Thanks to the many of you that have emailed pictures of your deal cubes. I have collected over 130 of them, all posted in our fabulous “Deal Cube Museum.”
Please continue to send pics as I intend to conduct other deal cube tourneys after this inaugural one concludes. Think of those recurring reality shows – we are now in just Season 1. There will be many seasons including All-Stars and maybe even reunion episodes! Remember, quality of the deal cube is irrelevant – any cube can win! Underdogs do it all the time…
Deal Cube Contest Process & Rules
Process:
1. There are 64 deal cubes in the 1st tournament. Additional tournaments will be held so please keep those pics coming.
2. A selection committee has ranked (ie. “seeded”) the 64 cubes – unlike the NCAA hoops tourney, the committee’s seedings are used for internal purposes and won’t be revealed until a winner is crowned.
3. In each of the first two rounds, half of the remaining cubes will be eliminated. For those two rounds, four cubes will be pitted against each other – and the two cubes obtaining the lowest number of votes will be eliminated. Thus, a voter can cast two votes on a group of four cubes.
4. In the last four rounds, two cubes will be pitted against each other and a voter can cast one vote on a group of two cubes.
5. Voting will take place on a poll placed on this blog daily. There will be a break between each round to allow votes to be cast for the last few contests in each round for more than a few days.
6. Polls will remain open for each round for quite a while – so don’t worry if you miss reading this blog for a day (or a week).
Rules:
1. There are no rules. Just like it’s unfair if folks that work the hardest on a deal wind up with no cube, it is possible that an inferior cube can attract more votes than a superior cube if someone figures out a way to obtain more votes for their cube (egs. casting multiple votes, having friends and family vote, offering bribes for votes).
2. FCPA doesn’t apply – so bribing of the selection committee (ie. Broc) will be considered.
3. Have fun and tell your friends about our contest.
Deal Cube Tournament: Round One; First Match
As noted in the rules above, please vote for two of the following four cubes below:
A few weeks ago, Mark Borges blogged about the first failed say-on-golden parachutes vote…
Exxon’s Executive Pay Webcast Represents Another Method of Shareholder Outreach
Ning Chiu of Davis Polk bring us this news from her blog:
This proxy season there has been a lot of focus on companies filing additional soliciting materials to supplement proxy disclosure, with a particular focus on executive compensation in light of the say-on-pay vote. Exxon Mobil has taken a particularly interesting approach turning a two-dimensional paper communication into something more dynamic by inviting interested persons to a company-sponsored webcast on executive compensation.
The webcast represents an additional proactive step Exxon has taken. On the same day it filed its proxy statement, Exxon took the unusual step of also filing a colorful presentation filled with data, graphs and photos to explain how its pay-for-performance approach focuses on the long-term nature of its capital-intensive business. In supplemental information filed more recently, Exxon took issue with specific aspects of the ISS analysis, including the peer group selected, which Exxon asserted failed to adjust for its size and complexity, since the company’s revenue is more than 4X larger by revenue and 3.5X larger by market capitalization than the median of the peer group.
On the webcast, which included a presentation, Exxon representatives discussed the company’s business environment, the scale and scope of the company and its focus on the long-term nature of its business strategy. The company explained that together, these form the basis for customized compensation decisions, including a lengthy “hold-to-retirement” policy and a unique approach on the deferral of 50% of annual bonuses, a measure rarely seen outside of financial institutions. The company’s focus on executive training, retention and succession was emphasized, including the fact that the company achieves its retention goals without change in control or severance agreements with senior executives. The company also discussed the shareholder engagement it undertook as a result of last year’s say-on-pay vote. In response to questions during the webcast, the company noted how its programs focus on performance assessments that take a more holistic approach rather than concentrating on formulas that inspire executives to reach for only certain specific goals. The company received several questions about specific aspects of its pay decisions, the reasons for the webcast and the proxy advisory firms’ recommendations.
In his blog, Mark Borges recently provided this analysis of ExxonMobil’s executive pay disclosure and more…
Early Bird Discount Ending Soon! “Proxy Disclosure Conference” Lineup!
We are very excited to announce that Corp Fin Director Meredith Cross will be part of our “7th Annual Proxy Disclosure Conference” on October 8th in New Orleans (and by video webcast). Just look at this beautiful baker’s dozen of panels for this Conference:
1. An Interview with Meredith Cross, Director of the SEC’s Division of Corporation Finance
2. Say-on-Pay Disclosures: The Proxy Advisors Speak
3. The Executive Summary & Other Ways for Disclosure to Facilitate Solicitation
4. The Latest SEC Actions & CD&A Developments: Compensation Advisors, Clawbacks, Pay Disparity & More
5. Refining Your Pay-for-Performance Message & Addressing the Impact of Your Vote
6. Getting the Vote In: The Proxy Solicitors Speak
7. Dealing with the Complexities of Perks
8. Conducting – and Disclosing – Pay Risk Assessments
9. Overcoming Form 8-K Challenges
10 Handling the Golden Parachute Requirement
11. Challenges for Smaller Companies: Their First Year
12. How to Handle Preliminary Proxy Statements
13. How to Handle the ‘Non-Compensation’ Proxy Disclosure Items
Register Now for Early Bird Rates – Act by May 31st: For the early bird discount rate, register by May 31st. This Conference is paired with “Say-on-Pay Workshop: 9th Annual Executive Compensation Conference” and they will be held October 8-9th in New Orleans and via Live Nationwide Video Webcast.
Last week, I blogged how LegalZoom was one of the first companies to announce its upcoming IPO after first submitting its registration statement under Corp Fin’s confidential submission policy and I analyzed the risk factors and other EGC-related disclosures in that Form S-1.
There have now been about a dozen Form S-1s filed by EGCs – most of them likely emerging from confidential submission but not all – including:
By the way, I disagree that EGC risk factors are a “turn-off” as mentioned in this article. As I wrote in my recently-posted “Risk Factors Handbook,” companies typically have between 20-30 risk factors in their disclosure – with IPOs having even more. Facebook has about 50. Do you think one more risk factor will even be noticed by the rare investor who bothers to read a prospectus?
I just announced an August 15th webcast – “JOBS Act Update: Where Are We Now” – that will analyze evolving market practices and the latest from the SEC. The program features Corp Fin Deputy Director Lona Nallengara, Steve Bochner, Joel Trotter, Michael Kaplan and Dave Lynn.
NYSE Proposes Listing Qualification Changes to Accommodate JOBS Act
The ripple effect of the JOBS Act is beginning to show as the NYSE has proposed to adjust its listing qualification standards to reflect that emerging growth companies, or ECGs, under the JOBS Act only need to present two years of audited financial statements.
In its rule filings, the NYSE notes that its initial listing standards require listing applicants to meet theapplicable financial criteria over a period of three fiscal years. As the staff of the NYSE bases its determination as to a company’s compliance with the financial initial listing standards only on publicly available audited financial data, an EGC which availed itself of the right to file only two years of audited financial data as part of its initial public offering registration statement or subsequent registration statements would be unable to qualify for listing under those particular financial listing standards. The NYSE proposes to amend the initial financial listing standards in Sections 102.01C and 103.01B to permit an EGC to meet the applicable standard on the basis of the two years of audited financial data actually reported, rather than the three years of financial data that would otherwise be required.
The proposed amendment would only be applicable to EGCs that actually avail themselves of their ability to report only two years of audited financial information. Under the proposed amendments, EGCs would still be required to meet the same aggregate financial requirements, but would be required to do so over a two-year period rather than a three-year period, if they have availed themselves of the JOBS Act provision allowing EGCs to file only two years of audited financial statements.
May-June Issue: Deal Lawyers Print Newsletter
This May-June issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:
– Lessons Learned: Martin Marietta Materials vs. Vulcan Materials
– Delaware Chancery Enjoins Hostile Bid Based on Confidentiality Agreement Breach
– The JOBS Act: Implications for Private Company Acquisitions and M&A Professionals
– After the JOBS Act: The Increased Need for Common Sense
– Groping for Gold: $305 Million in Plaintiff Attorney Fee Awards Under Grupo México
If you’re not yet a subscriber, try a no-risk trial to get a non-blurred version of this issue on a complimentary basis.
On July 30th, the Sarbanes-Oxley will celebrate its tenth birthday. You may not like SOX, but your job may not have been created “but for” the Act. It was definitely a “fuller employment” event for many in our community. As we approach the anniversary, there is bound to be a number of reminisces written, most of which will bound to be negative in their outlook. But as noted in this recent NY Times article (I’m quoted!), there also have been many benefits. Going back, here are some thoughts from Lynn Turner on SOX’s history – here are my own remembrances of how the Act snuck up on us…and below are two polls, one for funsies and one for real…
Poll: The Long-Term Impact of Sarbanes-Oxley
When it comes to the long-term impact of Sarbanes-Oxley, please indicate which of these has had the biggest impact on your practice in this anonymous poll:
For a long time I’ve been outspoken about how the SEC’s former Inspector General – David Kotz – took advantage of his position to make a “name” for himself (here is one example). Then suddenly he left in January under a cloud of ethical questions about his own activities as noted in this blog (and I also noted other questionable activity in this blog; Kotz has not yet been replaced as the IG position remains open – here is the job posting). Last week, Bloomberg reported that the SEC was hiring an outside investigator to look into Kotz’s conduct during his tenure at the agency – including allegations of sexual misconduct in the office per this WSJ article.
Looks like there could be a bizarre culture in that small SEC office. According to this Reuters article, one of the newer members of that office – David Weber, assistant inspector general – has been placed on admin leave after “talking openly about wanting to carry a concealed firearm at work and some employees complained he was a physical threat.” And this guy’s lawyer claims that he is the victim of retaliation because he had previously complained about alleged misconduct in the IG’s office. This Huffington Post has more details in this blog. Although I think we will find out still more juicy details about this office’s culture soon enough as the investigation into it develops…
NYSE Proxy Fee Advisory Committee’s Report: Recommends Fee Drop of 4% on Average
After 18 months of work, the NYSE Proxy Fee Advisory Committee released its report yesterday with recommendations for changes to the fees that banks and brokers charge companies for forwarding proxy materials to shareholders who hold stock in “street name.” This is the process by which the fees that Broadridge charges gets set for work on behalf of their broker clients. Under NYSE Rule 465, any fee changes must be approved by the SEC – fee rates were last changed a decade ago.
Here’s an excerpt from Davis Polk’s Ning Chiu’s blog on the topic:
The Report painstakingly describes the careful work by PFAC in considering each of the four different type of proxy fee designed to compensate brokers for different services, an examination of the existing rationale based on the work involved and an evaluation of whether a change in fee is warranted based on recent developments, such as a move toward less paper distributions. According to the Report, it is expected that overall fees paid by companies will decrease by about 4% under the revised structure.
PFAC’s recommendations include several changes to the existing fees and also streamlining the proxy fee categories to increase transparency. In addition, PFAC supported allowing companies to ask brokers for a list of the identity of non-objecting beneficial owners (NOBO) based on number of shares held or of those that have not yet voted proxies, without needing to pay for an entire list of all NOBOs. In order to encourage further retail investor voting, PFAC also recommended that the NYSE broach with the SEC the idea of a fee to pay for an “investor mailbox,” through which investors can access proxy materials and voting forms through their brokers’ website. For those interested in learning more, here’s an archived version of a webcast sponsored by the NYSE.
PFAC’s work is only the beginning. The NYSE indicated that it will initiate discussions regarding the PFAC’s recommendations with the SEC, after which the NYSE would expect to submit a rule change proposal to the SEC reflecting the outcome of these discussions. Any rule filing proposal would be published for public comment prior to SEC approval.
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Unintended Consequences of the STOCK Act
– The iPad and the Law
– 7th Circuit Ruling Expands Rights of Whistleblowers to RICO
– Delaware Weighs In: Indemnification and Advancement of Expenses
– Boards Trends in the S&P 1500
As I blogged recently, journalists have been asking me if they can be shut out of an annual shareholders meeting. The answer is “yes” if state law allows the company to only admit shareholders as of the record date into the meeting (which I believe most state laws do). This type of restriction typically is disclosed in the company’s proxy statement. Here is one example of such a disclosure:
Attendance at the Annual Meeting
You will need proof of ownership to enter the Annual Meeting. If your shares are held beneficially in the name of a bank, broker or other holder of record and you plan to attend the Annual Meeting, you must present proof, such as a bank or brokerage account statement, of your ownership of common stock as of March 1, 2012, to be admitted to the Annual Meeting. At the Annual Meeting, representatives of the company will also confirm your shareholder status. Shareholders must also present a form of personal identification to be admitted to the Annual Meeting. NO CAMERAS, RECORDING EQUIPMENT, ELECTRONIC DEVICES, BAGS, BRIEFCASES, PACKAGES OR SIMILAR ITEMS WILL BE PERMITTED AT THE ANNUAL MEETING. This is permitted under state law.
I checked in with independent tabulator Carl Hagberg who noted:
Although good practices dictates that companies allow journalists if they want to foster good relations with the media, etc., it depends on the company. And for some companies, it depends on the year (some years they allow journalists or don’t even guard the door that closely – and for others, they are strict, probably because of some controversy brewing).
It’s been a long slow trend towards closing the meetings to journalists. In the old days, the media had a special breakout room, etc. I haven’t heard of that much anymore – plus now everyone is treated as a potential journalist (as reflected in the all caps language in the proxy statement excerpt above). A few hundred companies webcast their meetings and those obviously are very accessible.
My ‘educated guess’ is that most large companies – and most smaller ‘community-oriented and consumer-oriented companies’ too – still go out of their way to welcome the media. A few of the larger companies still sort of ‘confine them’ to a “press room” with an A-V feed. And less than 5% officially exclude them.
The problem with exclusion is the natural – and usually well-warranted assumption – that companies that won’t admit the press have (or foolishly feel) they may end up having “something to hide” that comes out in their meeting. Nothing tends to draw more interest from the press than circumstances like this – and ironically, it usually serves to make any news stories much more juicy and much more prominent than they would otherwise have been. Learn more about this topic from my meeting admission criteria article.
Our New “Properties Disclosure Handbook”
Spanking brand new. Posted in our “Properties Disclosure” Practice Area, this comprehensive “Properties Disclosure Handbook” provides a heap of practical guidance about the disclosure obligations under Item 102 of Regulation S-K, a topic never covered in any other securities law treatise…
Checking Out TradingView.com
In this podcast, Stan Bokov of TradingView.com explains how TradingView.com works, including:
– When was TradingView.com launched?
– What can investors do on it?
– What is the business model?
– How might someone within a company use it?
We are very excited to announce that Corp Fin Director Meredith Cross will be part of our “7th Annual Proxy Disclosure Conference” on October 8th in New Orleans (and by video webcast). Just look at this beautiful baker’s dozen of panels for this Conference:
1. An Interview with Meredith Cross, Director of the SEC’s Division of Corporation Finance
2. Say-on-Pay Disclosures: The Proxy Advisors Speak
3. The Executive Summary & Other Ways for Disclosure to Facilitate Solicitation
4. The Latest SEC Actions & CD&A Developments: Compensation Advisors, Clawbacks, Pay Disparity & More
5. Refining Your Pay-for-Performance Message & Addressing the Impact of Your Vote
6. Getting the Vote In: The Proxy Solicitors Speak
7. Dealing with the Complexities of Perks
8. Conducting – and Disclosing – Pay Risk Assessments
9. Overcoming Form 8-K Challenges
10 Handling the Golden Parachute Requirement
11. Challenges for Smaller Companies: Their First Year
12. How to Handle Preliminary Proxy Statements
13. How to Handle the ‘Non-Compensation’ Proxy Disclosure Items
Register Now for Early Bird Rates – Act by May 31st: For the early bird discount rate, register by May 31st. This Conference is paired with “Say-on-Pay Workshop: 9th Annual Executive Compensation Conference” and they will be held October 8-9th in New Orleans and via Live Nationwide Video Webcast.
Our New “Code of Ethics/Conduct Disclosure Handbook”
SEC’s Enforcement Division Takes On Deloitte & Touche in China
I’ve blogged numerous times about the risks of investing in some Chinese companies – and the challenges that regulators have with them here (see this blog). Last week, the SEC announced an enforcement action against Shanghai-based Deloitte Touche Tohmatsu for its refusal to provide the agency with audit work papers related to a China-based company under investigation for potential accounting fraud against US investors. Here is Francine McKenna’s blog entitled “Why Is The SEC Pursuing Deloitte Shanghai? Looks Like It’s Personal.”
Last week, the PCAOB posted its “2011 Annual Report,” weighing in at 50 pages…
As noted in this article, LegalZoom is one of the first companies to announce its upcoming IPO after first submitting its registration statement under Corp Fin’s confidential submission policy. Here’s the company’s Form S-1 that it filed on Thursday, presumably after responding to comments from the Staff.
The company’s prospectus has several disclosures related to its status as an “emerging growth company.” For example, notice this risk factor on page 20 (there are several other risk factors that also touch upon EGC status – or risks of losing that status):
We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourself of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
That matches the theme of this statement on the prospectus cover page:
We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our common stock involves risks. See “Risk Factors” beginning on page 11.
In addition, there is this MD&A statement on page 50 under “Recent Accounting Pronouncements”:
As an emerging growth company under the JOBS Act, we have elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the Act. This election is irrevocable.
Don’t forget that our just-published May-June issue of The Corporate Counsel contains in-depth and practical guidance on the JOBS Act. If you’re not yet a subscriber, try a no-risk trial now to get the issue rushed to you.
JOBS Act: Corp Fin Updates Its Confidential Submission Process
When Corp Fin initially announced its procedures for making confidential submissions under the JOBS Act last month, it stated that it would be implementing a system for electronic transmission. On Friday, Corp Fin provided an updated announcement that launches an electronic transmission process that replaces the procedures announced back in April – this is available for emerging growth companies and certain foreign private issuers. Someday, these submissions will be made via Edgar – but Edgar still needs to be reconfigured to allow for that.
Here’s an excerpt from the updated announcement:
All issuers submitting draft registration statements confidentially pursuant to the JOBS Act or for non-public review under the Division policy must follow these instructions on how to use the secure e-mail system. All draft submissions must be in text searchable PDF format and should include a transmittal letter identifying the issuer and the type of submission. Emerging Growth Companies should confirm their status as an EGC in their transmittal letters. We will confirm receipt of submissions via secure e-mail.
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:
– Even More on ” Adjournment and Circulation of Proxy Cards”
– SEC Staff Comments: Questioning Qualifications of Financial Reporting Staff
– Reminder: SEC Interpretation on Reconciliation for Use of Non-GAAP Measures in CD&As – OPERS: Auditor Ratification Dependent on % of Non-Audit Fees Paid
– A Final Look at E&S Proposal Results
– Shareholder Proposals: Questions of Proof of Ownership Continue
As Europe faces upheaval, so do the voting results on pay in the United Kingdom and Switzerland – even going so far as to cost the CEO of Aviva his job, as noted in this WSJ article! Barclays, Credit Suisse and UBS. And check out this Reuters article.
Transcripts: Our Two Blockbuster JOBS Act Webcasts
We have posted the transcripts for our pair of popular webcasts on the JOBS Act:
TechCrunch recently ran this blog noting that SolarCity is one of the first companies to use Corp Fin’s confidential submission process for an IPO by an emerging growth company under the JOBS Act. Here is SolarCity’s Rule 135 notice.
A “Secret” Way to Invest in Facebook Before It Goes Public
With six pre-effective amendments to its Form S-1 under its belt, Facebook’s IPO is set to price next week – amid lower than expected demand according to this Bloomberg article (or oversubscribed per this Reuters piece) – and the SEC’s Enforcement staff probably has it’s hands full as some folks are pretty brazen in their shady dealings, playing off the Facebook deal. I’m not sure if this is one of them – but this 4-minute video entitled “A “Secret” Way to Invest in Facebook Before it Goes Public” sure sounds fishy…
Paranoia will destroy ya. A few weeks ago, I blogged about “How to Deal With ‘Occupy Your Annual Meeting‘.” I mentioned how companies should not overreact to the demonstrations that mainly are part of the Occupy movement (see this 5-minute video of the demonstrations outside of Cigna’s annual meeting). So far, things have gone fairly smoothly although EQT had its meeting delayed for a few hours (hat tip to the Society of Corporate Secretaries for alerting me to that).
What has blown my mind is that the city of Charlotte appears to have taken it upon itself to apply the “war-time rules” that it will use for the Democratic National Convention later this year for the Bank of America and Duke Energy shareholder meetings. As noted in this Charlotte Observer article, the police have expanded powers during these meetings – even allowing them to prohibit people from carrying backpacks, satchels and coolers into the designated public places. As noted in this article, four people were arrested yesterday outside BofA’s meeting.
Good grief. I am all for being prepared for an annual shareholders meeting and preventing harm, but this development sure smacks of Big Brother, as noted in this Huffington Post blog. Below are pics that a member sent me from outside the BofA meeting yesterday…
JOBS Act: Trading & Markets Issues Six FAQs on Crowdfunding Portals
On Monday, the SEC’s Division of Trading & Markets issued six FAQs on crowdfunding portals.
The ABA’s Business Law Section has submitted this comment letter on the JOBS Act to the SEC…
Deregistration Under JOBS Act
In this podcast, David Scileppi of Gunster discusses the process of deregistration under the JOBS Act – and provides some practice tips, including:
– How does JOBS Act facilitate ability of banks to deregister?
– What is the SEC Staff’s guidance on this so far?
– What is the process for banks to follow if they determine they are eligible to deregister?
– Any surprises when doing one of these deregistrations?
