Here are survey results on preparing for complying with the SEC’s new conflict minerals rules:
1. Who is responsible for conflict minerals compliance:
– Legal department – 45%
– Procurement – 35%
– Finance – 15%
– Other – 13%
– Don’t know – 9%
– Not applicable, we are not an SEC registrant – 1%
2. Do you currently expect that you will be required to file a Form SD:
– No, we do not manufacture or contract to manufacture products – 11%
– No, conflict minerals are not necessary to the functionality or production of our products – 9%
– Yes, but we expect to conclude that all conflict minerals come from scrap, are recycled or originate outside the covered countries – 9%
– Yes, and we expect to rely on “DRC Conflict Undeterminable” – 22%
– Yes, and we expect to include an independent audit report – 5%
– Don’t know – 42%
– Not applicable, we are not an SEC registrant – 2%
3. If you manufacture or contract to manufacture products and conflict minerals are only contained in your packaging, do you anticipate concluding that packaging is necessary to the functionality or production of your products:
– Yes – 7%
– No – 11%
– Don’t know – 28%
– Not applicable – 54%
4. How far along are you in preparing for conflict mineral compliance:
– We’re still in denial – 18%
– We’ve begun to analyze our products, but haven’t begun implementing systems – 67%
– We’ve begun to revise our supply contracts to help comply – 2%
– We are very far along and don’t believe compliance will be a problem – 5%
– Don’t know – 2%
– Not applicable – 5%
Please take a moment to participate in this “Quick Survey on Internal Audit” and this “Quick Survey on Rules of Conduct for Board Meetings & Annual Meetings.”
Conflict Minerals: Latest in the Lawsuit Against SEC’s Rules
This Cooley news brief notes that filings have been made in the lawsuit against the SEC’s conflict minerals rules, most of them procedural. The filings state that SEC has agreed to an expedited briefing schedule, with final briefs to be filed by March 29th. Note that Amnesty International has intervened in the lawsuit to support the SEC…
I continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Judge Gets Into Online Disclaimers
– Update: Project to Enhance COSO’s Internal Control Framework
– Canada Looks to Bolster Governance of Its Banks
– Bad Grades Are Rising for Auditors
– Second Circuit Eases Aiding and Abetting Standard for SEC
Rumors Over SEC Chair Schapiro’s Departure Intensify
Here is a WSJ article that speculates on whom the next SEC Chair could be…Mary John Miller, a top Treasury Department official who played a key role during the debt-ceiling debate. Here’s an article outlining a speech that Mary Miller recently delivered on regulation…
SEC Brings Insider Trading Case Involving $276 Million Scheme
Yesterday, the SEC charged a hedge fund in a $276 million insider trading scheme involving a clinical trial for an Alzheimer’s drug being jointly developed by two pharmaceutical companies. The illicit gains generated in this scheme make it the largest insider trading case ever charged by the SEC. Here are thoughts from David Smyth of “Cady Bar the Door” about the case…
Last week, the European Commission proposed legislation with a target of 40% women on board, with exceptions for small and medium-sized companies. The proposal is not a mandatory quota. Under the proposed Directive, companies that fail to meet the standard would be subject to sanctions such as “administrative fines or the annulment of the appointment of non-executive directors.” Here’s a NY Times article about a pushback in the UK over the EU proposal.
Securities Fraud: SEC Socks BP for Half a Billion!
Last Thursday, as noted in this press release, the SEC charged BP with misleading investors while its Deepwater Horizon oil rig was gushing into the Gulf of Mexico by significantly understating the flow rate in multiple reports filed with the SEC. BP agreed to settle the SEC’s charges by paying the third-largest penalty in agency history at $525 million. That’s some serious coin!
But that’s nothing. As noted in this NY Times article, BP agreed to pay over $4 billion and plead guilty to 14 charges from the DOJ. And three BP executives were individually charged with crimes. And the company could owe another $21 billion in pollution fines under the Clean Water Act. The coverup always is more costly than the crime. Here is a Glass Lewis blog about the saga…
The SEC’s 2nd Annual Credit Rating Agency Report
Last week, the SEC issued its 2nd Annual Staff Report based on credit rating examinations. The Staff determined that with one exception, all NRSROs appropriately addressed the Staff’s recommendations in the first annual report in 2011. In addition, the Staff announced a new initiative to highlight compliance issues at credit rating agencies between examinations.
Just as I was pushing the button on Friday morning to blog about Glass Lewis’ ’13 policies, ISS released their 2013 voting policies. ISS is holding a webcast on December 6th, by which time it is likely that ISS will have also issued a set of FAQs that flesh out the new policy updates. We have our own annual webcast with Pat McGurn coming up too – “Pat McGurn’s Forecast for 2013 Proxy Season: Wild and Woolly.” I’ll be posting memos in our “ISS Policies” Practice Area.
The SEC’s Annual Whistleblower Report: 3000 Tips in a Year
Last week, the SEC’s Office of the Whistleblower published a report for its activities of for the past year – revealing that it received 3,000 whistleblower tips from all 50 states and from 49 countries, with the most common complaints being related to disclosures & financials (18%), offering fraud (16%) and manipulation (15%). The bulk of the tips inside the U.S. came from California (17%) with New York (10%) and Florida (8%) being right behind (“need some swamp land?”). The big news was that 143 enforcement judgments and orders potentially qualify for a whistleblower award.
SEC Still Has Reservations about IFRS
As this Accounting Today article notes, the SEC’s “wait and see” approach to IFRS doesn’t appear to be changing…
Last week, Glass Lewis made available it’s 2013 proxy voting guidelines to its subscribers only. [ISS came out with their ’13 policy updates this morning – I’ll cover in Monday’s blog.] Here’s some analysis of the new guidelines from Towers Watson’s Dan Kelly & Jim Kroll (I’m posting memos on GL’s update in our “Glass Lewis Policies” Practice Area):
On November 8, Glass Lewis released its updated U.S. 2013 proxy paper guidelines, which immediately went into effect. The 2013 guidelines complement material compensation-related updates that went into effect this past July when Glass Lewis began sourcing peer companies for its pay-for-performance analyses from Equilar. (See “Glass Lewis Updates Its Pay-for-Performance Model.”) Although the recent policy update primarily focuses on issues outside of executive compensation, there are some changes with potential implications for executive pay in the upcoming proxy season:
– Equity plans up for shareholder approval will be examined for share-counting provisions that understate the potential dilution or cost to common shareholders. Although an uncommon practice, Glass Lewis will now evaluate so-called inverse multipliers in fungible share reserves that result in grants of options or stock appreciation rights that are counted against the share reserve as less than one share.
– Board responsiveness to a negative shareholder vote will be under scrutiny any time 25% or more of shareholders vote against the recommendation of management on any proposal. The new general policy will require examination of any disclosures of the board’s actions in response to shareholder concerns since the last annual meeting. Glass Lewis specifically noted that this policy will apply to compensation matters such as recent modifications to the design or structure of the company’s executive compensation programs.
– In recommending negative votes in the absence of a committee chairman, Glass Lewis’s policy has been to recommend that shareholders vote against the senior director (either the longest-serving member of the committee or, if one cannot be determined, the longest-serving board member on the committee). In a change from previous years, the 2013 guidelines call for Glass Lewis to recommend a vote against all directors if seniority cannot be determined. This policy will apply to all committees, including the compensation committee.
No other compensation-related updates were included in the release of the proxy advisor’s U.S. 2013 guidelines. Conspicuously absent from the list of changes was any mention of further updates to say-on-pay voting guidelines or the incorporation of alternative pay definitions. As such, it appears that the Glass Lewis pay-for-performance and say-on-pay analyses were set for the 2013 proxy season after the July updates.
DOJ & SEC Jointly Issue FCPA Guidelines
On Wednesday, the DOJ’s Criminal Division and SEC’s Enforcement Division issued joint guidelines for companies navigating the Foreign Corrupt Practices Act. The 130 pages of guidance – entitled “A Resource Guide to the U.S. Foreign Corrupt Practices Act” – is arguably the most thorough review of anti-bribery compliance since the FCPA was originally passed in 1977. Here is the press release – and here are Enforcement Director Khuzami’s remarks. We are already posting numerous memos in our “Foreign Corrupt Practices Act” Practice Area – and see this blog about declination opinions.
For those curious, here is an update on the status of DTC’s flooded vault, which I blogged about last week.
Venture-Backed Companies: Corporate Governance & Disclosure Practices in IPOs
Recently, Wilson Sonsini wrote this 2nd annual report on the governance and disclosure practices of 50 venture-backed companies that went public from July 2011 through June 2012, including those related to directors and independence, board committees and policies, stock plans, key metrics and non-GAAP measures and defensive measures.
Ever since the SEC announced a week ago that it was giving relief to those impacted by Hurricane Sandy, I have been blanketed with questions about what exactly are the parameters of the relief. As noted in this press release, the SEC finally issued an exemptive order spelling out those details of conditional relief in a wide variety of areas including ’34 Act filing deadlines, S-3 & S-8 eligibility, Rule 144 public information criteria, proxy delivery requirements to impacted areas and more (eg. auditor independence requirements as they relate to reconstruction of previously existing accounting records for audit clients).
To get a sense of how the SEC works – which might help explain why it takes as long as it does to get an order like this out the door – tune in to our upcoming webcast: “How the SEC Really Works.” Even if you work at the SEC, I think this program will be instructive as to how offices other than yours function…
The Latest SEC Enforcement Stats
Yesterday, the SEC issued this press release highlighting the victories of the Enforcement Division over the past year – including noting that the agency has brought financial crisis actions against 117 defendants over the past 2.5 years. Insider trading cases essentially were flat compared to the prior year. and there were 79 actions related to disclosure violations…
This November-December issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:
– “But I Just Work Here!”: The Rise of Corporate Officer Fiduciary Liability
– When Companies Combine: Object Lessons in Managing Leadership Succession
– Vintage Deal Tools Reemerge
– Analysis: Say-on-Golden-Parachute Voting
– Checklist: How to Handle Stockholder List Requests
I haven’t personally made it to PLI’s annual Securities Law Institute in perhaps 6-7 years now after being a mainstay for 15 years or so. But my goal is to make it next year. I will be at the ABA Fall Meeting this Friday. Anyways, PLI has blogged some of the highlights from last week’s event, including:
I was very sad to hear that Jim Byrne, long-time corporate secretary for Bankers Trust – who retired a decade ago – has passed away. Here is his NY Times obit. Jim was one of the bright stars that drew me into the fold of the Society of Corporate Secretaries. When I was at the SEC, he arranged a trip for me and others to Wall Street to explain some of the mysteries of the process. A very kind man. My condolences to his family and friends.
Say-on-Pay: Now 60 Failures
I’ve added two more companies to our failed say-on-pay list on CompensationStandards.com for 2012 as Oracle and PMFG during the past week. We are now at 60 companies in ’12 that have failed to garner major support. Hat tip to Karla Bos of ING Funds for keeping me updated.
Compensation Standards Newsletter: Fall Issue Now Available
We have posted the Fall 2012 Issue of our Compensation Standards newsletter that contains practical guidance pulled from our successful pair of executive pay conferences. With Dave Lynn, Mark Borges and I wrapping up the 2013 Edition of Lynn, Borges & Romanek’s “Executive Compensation Disclosure Treatise & Reporting Guide”- all of the updated Chapters of the Treatise are already posted on CompensationStandards.com – we thought it was best to compile the Talking Points as our Fall issue since that guidance didn’t make it into the Treatise.
With the election behind us, the rumors over whether SEC Chair Schapiro is a short-timer will intensify. And when the SEC Chair changes, there often are other senior management changes.
Anyways, I’ve decided to create this list of the Directors for the Division of Corporation Finance, dating back to 1934 (before the Division had that name). This list surprisingly wasn’t easy to create as the SEC nor the SEC Historical Society maintains one. The list is repeated below (and includes their term as a Director):
1. Baldwin Bane (1934 – 1952)
2. Byron “Barney” Woodside (1952 – 1960)
3. Manuel “Manny” Cohen (1960 – 1962)
4. Edmund “Ed” Worthy (1962 – 1969)
5. Charles “Charlie” Shreve (1969 – 1970)
6. Alan Levenson (1970 – 1976)
7. Richard “Dick” Rowe (1976 – 1979)
8. Edward Greene (1979 – 1981)
9. Lee Spencer (1982 – 1984)
10. John Huber (1984 – 1986)
11. Linda Quinn (1986 – 1996)
12. Brian Lane (1996 – 1999)
13. David Martin (1999 – 2002)
14. Alan Beller (2002 – 2006)
15. John White (2006 – 2009)
16. Meredith Cross (2009 – present)
I saw a sneak preview for “Life of Pi” last night. Wasn’t expecting to like it given the previews and because I’m not a fan of 3-D. It was mind-blowing, both the story and the way the 3-D felt. I definitely recommend it. Look at this clip of the flying fish scene…
The Debate Over Cost-Benefit in Rulemaking Continues
Here is an article from the Washington Post analyzing the Senate debate over a pending bill that could force federal agencies to do even more cost-benefit analysis when conducting rulemaking…
What the Election Results Mean for Dodd-Frank?
Here is an article from the Washington Post analyzing the impact of the results on Dodd-Frank and all the rulemaking thereunder that still needs to get done…
Here’s news from Davis Polk’s Ning Chiu from this blog:
In early October, the American Petroleum Institute, Chamber of Commerce, Independent Petroleum Association of America and National Foreign Trade Counsel had filed a complaint and a petition for review in the D.C. Circuit Court of Section 13(q) of the Exchange Act, which under Dodd-Frank required the Commission to issue rules mandating reports by resource extraction issuers relating to payments made to a foreign government or the U.S. federal government in order to further the commercial development of oil, natural gas or minerals. The plaintiffs later submitted a motion requesting that the Commission stay the effective date of the final rules.
The SEC has now issued an order denying the motion to stay the implementation of the rules. The SEC adopting rules require issuers to comply for fiscal years ending after September 30, 2013, with each annual report due no later than 150 days after the end of the most recent fiscal year, such that the first reports would be due on February 28, 2014, at the earliest. This timing largely drove the Commission’s decision on this motion.
In denying the stay, the Commission indicates that they do not believe the plaintiffs have demonstrated imminent, irreparable harm, given that the court’s expedited briefing and argument schedule may determine the validity of the rules as soon as spring 2013. The Commission was also unpersuaded by the plaintiff’s claims of harm with respect to: (a) initial compliance costs to document the payment information required under the rule; (b) competitive disadvantage for new contracts; (c) detrimental effects on existing contracts where disclosure is prohibited; and (d) competitive harms resulting from competitors’ use of the disclosed information. In addition, the Commission found that the plaintiffs have not demonstrated a likelihood of success on the merits of their petition, based on the Commission’s view of the strength of the explanations set forth in the rule’s adopting release.
Corp Fin May Recommend Proposal Mandating Disclosure About Political Spending
The WSJ reports that Corp Fin is considering recommending a proposal that would mandate disclosure of corporate political spending and lobbying activities. According to the article, the idea for the proposal was triggered by a rulemaking petition submitted to the SEC last year by a group of academicians. The SEC has received over 300,000 comment letters on the petition. Currently, some companies voluntarily make disclosure about the uses of corporate resources for political activities, but there is no SEC requirement to do so, and most companies “are hesitant to disclose the donations, saying it is part of ordinary business operations.” The petitioners argued that the information is necessary to allow investors to hold corporations accountable, especially since the decision in Citizens United. In addition to the petition, there is also pressure on Corp Fin from the Coalition for Accountability in Political Spending, and one of the SEC commissioners has given a speech advocating rulemaking. According to the article, there have also been a record number of shareholder proposals related to corporate political spending and lobbying activities submitted in the 2012 proxy season.
PCAOB Makes Progress on Chinese Audit Access
I’ve blogged several times about the PCAOB’s challenges in gaining access to audits of Chinese companies listed on US exchanges (as well as blogged about the questionable audits of this companies). This Reuters article notes that there has been progress made in this area recently…
Here are survey results on delegation of authority practices:
1. Who is responsible for managing your company’s delegation of approval authority process?
– Corporate secretary’s office – 25.0%
– Legal department – 27.5%
– Individual business units are responsible for managing their own process – 12.5%
– Finance – 30.0%
– Other – 5.0%
2. On what does your company base its delegation of authority structure?
– Monetary thresholds – 90.0%
-Transaction type (e.g. acquisition, capital expenditure, procurement, etc.) – 70.0%
– Strategic impact – 0%
– Business risk – 15.0%
-Time/resource commitment – 2.5%
– Other non-monetary considerations – 7.5%
3. Which best describes your company’s approach to delegation of authority?
– We have a single policy that uniformly applies to the parent company and subsidiaries – 57.5%
– We have a single policy with unique thresholds for the parent and/or particular subsidiaries – 25.0%
– We do not have a single policy and separately address delegation of authority at each subsidiary – 10.0%
– Not applicable as our company isn’t structured into parent and subsidiaries – 5.0%
– Other – 2.5%
Please take a moment to participate in this “Quick Survey on Rules of Order for Board Meetings & Annual Meetings” and this “Quick Survey on Conflict Minerals.”
September-October Issue of “The Corporate Counsel”
Last week, we wrapped up the September-October Issue of The Corporate Counsel and it includes pieces on:
– JOBS Act Update: SEC Proposes the General Solicitation Changes to Rule 506
– The Rule 144 Aggregation Tail–Donees’ Sales Don’t Affect Affiliate’s Form 144 Filing Obligation
-Three-Month Form 144 Look-Back Includes Sales Covered by Prior Form 144
– Standing in the Affiliate’s Shoes–Our Interpretive Request
– 2012 Year-end Tax Tip for Gifts of Stock and Other Charitable Giving
– Say-on-Pay Litigation 2.0
– The Staff’s Annual SLAB on Shareholder Proposals
– Nasdaq Research Keeps Getting Easier (and Better)
– Compensation Consultant Fee Disclosure–“Additional Services” Include Those Rendered to Compensation Committee
– Farewell to XBRL Limited Liability for LAFs
Act Now: Get this issue for free when you try a 2013 No-Risk Trial today.
