Here’s an excerpt from this Morgan Lewis blog by Linda Griggs and Sean Donahue:
U.S. companies will need to comply with a new converged revenue recognition standard that the FASB and the International Accounting Standards Board (IASB) issued on May 28. The converged standard—which applies to fiscal years beginning after December 15, 2016—eliminates many existing industry and other accounting guidance related to revenue recognition for U.S. companies and provides the first comprehensive requirements in International Financial Reporting Standards.
The new standard may not affect all U.S. companies equally, but it will require all to evaluate their contracts to determine whether:
– the new standard will affect the timing and amount of revenue recognized;
– new contracting processes should be considered;
– internal control over financial reporting and IT systems need to be updated; and
– bonus and incentive plans and other compensation arrangements need to be revised.
The amount and timing of revenue may be affected for the following reasons:
1. The new revenue recognition standard requires companies to determine whether goods or services promised in a contract are separate performance obligations that must be accounted for separately if they are distinct, which means that (1) “[t]he customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer” and (2) “[t]he promise to transfer the good or service is separately identifiable from other promises in the contract.”
2. The amount of revenue that is recognized (i.e., the transaction price) must take into account various factors, including the following:
– Discounts, credits, price concessions, returns, and performance bonuses/penalties that may be considered to be variable consideration. Variable consideration may only be included in the transaction price to the extent that it is “probable” that the variable consideration will not be reversed.
– Any significant financing component in the contract that results from the timing of the customer’s payment differing by more than a year from the transfer date of the promised goods or services to the customer, in which case the transaction price should be adjusted for the time value of money.
– Any noncash consideration being paid by the customer.
– Any consideration payable to the customer, such as vouchers and coupons.
3. The timing of revenue recognition will be affected by the following:
– The allocation of revenue to different performance obligations
– The timing of when the entity’s customer obtains control of a good or service because—unless an entity transfers control of a good or service over time, requiring the recognition of revenue over time—the entity is considered to satisfy the performance obligation at a point in time.
A significant requirement in the new revenue recognition standard is the principles-based disclosure requirement, which is intended to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from such contracts. This will likely result in robust, qualitative, and quantitative information about contracts on a disaggregated basis for appropriate categories of customers, such as the categories that companies use in their investor presentations, about related revenues, the allocation of the transaction price to performance obligations and significant judgments, and changes in judgments made in applying the new standard to contracts.
Mark Zuckerberg and other members of Facebook Inc’s board have been sued by a shareholder who claimed a policy letting them annually award directors more than $150 million of stock each if they choose is unreasonably generous. In a complaint filed on Friday night in Delaware Chancery Court, Ernesto Espinoza said the board was “essentially free to grant itself whatever amount of compensation it chooses” under the social media company’s 2012 equity incentive plan, which also covers employees, officers and consultants.
He said the plan annually caps total awards at 25 million shares and individual awards at 2.5 million, and in theory lets the board annually award directors $156 million in stock each, based on Friday’s closing price of $62.50. The lawsuit does not contend that such large sums will be awarded. Espinoza also said last year’s average $461,000 payout to non-employee directors was too high, being 43 percent larger than typical payouts at “peer” companies such as Amazon.com Inc and Walt Disney Co that on average generated twice as much revenue and three times more profit.
Facebook spokeswoman Genevieve Grdina said in an email: “The lawsuit is without merit and we will defend ourselves vigorously.” A spokeswoman for Robbins Arroyo, a law firm representing the plaintiff, had no immediate comment.
The lawsuit alleges breach of fiduciary duty, waste of corporate assets and unjust enrichment. It seeks to force directors to repay Facebook for alleged damages sustained by the Menlo Park, California-based company, and to impose “meaningful limits” subject to shareholder approval about how much stock the board can award itself.
Among the other defendants is Facebook Chief Operating Officer Sheryl Sandberg, a director whose compensation was $16.15 million in 2013, according to a regulatory filing. She is worth $999 million, Forbes magazine said on Monday. Zuckerberg made $653,165 last year, a regulatory filing shows, and Forbes said his net worth is $27.7 billion. Espinoza was also a plaintiff in a 2010 shareholder case in Delaware against Hewlett-Packard Co concerning its handling of the resignation of Chief Executive Mark Hurd over his relationship with a former contractor. The case is Espinoza v. Zuckerberg et al, Delaware Chancery Court, No. 9745.
SEC to Bring More Insider Trading Cases in Administrative Proceedings?
As noted in this Reuters article, the SEC is looking to bring more insider trading cases “as administrative proceedings in appropriate cases,” Andrew Ceresney, head of the SEC enforcement division, told the District of Columbia Bar on Wednesday. “We have in the past. It has been pretty rare. I think there will be more going forward.”
Meanwhile, here’s the NY Times article admitting that the paper got it wrong in reporting that golfer Phil Mickelson was being investigated for insider trading…
The SEC’s biggest problem in bringing its first whistleblower retaliation case – a settled administrative action against Paradigm Capital Management – may be the lack of statutory authority to do so under Dodd-Frank. The SEC’s track record in this area is already blemished.
Dodd-Frank unambiguously defined “whistleblower” to mean people who provide information to the SEC. However, the SEC promulgated regulations that purported to expand the definition of “whistleblower” to include any individual who has reported information which could lead to prosecution by the SEC for violations of US securities laws, even if the individual does not report that information directly to the SEC. Under this expansive SEC regulation, a “whistleblower” would include an individual who only made an internal complaint to his or her company, but did not report the alleged conduct to the SEC.
A recent opinion by the federal Fifth Circuit Court of Appeals rejected the SEC’s “expansive interpretation of the term ‘whistleblower’ for purposes of the whistleblower protection,” denying retaliation protection to an employee who did not report alleged misconduct to the SEC and was demoted, then fired, for complaining to managers and a corporate ombudsman that the company was engaged in questionable lobbying efforts with an official in the Iraqi government.
The Fifth Circuit dismissed the employee’s arguments that the more expansive SEC regulation provided protection, stating that “there is only one category of whistleblowers: individuals who provide information relating to a securities law violation to the SEC.”
The SEC’s self-granted authority to bring its own anti-retaliation action suffers from the same impermissibly “expansive interpretation” of Dodd-Frank.
The relevant portion of Dodd-Frank authorizes “[a]n individual who alleges discharge or other discrimination” to file an anti-retaliation lawsuit. The statute does not authorize the SEC to file such a lawsuit. However, the same regulation promulgated by the SEC that the 5th Circuit found exceeded the SEC’s statutory authority to define “whistleblower” also purports to make the anti-retaliation provisions “enforceable in an action or proceeding brought by the Commission.”
As with the SEC’s attempt to redefine “whistleblower,” the SEC’s first attempts to exercise its self-granted authority to pursue an anti-retaliation claim will eventually be challenged in courts.
According to this Reuters article, 11 pension funds have written a letter disputing comments that Commissioner Gallagher made in a recent speech about possible funding gaps at pension funds generally…
The SEC Celebrates 80 Years Online
Although the actual celebration was tamped down this year – an ice cream social – the SEC has built a “80th Anniversary” spotlight page that is pretty cool. Some old-time videos including one with the 1st SEC Chair, Joe Kennedy…
We have launched a new “Job Board” that can help you land a job – or find candidates for a job opening (the first job opening is already posted!). You don’t need to be a member to participate – nor does it cost anything to post a job opportunity or search for a new job. Every aspect of it is entirely free. Tell your recruiter friends so they can post jobs. If you’re not a member, you do need to “register” for the job board (we require that so the folks on the other end of a job transaction can reach you). Check it out!
Regulation A+ Comment Letters: Putting Some Emotion Into It
Jason Coombs files a lot of comment letters – here is his latest on the Regulation A+ proposal. Perhaps this is not his best work, but it does have its moments. Here is an excerpt:
Certain state securities regulators have used actual “fighting words” and have made potentially-criminal threats including threats of violence or a civil war in planned retaliation if the Commission includes any preemption language in its final Rule for Regulation A+.
More on our “Proxy Season Blog”
We continue to post new items regularly on our “Proxy Season 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:
– Annual Meeting Midpoint: Closer Look at Governance Shareholder Proposals
– Analysis: A Closer Look at April’s “Vote No” Campaigns
– Interim Voting Tallies: Broadridge’s Background Report
– Major Governance Changes at Nabors, But Vote-Counting Method Continues to Draw Criticism
– Canada Proposes Guidance – Not Regulation – for Proxy Advisors
– Warren Buffett Speaks: Board Realities & Shareholder Voting
Temple Professor Tom Lin recently published an article examining executive power and “corporate democracy,” which is a loaded term for some in our profession. Below is the abstract:
This Article deciphers a long-standing paradigm of power — the President as CEO — and offers an original and better legal understanding of executive governance. This Article presents the first sustained, comparative study of CEOs and presidents, the theoretical ties that bind them in the popular imagination of law and society, and the practical truths that sever their bonds in the real world of politics and business. It argues that this overused but understudied construct of law and society illuminates these two chief executives, but also obscures and distorts them with dangerous consequences. This Article suggests that in better understanding the laws and powers of those who lead and govern, we can learn better ways to be led and governed, as shareholders and citizens alike.
This Article begins with a normative and historical analysis that challenges conventional comprehensions of the President as CEO paradigm. It then charts the parallel promises and perils of power shared by CEOs and presidents. Drawing from constitutional law, corporate law, and organizational theory, it explains how promises of unity, accountability, and effectiveness converge with perils of capture, deference, overconfidence, and aggrandizement. Next, this Article highlights critical divergences between CEOs and presidents in connection with their elections, objectives, and constituents. Because of these divergences, it argues that popular movements to conflate presidents and democracy with CEOs and corporations can undermine American democracy and American corporations. Instead of quixotic conflations, this Article calls for deeper comparative examinations of these chief executives as a way to unlock new insights into corporate democracy, corporate purpose, government privatization, and executive power.
Thanks for the Gumball Mickey: Gibson Dunn, Washington DC
Excited to get the good people at Gibson Dunn in DC involved in the “Gumball Madness” in this 20-second video:
Printed: Popular “Romeo & Dye Forms & Filings Handbook”
Good news. Alan Dye has completed the 2014 edition of the popular “Section 16 Forms & Filings Handbook,” with numerous new – and critical – samples included among the thousands of pages of samples. Remember that a new version of the Handbook comes along every 4 years or so – so those with the last edition have one that is dated. The last edition came out in 2009.
Act Now: If you don’t try a ’14 no-risk trial to the “Romeo & Dye Section 16 Annual Service,” we will not be able to mail this invaluable resource to you now that it’s done being printed. The Annual Service includes a copy of this new Handbook, as well as the annual Deskbook and Quarterly Updates.
In this 2-minute video, there are 19 great ways that Freeport-McMoRan enhances the usability of its 2014 proxy statement:
The Battle Over Delaware’s Fee Shifting Legislation
Initially, it looked like the Delaware legislature was moving fast to adopt legislation that would essentially overturn the recent Delaware Supreme Court decision in ATP Tour v. Deutscher Tennis Bund (which held that fee-shifting bylaws were permissible). It still is likely to get passed soon enough – but the Chamber of Commerce has written letters to state legislators that has delayed the debate on the bill for the time being…
More on our “Proxy Season Blog”
We continue to post new items regularly on our “Proxy Season 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:
– Shareholder Proposals: Proponent Loses Lawsuit to Compel Inclusion
– Determining Materiality in the Context of MD&A Disclosure
– Governance By Gunpoint: Aaron’s
– A Closer Look at Shareholder Proposals This Season
– More on the “Activist-Investor” Debate
There is nothing more stressful – with perhaps the exception of a major disruption – at an annual shareholder meeting than having to postpone and adjourn the meeting. As reported in Mike Melbinger’s blog, last week, Cheniere Energy filed these supplemental proxy materials to postpone a special shareholder’s meeting as a result of a lawsuit alleging improper compensation disclosures and some fishy counting of votes (see also Jill Radloff’s blog and this WSJ article).
This came on the heels of Cortland Bancorp having to postpone its annual meeting because its transfer agent’s tallies couldn’t be trusted in the wake of an enforcement action filed by the SEC. In our “Annual Shareholder’s Meetings” Practice Area, I have posted sample supplemental proxy materials and Form 8-Ks dealing with meeting postponements and adjournments – and here’s a blog from Keith Bishop about abstentions in the news…
Back to the fishy counting of votes, for those that have watched my videos about “usable” proxies, you will see that I have highlighted companies that used a chart to clearly describe how abstentions and broker non-votes are counted for each agenda item. The Cheniere Energy lawsuit highlights the need to have good disclosure in this area – and it will be interesting to see if the plaintiffs firms will be scouring 8-Ks for proposals that reportedly passed, but should not have passed had abstentions and broker non-votes been counted properly (and vice versa), as well as Section 14(a) claims for incorrect descriptions of the vote required…
PCAOB Adopts “Related Parties & Unusual Transactions” Auditing Standard
As noted in this blog by Gibson Dunn’s Michael Scanlon, the PCAOB recently adopted Auditing Standard #18 that expand audit procedures required to be performed with respect to three important areas: (1) related party transactions; (2) significant unusual transactions; and (3) a company’s financial relationships and transactions with its executive officers. The standards also expand the required communications that an auditor must make to the audit committee related to these three areas. They also amend the standard governing representations that the auditor is required to periodically obtain from management.
Thanks for the Gumball Mickey: The Women’s 100
I’m still receiving “thank you’s” from the attendees of last week’s inaugural “The Women’s 100 Conference.” Here’s a short video of the women playing homage to Mickey:
Surprise! It’s Randi blogging for the first time on this blog…Ever since the recent, highly publicized cyber breach incidents – whether warranted or not (see Broc’s recent blog) – it seems like hardly a day goes by without media coverage & third-party commentary about the board’s risk oversight role. This new Deloitte report– which addresses Deloitte’s findings of a global study addressing the prevalence and drivers of board-level risk committees – is very timely.
A primary theme is that board risk committees are just one tool that boards should at least consider to help effect their risk oversight responsibilities. That said, as the study shows, board risk committees (stand-alone or hybrid) for large companies outside the highly regulated financial services industry (FSI) are still relatively uncommon globally – and virtually non-existent in the US. This is the kind of benchmarking information most boards like to be aware of.
Most commonly, US boards effect their risk oversight by allocating responsibilities among multiple board committees; the balance typically retain responsibility at the full-board level. However, like all other governance practices, re-evaluating the approach to risk oversight periodically in the context of evolving macro & company-specific circumstances is important – even if it appears that the status quo is working. Sometimes this means reviewing particular governance practices outside of the board’s slated review time frame (e.g., proxy season). This report assists that review process by teeing up for the board’s consideration these potential benefits of a risk committee:
Depending on the organization and its industry, risks, and regulatory and risk governance needs, a board-level risk committee can enable the board to:
Assert and articulate its risk-related roles and responsibilities more clearly and forcefully.
Establish its oversight of strategic risks, as well as the scope of its oversight of operational, financial, compliance, and other risks.
Task specific board members, external directors, and other individuals with overseeing risk and interacting with management and the chief risk officer.
Recruit board members with greater risk governance and risk management experience and expertise.
Keep the board more fully informed regarding risks, risk exposures, and the risk management infrastructure.
Importantly, the report emphasizes that – outside of the FSI – risk committees aren’t normally required, and may not be desirable for every company. Each board needs to determine for itself how best to effect its risk oversight responsibilities; a dedicated risk committee is just one of several potential approaches. As noted in my previous blog about board technology committees, some boards function most effectively at the full board level with minimal work conducted in standing committees – whereas others function primarily through their standing committees. Both approaches can be equally effective. Along those lines, the board can certainly achieve the risk oversight benefits identified in the report without establishing a dedicated risk committee.
Should Directors Be Allowed to Attend All Committee Meetings?
Speaking of board committees, I couldn’t help but to add my 2 cents to a current spirited debate on LinkedIn about whether it’s appropriate for all board members to attend all committee meetings. It quickly became clear in my following of this group discussion that not only are the views about this topic widely divergent, but that my views appear to be in the minority on this issue.
So far, opinions weigh in favor of excluding all non-committee member directors from all standing committee meetings, whereas I and a few others believe that – generally (subject to independence & other relevant considerations) – allowing all directors to attend all committee meetings as observers/listeners is a net positive. What I am observing by following this discussion is that the views of those opposed to this “open invitation” approach are based on philosophical beliefs about “right and proper” governance and assumptions about director personality & behavior – rather than their personal experience. On the other hand, those of us in favor of this “open invitation” approach are basing our views on our positive first-hand experiences with this practice.
The “opposition camp” is largely attributing negative characteristics to directors who express a desire to attend committee meetings other than their own – including micromanagement, lack of trust of the competence of committee members, out-of-control egos, inexperience, etc. – that simply bear no resemblance to my (and a few others’) personal experience. There also appear to be concerns about potential inefficiencies, inadequate leadership skills of board chairs who would allow such a practice, the director’s desire to attend committee meetings possibly revealing tendencies to overstep into management territory, etc.
As I noted in the group discussion, while I was a corporate GC & secretary, two of my very seasoned and reputable directors who have served for many years as directors of other public companies suggested this practice of inviting (but not mandating) all directors to attend all committee meetings based on their positive experiences at one of the Fortune 500 company boards on which they (still) serve. Triggered by their recommendation, we adopted the practice at my company and it unquestionably resulted in a more aware and engaged board overall – as well as other upsides. These upsides (and others) are shared by the few other LinkedIn group members who expressed favorable views about this approach based on their personal experiences.
This is not to say that allowing all directors to attend committee meetings as a listener/observer is the right approach for every company; rather, each board should consider this based on its own facts and circumstances. However, those who have not experienced it should not automatically assume that a director’s request to attend committee meetings evidences personality (or other) flaws – or that adopting this approach would result in inefficiencies or other adverse implications.
Finally, I have to say that it seems counter-intuitive to me that – with all of the media and investor criticism lately about directors’ lack of sufficient awareness & engagement, people are so vehemently opposed conceptually to directors attending their own board’s key committee meetings.
Webcast: “Proxy Season Post-Mortem: The Latest Compensation Disclosures”
Tune in tomorrow for the CompensationStandards.com webcast – “Proxy Season Post-Mortem: The Latest Compensation Disclosures” – to hear Mark Borges of Compensia, Dave Lynn of CompensationStandards.com and Morrison & Foerster and Ron Mueller of Gibson Dunn analyze what was (and what was not) disclosed this proxy season.
Perhaps not as good a battle as “What If Conan Met Thor?” – but it has to be up there. Recently, two different articles brought two extremes to my attention. First, this blog by the “Activist Investor” stated a belief that CEOs shouldn’t serve on the board at all, much less serve as the board chair. Then, this Laurel Hill article analyzed a WSJ article entitled “The Hottest Corporate Fad: Pay CEOs to Find Successors.” In essence, the boards in these cases arguably are paying the CEO to do its job. Shoot me an email with your opinion on either (or both) of these topics. I will keep them to myself – but I’m curious what others think…
Study: A 13-Year Comparison of Restatements
In a recent study, Audit Analytics looked back over 13 years of restatements and, among other things, found:
– In the last four years, the quantity of restatements has leveled off and severity has remained low, but restatements have increased from accelerated filers for the third straight year.
– During 2010, 157 accelerated filers disclosed restatements, followed by 210 in 2011; 282 in 2012 and 290 in 2013.
– During 2013, Revision Restatements (restatements revealed in a periodic report without a prior 8-K, Item 4.02 disclosure that past financials can no longer be relied upon) represented about 68.8% of the restatements disclosed by 10-K filers. This percentage represents the highest percentage calculated since the disclosure requirement came into effect August 2004.
– During 2013, the average income adjustment per restatement by publicly traded companies (on Amex, NASDAQ, or NYSE) was about 3.2 million dollars, the lowest during the last seven years reviewed.
– During 2013, about 52.8% (235 out of 445) of the restatements disclosed by publicly traded companies (on Amex, NASDAQ, or NYSE) had no impact on earnings, the highest during the last seven years reviewed.
– The average number of days restated (the restatement period) was 548 days during 2013, the sixth year in a row with a period above but near 500 days.
Tune in tomorrow for the webcast – “Underwriter’s Counsel: Latest Developments” – during which White & Case’s Colin Diamond, Cravath’s LizAnn Eisen and Davis Polk’s Joe Hall will explore the latest developments that impact underwriter’s counsel, including negotiating the underwriting agreement, obtaining a comfort letter and making filings with FINRA.
As reported in this WSJ article, nearly 1,300 companies filed Forms SD to report on conflict minerals by the June 2 deadline. The result? Inconclusive. While a number of companies acknowledged their suppliers may have sourced minerals from the DRC or adjoining countries, a “majority of companies whose filings were reviewed by The Wall Street Journal… said they haven’t figured out if their products, ranging from electronics to jewelry, are in the clear. Only a handful were confident their supplies were free of conflict metals….” Companies contended that the sources were difficult to trace, that they did not receive questionnaires from suppliers or received incomplete, inaccurate or unreliable responses or that “the complexity of their manufacturing processes made it impossible to give a definitive answer.”
A conflict minerals consultant observed that the “‘credibility and the certainty of the data, through the supply chain, doesn’t really exist completely. Because it is the first time anybody has ever done this, there is a question about the quality of the data.'” The article notes that the “SEC estimated conflict-mineral reports would cost companies up to $4 billion in the first year, and drop to between $200 million and $600 million in later years. Companies were projected to take about 480 hours, on average, to complete a report, compared with about 2,000 hours for a corporate annual report.” It will be interesting to see what the real numbers were.
Proposed Regulation A+: Comment Letter from 20 Members of Congress Opposing Pre-Emption
A few days ago, 20 members of Congress submitted this comment letter opposing pre-emption in the context of proposed Regulation A+. For some time, NASAA has been making the argument that the pre-emption aspects of proposed Regulation A+ are inconsistent with legislative intent. In addition, SEC Commissioner Stein is opposed to pre-emption – and Commissioner Aguilar has said that he has asked the SEC’s General Counsel to provide guidance on whether pre-emption was permitted. Here are all the comments so far on this proposal. Thanks to David Pankey of McGuireWoods for the heads up!
Meanwhile, here are the comments on the SEC’s crowdfunding proposal – including this one recently filed by the ABA’s Business Law Section…
Opposing Climate Change: Environmental Groups Warn Directors and Executives of Possible Personal Liability
Greenpeace International, WWF International and the Center for International Environmental Law sent letters to executives and directors of 32 major oil, gas and energy companies, warning them that they may ultimately face personal liability related to climate change issues.
According to the NGOs, the targeted companies are “working to defeat action on climate change and clean energy by funding climate denial and disseminating false or misleading information on climate risks.” Beyond this general yet inflammatory allegation, there are no specific examples or references cited other than a list of news stories and other publications about corporate influence and “lobbying” activities. The group claims that these companies face increasing risks of climate-related litigation arising from insufficient disclosures or as a result of major corporate losses, expenses or penalties. Derivative suits may follow with allegations of officers and directors’ mismanagement and ultimately create an evolving standard of fiduciary duty in the context of climate change. As a result, they warn that D&O insurers may not provide coverage for these kinds of lawsuits. The letter was also sent to 45 D&O insurers.
Responses to a list of questions, which will be made publicly available, are requested in four weeks. The questions include whether officers and directors believe that they would be indemnified under the company’s D&O policy if accused of having “misled” consumers and investors or engaged in “disinformation” or campaigns to “obstruct, suppress or discredit” scientific information.
We have posted the survey results regarding how companies are preparing now for the SEC’s upcoming pay disparity rulemaking (compare to the same poll from two years ago), repeated below:
1. At our company, the board:
– Does not consider internal pay equity when setting the CEO’s compensation – 64%
– Does consider internal pay equity as a factor by comparing the CEO’s pay to all employees – 8%
– Does consider internal pay equity as a factor by comparing the CEO’s pay to other senior executives – 36%
– Does consider internal pay equity as a factor by comparing the CEO’s pay to a formula different than the two noted above – 3%
2. Ahead of the SEC’s mandated pay disparity disclosure rulemaking under Dodd-Frank, our company:
– Has not yet considered how we would comply with the rules – 74%
– Has begun considering the impact by assessing whether we could comply with the precise prescriptions in Dodd-Frank but we have not yet tested statistical sampling – 29%
– Has begun considering the impact by assessing whether we could comply with the precise prescriptions in Dodd-Frank including assessing whether we could use statistical sampling – 12%
3. As one of the companies that have assessed the impact of the SEC’s mandated pay disparity disclosure rulemaking, our company:
– Believes we could comply with the precise prescriptions in Dodd-Frank without too great a burden – 78%
– Believes we could comply with the precise prescriptions in Dodd-Frank but it would be too burdensome unless statistical sampling is allowed – 3%
– Believes we could comply with the precise prescriptions in Dodd-Frank but it would be burdensome even if statistical sampling is allowed – 25%
– Believes we wouldn’t be able to ever comply with the precise prescriptions in Dodd-Frank – 0%
4. In your own opinion, do you think that statistical sampling would have too high a potential for manipulation or material error:
– Yes – 84%
– No – 5%
– I don’t have an opinion – 19%
Over on CompensationStandards.com, I have blogged about a California bill – California Senate Bill 1372 – that would tie the state’s tax code to a pay ratio formula as a way to tackle income inequality. Last week, the bill was narrowly voted down in the California Senate, 19-17. See this LA times article; AP article – and Towers Watson note.
SEC’s Reg Flex Agenda: Four Horsemen Rulemakings Comings & Goings
A few months ago, I blogged about some remarks from Corp Fin Director Keith Higgins that included a status update on the Four Horsemen rulemakings from Dodd-Frank. Last Friday, the SEC issued its semi-annual Reg Flex Agenda indicating that the pay ratio rules would be adopted by October – and that the three other rulemakings would be proposed by that same month. Does this really mean anything? No, not really – as Reg Flex Agendas tend to be “aspirational” as I’ve blogged about a few times recently.
That doesn’t mean that I don’t believe those actions will be accomplished by that date. In fact, SEC Chair White has continued to express a desire to get all the Dodd-Frank rulemakings behind her – so I would be surprised if we didn’t see final pay ratio rules sooner, as well as proposals on at least some of the other three before then too. But you never know, particularly as the five Commissioners seem to be more polarized than ever…
A potential wild card here is that the House Financial Services Committee recently passed 9 capital formation bills – some with strong bipartisan support and some that would require the SEC to adopt new rules within a short timeframe (eg. 180 days). A new spate of required rulemakings could hinder any plans to act on some or all of the Four Horsemen…
