’s an excerpt:
The SEC has not issued a specific rule or guidance as to how an issuer should calculate the AFFO metric. And, there is no regulatory guidance as to how Mr. Block should have made the reconciliation. There has been a lot of demand for the SEC to do more rule-making in this space. Possibly, this verdict will result in a louder cry for rule-making. Meanwhile, the verdict is a warning shot across the bow for corporate officers publishing and discussing non-GAAP metrics.
Regardless of the merits of this criticism, the case is a reminder that non-GAAP disclosures are subject to close scrutiny – and not just by the SEC. In the current environment, companies & officers should not expect to be cut a lot of slack by the SEC – or federal prosecutors – for “creativity” in how undefined non-GAAP metrics are used.
Non-GAAP: Corp Fin on “Free Cash Flow” Use
This recent MarketWatch article says that Corp Fin is scrutinizing companies’ use of “free cash flow” as a non-GAAP measure – and “has warned more than 20 companies in the last six months about their potential misuse use of the non-standard metric “free cash flow.”
Actually, this kind of warning from Corp Fin goes back far beyond the May 2016 CDIs, as that language dates back to June 2003 FAQs. We believe that the Staff has been issuing comments about how FCF is calculated for nearly 15 years with no change. The Staff did add a single – and obvious – sentence to that 2003 guidance, but it was not for a widespread problem. Corp Fin added: “Also, free cash flow is a liquidity measure that must not be presented on a per share basis.”
While free cash flow refers generally to operating cash flow less “cap ex,” it doesn’t have a standard definition. Despite that, it’s a metric that investors really like. As this Fredrikson & Byron blog points out, that combination of factors may be the reason for the Staff’s close watch on the way companies use it.
Non-GAAP: Corp Fin (Once) Said “Tone it Down”
In other non-GAAP news, in this article, the WSJ reported that Corp Fin told one major airline to tone down the praise of a non-GAAP measure. Here’s the Staff’s comment letter – which notes that the comment also applies to the company’s earnings releases. Here’s an excerpt from the WSJ article:
American Airlines Group removed certain “descriptive language” from its financials at the behest of the Securities and Exchange Commission, according to recently released correspondence. The regulator directed the airline to stop telling investors that numbers inconsistent with standard accounting were “more indicative” of company performance and “more comparable” to metrics reported by other major airlines. American Airlines, in an April 3 letter to the SEC, said it would drop the references from its future filings and replace them with language that describes adjusted measures as useful to investors.
Note that this clearly is not a trend – it would not surprise us at all if that was the only comment of its kind. The Staff did indeed say “tone it down” – but I’m not sure how much that matters if they did it once – or even a handful of times. We’re not hearing much in the way of a broad warning about this kind of thing when the Staff is out speaking.
Don’t forget to tune into our September 13th webcast – “Non-GAAP Disclosures: Corp Fin Speaks” – featuring Corp Fin’s Chief Accountant Mark Kronforst & Dave Lynn. They will discuss what companies are doing – and should be doing – in the wake of the first year’s worth of Corp Fin comment letters since last year’s CDIs.
Yesterday, I blogged about “initial coin offerings” – or ICOs – over on “The Mentor Blog.” The ink on that blog was barely dry when the SEC weighed in with its own thoughts – in the form of a Section 21(a) Report addressing the status of “digital assets” under the Securities Act.
Guess what? Despite claims that “coins” aren’t securities, the SEC sure thinks they can be. Here’s an excerpt from the SEC’s press release on the Report:
The SEC’s Report of Investigation found that tokens offered and sold by a “virtual” organization known as “The DAO” were securities and therefore subject to the federal securities laws. The Report confirms that issuers of distributed ledger or blockchain technology-based securities must register offers and sales of such securities unless a valid exemption applies. Those participating in unregistered offerings also may be liable for violations of the securities laws. Additionally, securities exchanges providing for trading in these securities must register unless they are exempt.”
Materiality: SEC’s Investor Advocate Tells FASB What It Thinks
I thought this recent letter from the SEC’s Office of the Investor Advocate on FASB’s proposal to change its definition of “materiality” was worth noting.
FASB proposes to conform its approach to financial statement materiality to the judicial definition of materiality that applies in other contexts. Right now, there’s a disconnect between the two standards. Instead of requiring that there be a “substantial likelihood” that information would be material, FASB’s Concept Statement No. 8 currently says information is material if “omitting it or misstating it could influence decisions” that users of financial statements make.
Business groups have applauded the proposed change, but many investor groups have panned it – and the Investor Advocate’s letter provides a fairly comprehensive overview of their objections. It also offers up a revised proposal that would have FASB return to its previous materiality definition – which was generally consistent with the legal concept of materiality – but heavily salt that definition with the “qualitative” considerations embodied in SAB 99.
Materiality: An Accounting Decision?
I can’t resist pointing to one section of the Investor Advocate’s letter to FASB that had me – and I think will have many other lawyers – rolling their eyes. Here’s one of the concerns investors have about the proposed change in FASB’s materiality standard:
The proposals would move decision-making on materiality from accountants to lawyers. The SEC’s Investor Advisory Committee, in a theme echoed by other investors, warned in its comment letter of the risk “that, by replacing the current, differentiated professional accounting standard with a case-law driven legal standard, close questions of judgment will ultimately devolve to lawyers rather than accountants.”
You’ve got to be kidding! If I had a dollar for every time an accountant said “well, it’s a materiality issue – and that’s a legal call,” I’d be sipping Margaritas on my private island beach. However, I do want to thank Investor Advocate for this comment – which I intend to laminate so I will be sure to have it to share with the next accountant who tries to artfully dodge the financial statement materiality bullet in this fashion.
Legislative efforts at governance & disclosure reform – such as the “Financial Choice Act” – have gotten a lot of attention this year. This Rivel Research study asked institutional investors what they thought of those efforts – and the short answer is “not much.”
North American & European institutional investors oppose major change in the US governance regulatory framework. Here are some of the study’s conclusions:
– Two-thirds (65%) believe a weakened SEC will have a negative effect on governance outcomes.
– A large plurality (43%) oppose efforts to pare back the Dodd-Frank Act. Only 18% support it. The rest are uncertain.
– There is widespread opposition (among two in three proxy voters) to rolling back the Act’s mandates for board diversity disclosure, political spending disclosure, & separation of Chair/CEO
– Even if Dodd-Frank is pared back, the vast majority of investors believe that companies should continue to honor/abide by the rules originally set forth within. In fact, many will be seeking expanded disclosure in many areas.
In the event that key governance & disclosure mandates are repealed, the study also says that companies should prepare for increased engagement – nearly half of the investors said they would ramp up their efforts to engage companies on governance matters. What’s more, 41% say they’ll be more inclined to support an activist if the rules are pared back.
Now that the House of Representatives has passed the Financial Choice Act, is Sarbanes-Oxley next on its “hit list”? This recent blog from Cooley’s Cydney Posner says a key part of it just might be. Here’s the intro:
What’s next for the House after taking on Dodd-Frank in the Financial CHOICE Act? Apparently, it’s time to revisit SOX. The Subcommittee on Capital Markets, Securities, and Investment of the House Financial Services Committee held a hearing earlier this week entitled “The Cost of Being a Public Company in Light of Sarbanes-Oxley and the Federalization of Corporate Governance.”
During the hearing, all subcommittee members continued bemoaning the decline in IPOs and in public companies, with the majority of the subcommittee attributing the decline largely to regulatory overload. A number of the witnesses trained their sights on, among other things, the internal control auditor attestation requirement of SOX 404(b). Is auditor attestation, for all but the very largest companies, about to hit the dust?
Whistleblowers: $61 Million Reasons to Drop a Dime!
Holy Cow! I guess this isn’t signed, sealed & delivered just yet, but the SEC Staff is apparently recommending a $61 million award to 2 whistleblowers who played a role in a $267 million settlement with J.P. Morgan. Here’s an excerpt from an AdvisorHub article:
Two whistleblowers whose outing of JPMorgan Chase’s bias toward selling wealth customers in-house funds led to the bank’s $267 million settlement with the government will receive payments equal to 23% of the award, according to a “preliminary determination” letter by SEC claim-review staffers.
The letter, a copy of which whistleblower Johnny Burris provided to AdvisorHub and other publications, recommends that the regulator pay one whistleblower 18% of the award, or $48.1 million, while a second receive 5%, or $13.1 million. The SEC by policy does not name whistleblower award recipients, and Burris would not confirm whether he was one of the successful claimants.
The requests of four other claimants for an award were denied because their information did not contribute to the SEC’s examinations, corollary investigations or significantly affect its enforcement action against JPMorgan, according to the letter. The award would far top the previous record of $30 million, which the SEC announced in September 2014.
Normally – as I have blogged many times (here’s one) – the SEC’s Reg Flex Agendas tend to be “aspirational.” But perhaps this time is different.
As part of a federal agency-wide reveal of the new Administration’s plans for rulemaking, the SEC posted the latest version of its Reg Flex Agenda last week. This agency coordination is the Administration’s “unified agency regulatory agenda.”
This Reg Flex Agenda is notable for what it omits – get a load of what’s not on the list:
– Pay-for-performance
– Clawbacks
– Hedging
– Universal proxy
– Clawbacks of incentive compensation at financial institutions
Does this mean that the SEC doesn’t intend to ever proceed with adopting any of the outstanding Dodd-Frank rules that are still in the proposal stage? We don’t know. As this Cooley blog notes, the Preamble indicates that it reflects “only the priorities of the Acting Chairman [Michael Piwowar], and [does] not necessarily reflect the view and priorities of any individual Commissioner.” Since the information in the Reg Flex Agenda was accurate as of March 29th – and SEC Chair Jay Clayton wasn’t confirmed until May – it’s unknown how Chair Clayton feels about all this.
But it might be a sign – because as noted in this article from “The Hill”: “OMB said agencies for the first time will post a list of “inactive” rules to notify the public of regulations that are still being reviewed or considered.” Hat tip to Scott Kimpel of Hunton & Williams for the heads up!
This all doesn’t impact the implementation of the pay ratio rule – because that rule was already adopted a few years ago. It just had a delayed effectiveness date. So it would never show up on a Reg Flex Agenda unless there was rulemaking to delay or repeal it…which there is not…
Pay Ratio Conference: Discounted Rate Ends This Friday
Last chance to register at a reduced rate for our comprehensive “Pay Ratio & Proxy Disclosure Conference.” The discount expires this Friday, July 28th. New Corp Fin Deputy Director Rob Evans will open the event.
It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. And in addition to the October Conference, you gain access to three pre-conference webcasts. And a set of “Model Pay Ratio Disclosures” in both PDF & Word format.
The first webcast was last week & that 75-minute audio archive is available now – a transcript of that program is coming soon. The second webcast is on August 15th; the third webcast is September 27th.
Register Now – Discount Ends This Friday: 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 by July 28th to take advantage of the 10% discount.
Exchange Act Filing Status: It’s That Time Again. . .
This Bass Berry blog reminds everybody that it’s time to check your filing status for 2018 Exchange Act reports:
While the determination of whether a company will qualify as an “accelerated filer” or “large accelerated filer” for 2018 will not take effect until the date your Form 10-K is filed for fiscal 2017 (or, if earlier, your 10-K due date), the determination of your public float is calculated as of the last business day of the most recently completed second fiscal quarter, or June 30 for companies with a calendar fiscal year.
It looks like investors used their votes to send a message to some directors during this year’s proxy season – and it wasn’t “keep up the good work.” This excerpt from a recent Bloomberg article explains:
Shareholders have withheld 20 percent or more of their votes for 102 directors at S&P 500 companies so far this year, the most in seven years, according to ISS Corporate Solutions, a consulting firm specializing in corporate governance. While largely symbolic, the votes at companies such as Wells Fargo and Exxon Mobil are recognized as signals of displeasure and put pressure on boards to engage.
“Institutional investors are becoming more actively involved in communicating displeasure through their votes,”said Peter Kimball, head of advisory and client services at the consulting firm, a unit of Institutional Shareholder Services. “Voting against directors at large-cap S&P 500 companies is a way for an institution to send a signal to other, smaller companies about the actions that they don’t like. That feedback trickles down.”
We’ve previously blogged about Blackrock & State Street’s increasing assertiveness when it comes to pushing for board action on their priorities – and their greater willingness to use their voting clout to send a message to boards that aren’t responsive. The results from this proxy season suggest that other institutions may be taking the same approach.
Boards: What Do Proxy Advisors Want in a New Director?
I’m trying not to take this personally, but according to this recent “Directors & Boards” article, I’m everything that proxy advisors don’t want when it comes to new director candidates – “male, pale & stale.” So who do proxy advisors want instead of me? Here’s the article’s answer:
If proxy advisors – the firms that provide public company research and guidance to large investors – were writing a personal ad for the perfect board director it would probably go a bit like this:
Looking for diverse director with integrity who enjoys face-to-face communication with investors.
That profile is based on new report from “The Conference Board” called “Just What is a Director’s Job?” The report was the product of a roundtable of more than 50 proxy advisors, including ISS & Glass Lewis. The description of the proxy advisors’ “dream date” highlights not merely the growing importance of board diversity, but also the central position that shareholder engagement plays in their views about what makes a good corporate director.
Secret Societies: The Illuminati, Knights Templar & “The Big Four”?
Pretty interesting stuff in this European Parliament group study on the “opacity” of the organizational structure of the Big Four accounting firms. According to the study, nobody knows how many offices the Big Four have, exactly where they’re located, how many people work for them, or how their ownership is structured. Why so secretive? The study says that the Big Four have their reasons:
We suggest that the structure adopted by the Big Four firms of accountants, which at one level suggests the existence of a globally integrated firm and at another suggests that they are actually made up of numerous separate legal entities that are not under common ownership but which are only bound by contractual arrangements to operate common standards under a common name, has been adopted because it:
– Reduces their regulatory cost and risk;
– Ring-fences their legal risk;
– Protects their clients from regulatory enquiries;
– Delivers opacity on the actual scale of their operations and the rewards flowing from them.
The study was released by a left-leaning group of members who serve on the European Parliament’s Panama Papers inquiry committee. Anyway, who knew that your mild-mannered independent registered public accounting firm was playing such an integral role in bringing about the “New World Order”?
