As noted in this WSJ article and NY Times article, the DOJ and SEC have sent subpoenas to Rep. David Camp, Chair of the House Ways & Means Committee, and Congressional Staffer Brian Sutter, regarding whether they tipped traders about a change in health care policy in the wake of a long-running investigation. And on Friday, as noted in this WSJ article, the SEC filed a lawsuit in the Southern District of New York seeking to compel the subpoenas. Possible grand jury to follow.
Here’s an excerpt from David Smyth’s blog about the case:
This is fascinating to me for so many reasons, among them: (1) the potential Constitutional cluster we’re about to witness; (2) the real test this poses for the recently passed STOCK Act’s effectiveness; and (3) another example of Mary Jo White’s severe distaste for those who defy Commission subpoenas.
And here’s an excerpt from the latest WSJ article:
“It’s not unheard of for an agency to serve a subpoena to Congress, but for an agency to sue is—if not unprecedented—at least very rare,” said Michael Stern, who was senior counsel to the U.S. House from 1996 to 2004. “It shows that there is a serious conflict; the SEC really wants the information and the House really wants it protected,” he said.
Conflict Minerals: Are the Form SDs “Working”?
Recently, I blogged that perhaps no one would read all the Form SDs being filed except compliance people like ourselves. But I haven’t focused on how the disclosure in the reports might change corporate behavior – as I’ve been focused on the immaterial nature of them like everyone else in our profession. But as noted by Steve Quinlivan in his blog, a report issued by the “Enough Project” indicates market changes spurred by this Dodd-Frank provision have helped to significantly reduce the involvement of armed groups in eastern Democratic Republic of Congo in the mines of three out of the four conflict minerals. That certainly is good news!
More on Rule 506 Bad Actor Waivers
I’ve blogged several times about the SEC’s evolving policy on Rule 506 Bad Actor waivers as the Commissioners duke it out. The latest is this Reuters article entitled “SEC alters waiver policy to remove ‘too big to fail’ concern.” Here’s an excerpt:
In an interview with Reuters, SEC Republican Commissioner Michael Piwowar said he convinced the agency to alter the language in April after he threatened to vote against approving a waiver for the Royal Bank of Scotland Group Plc.The bank had requested the waiver to retain certain regulatory privileges, some of which make it easier for companies to raise capital, after one of its units struck a criminal plea deal in connection with the Libor bench mark interest rate manipulation case. But Piwowar said he feared voting to approve it without first changing the policy language could lead the market to believe the bank was too big to fail.
That is because the policy originally called for the SEC to consider a company’s “significance to the markets and its connectedness to other market participants” as a factor when deciding whether to deny a waiver. The SEC quietly made the change he requested on April 24.
And in her blog, Vanessa Schoenthaler notes that Senator Sherrod Brown (D-Ohio), Chair of the Banking Subcommittee on Financial Institutions and Consumer Protection, recently wrote a letter to Chair White questioning the Commission’s practices and procedures related to waiver of the automatic disqualification provisions…
Last month, I blogged about how the Delaware legislature was barreling towards passing legislation to reverse the impact of the ATP Tour v. Deutscher Tennis Bund decision. In the wake of this Delaware Senate resolution, here’s comes news from this WSJ blog:
Score this round for the U.S. Chamber of Commerce. The group representing business interests has won, at least for now, a fight in the Delaware legislature over whether companies can foist their legal bills onto shareholders who sue them and lose.
The Delaware legislature has postponed until early 2015 discussion of a proposed bill that had drawn heat from the Chamber, among others, the bill’s sponsor confirmed Wednesday. The bill would have banned companies from shifting the costs of losing cases onto the stockholders who bring them. “I certainly believe that we should not permit companies carte blanche to adopt these kinds of bylaws,” Sen. Bryan Townsend, who sponsored the bill, said in an interview. “But we have heard from a broad group of stakeholders and thought it best to take the coming months to continue our examination of the issue.”
The fight bubbled up after Delaware Supreme Court ruling last month that upheld a fee-shifting bylaw adopted by a private company, ATP Tour Inc. Some corporate lawyers said the ruling might open the door to public companies adopting similar “loser pays” provisions in an effort to deter shareholder litigation, which has skyrocketed in recent years. Such cases are now nearly automatic after the announcement of a merger, and rarely result in substantial gains for shareholders.
A section of the state bar quickly crafted legislation to ban companies from adopting such bylaws, and presented the measure to the legislature, which had been set to vote last week. But the Chamber opposed the bill, which it said “takes away a new tool … [that] businesses could use to reduce the amount of unnecessary litigation that accompanies corporate mergers,” according to a letter sent to Mr. Townsend June 5 and reviewed by The Wall Street Journal.
Others joined the fray. Dole Foods Co. also sent a letter to Mr. Townsend, the News Journal has reported. And more quietly, E. I. du Pont Nemours & Co., one of Delaware’s biggest and most influential companies, has quietly lobbied against the legislation, according to people familiar with its efforts. A DuPont spokesman confirmed that the company opposes the bill, but declined to comment further. DuPont’s intervention likely carried considerable weight in Delaware, where it was founded in 1802 as a gunpowder maker along the banks of the Brandywine Creek. It is the only Fortune 250 company based in the state, despite the dozens that claim it as their legal home, and its name is plastered around Wilmington, where its headquarters take up an entire city block.
XBRL Filings: 8-12% Contain Errors!
Here’s an excerpt from this piece by Compliance Week:
Calcbench, a technology firm promoting XBRL, says 8 to 12 percent of all filings provide the wrong scale for a number – such as reporting a number as 15 when the correct figure is 15,000. That mistake was most common in the fourth quarter of 2012, when one in eight filings contained a scaling problem, the firm says. Scaling most often occurs in tags associated with shares, but “a non-trivial number of errors” also occur in areas that are watched closely by analysts and investors, like revenue, net income, and assets. “Errors in these accounts may cause potentially wrong investment recommendations and decisions which may lead to increased liability by filing firms,” the report says. That makes them a high priority for correction, according to Calcbench.
Even more common, says the report, are sign switches, a problem in 40 to 60 percent of filings over the period analyzed by the firm. Sign switches are not as right or wrong as scaling errors, the firm says, but they can be confusing. As an example, cost of goods sold might be presented as a negative number that is added to revenue, or as a positive number that is subtracted from revenue. The analysis also finds a correlation between the presence of sign switches and the average number of tags in a filing. “The more tags you use, the more likely you are to have a sign switch,” the report says.
Transcript: “Proxy Season Post-Mortem: The Latest Compensation Disclosures”
We have posted the transcript for the recent CompensationStandards.com webcast: “Proxy Season Post-Mortem: The Latest Compensation Disclosures.”
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.
