Today is the “7th Annual Executive Compensation Conference“; yesterday was the “5th Annual Proxy Disclosure Conference” and the video archive of that Conference is already posted. Note you can still register to watch online by using your credit card and getting an ID/pw kicked out automatically to you without having to interface with our staff. Both Conferences are paired together; two Conferences for the price of one.
– How to Attend by Video Webcast: If you are registered to attend online, just go to the home page of TheCorporateCounsel.net or CompensationStandards.com to watch it live or by archive (note that it will take about a day to post the video archives after it’s shown live). A prominent link called “Enter Today’s Conference” on the home pages of those sites will take you directly to today’s Conference.
Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for TheCorporateCounsel.net or CompensationStandards.com). If you are experiencing technical problems, follow these webcast troubleshooting tips. Here is today’s Conference Agenda; times are Central.
– How to Earn CLE Online: Please read these FAQs about Earning CLE carefully to see if that is possible for you to earn CLE for watching online – and if so, how to accomplish that. Remember you will first need to input your bar number(s) and that you will need to click on the periodic “prompts” all throughout each Conference to earn credit. Both Conferences will be available for CLE credit in all states except for a few (but hours for each state vary; see the CLE list for each Conference in the FAQs).
Corp Fin Issues Five New XBRL CDIs
On Friday, Corp Fin issued five new CDIs regarding interactive data (ie. XBRL) – three of them related to Regulation S-K and two related to Regulation S-T. It also withdrew two ’34 Act Form CDIs because they related to XBRL phase-in and were outdated (we are now through two phase-in periods with one more taking place next summer). Here are the new CDIs:
I saw this article from Fortune about whether the CEO title could be held by multiple persons at once. I’ll keep my opinion to myself and let you weigh in instead in this anonymous poll:
As noted by Mark Borges in his CompensationStandards.com “Proxy Disclosure Blog” on Saturday:
One of the more challenging aspects of analyzing the executive compensation provisions of the Dodd-Frank Act has been trying to predict how the SEC would approach its rulemaking obligations. As we know, many of the provisions are to become effective only upon the completion of SEC (and, in some cases, national securities exchange) rulemaking. While I’ve always expected that the SEC’s rulemaking activities would stretch into 2011 and, possibly, beyond, in the absence of any formal announcement I’ve had to caution clients that it was possible some of the rules would be in place for the 2011 proxy season.
Well, the SEC has just posted a tentative schedule for its Dodd-Frank Act rulemaking and, as I suspected, most of the executive compensation-related rules won’t be ready until next year. Here’s the schedule by provision:
1. Section 951 – Shareholder Approval of Executive Compensation
– Proposed rules: October – December 2010
– Final rules: January – March 2011
4. Section 954 – Recovery of Erroneously Awarded Compensation
– Proposed rules: April – July 2011
5. Section 955 – Disclosure Regarding Employee and Director Hedging
– Proposed rules: April – July 2011
6. Section 957 – Voting by Brokers
– Proposed rules: April – July 2011
Mark includes preliminary observations at the bottom of his blog, which I’m sure he’ll discuss today during the “How the Dodd-Frank Developments Impact You: All the Latest” panel that opens our “5th Annual Proxy Disclosure Conference.”
Today: “Tackling Your 2011 Compensation Disclosures: The 5th Annual Proxy Disclosure Conference”
Today is the “Tackling Your 2011 Compensation Disclosures: The 5th Annual Proxy Disclosure Conference“; tomorrow is the “7th Annual Executive Compensation Conference.” Note you can still register to watch online by using your credit card and getting an ID/pw kicked out automatically to you without having to interface with our staff. Both Conferences are paired together; two Conferences for the price of one.
– How to Attend by Video Webcast: If you are registered to attend online, just go to the home page of TheCorporateCounsel.net or CompensationStandards.com to watch it live or by archive (note that it will take about a day to post the video archives after it’s shown live). A prominent link called “Enter Today’s Conference” on the home pages of those sites will take you directly to today’s Conference.
Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for TheCorporateCounsel.net or CompensationStandards.com). If you are experiencing technical problems, follow these webcast troubleshooting tips. Here is today’s Conference Agenda; times are Central.
– How to Earn CLE Online: Please read these FAQs about Earning CLE carefully to see if that is possible for you to earn CLE for watching online – and if so, how to accomplish that. Remember you will first need to input your bar number(s) and that you will need to click on the periodic “prompts” all throughout each Conference to earn credit. Both Conferences will be available for CLE credit in all states except for a few – but hours for each state vary; see the CLE list for each Conference in the FAQs.
Short-Term Borrowings: SEC Proposes Rules and Issues Interpretive Guidance
On Friday, the SEC proposed new rules to elicit disclosures for short-term borrowings (here’s Chair Schapiro’s remarks).
In addition, the SEC issued an interpretive release providing guidance on existing MD&A requirements for liquidity and funding disclosures. Since this interpretive release will become effective immediately upon publication in the Federal Register, companies will need to review it now as it will apply to their next periodic filing. The interpretive release:
– Reiterates long-standing MD&A principles as they apply to disclosure of critical liquidity matters, so that MD&A disclosure keeps pace with the increasingly diverse and complex financing alternatives available to companies.
– Make clears that a registrant cannot use financing structures (whether “on-balance sheet” or “off-balance sheet”) designed to mask the registrant’s reported financial condition – transparent disclosure is required.
– Emphasizes that leverage ratios and other financial measures included in filings with the SEC must be calculated and presented in a way that does not obscure the company’s leverage profile or reported results.
– Addresses divergent practices that have arisen in the context of tabular disclosure of contractual obligations, to focus companies on providing informative and meaningful disclosure about their future payment obligations.
If you don’t register today with our HQ, you can still walk-up in Chicago and register by bringing a check or credit card to pay the applicable amount when you arrive. In addition, you can register online with a credit card as late as you want and get an ID/password sent to you automatically to enter the Conference and watch (in fact, you can even do so after Monday as the video of the panels will be archived for nine months – so you can watch them anytime if you have a conflict with the Conference schedule or whenever you want a refresher). Register Now.
Updated: “Printable Set of Course Materials”
For the most relevant of our voluminous set of Course Materials, we have created a single PDF of “Printable Set of Course Materials.” This set was updated today as we just received two last sets of charts that will be referred to during Tuesday’s Conference. [Note that these will be handed out in Chicago – no need to print and lug if you don’t want to.] If you have already printed off this set, these are the two new additions that you can print rather than printing the entire set again:
– for the 1:45 internal pay equity panel, this set of charts from Don Delves
– for the 2:20 inadvertent gains panel, this set of charts from George Paulin
A lot of members emailed me about Wednesday’s proxy access poll, mostly wondering about the SEC’s cat. The story goes that there has been a male cat named Felix that has roamed the SEC’s halls since the silent movie era (yes, Felix moved anytime the SEC changed the location of its HQ). Staffers are always trying to steal Felix’s magic bag. And I’ve heard that Felix is quite a ladies man…
More Blog Honors: LexisNexis Top 25 Business Law Blogs
We are proud to say that both this blog and our DealLawyers.com Blog has been nominated for LexisNexis’ Top 25 Business Law Blogs. Having already won the ABA Law Journal’s “Blawg 100” voting contest this year, I am not encouraging you to comment on the list of the LexisNexis nominees as once is enough. But if you are so inclined, here is the info that LexisNexis gave me:
To submit a comment, log on to your free web center account. If you haven’t previously registered, you can do so on the Corporate & Securities Law Community. Registration is free and does not result in sales contacts. The comment box is at the very bottom of the page. The comment period for nominations ends on October 8th.
Too funny. No sooner did I blog yesterday about the lengthy wait for the SEC’s proxy access rules to get published in the Federal Register, but the preview of today’s FR revealed that today would be the big day. Here is today’s FR with the access adopting release.
So since the adopting release was published in the Federal Register on September 16th, the new access rules will become effective on November 15th – which would mean that companies who mailed their 2010 proxy statement prior to March 15, 2010 would have a window period that fully pre-dated the effective date of the rules for this proxy season – thus meaning that these companies would not be subject to proxy access for the 2011 proxy season. The ides of March…
Dodd-Frank: SEC Adopts Internal Controls Amendments to Exclude Smaller Companies
Yesterday, the SEC posted this adopting release with amendments to its internal controls rules and regulations to conform them to Section 404(c) of Sarbanes-Oxley, as modified by Section 989G of Dodd-Frank, to state that 404(c) doesn’t apply to companies that are neither an accelerated filer nor a large accelerated filer.
SEC Receives PCAOB’s Proposed Changes to Risk Assessment Standards
Yesterday, the PCAOB filed proposed changes to eight auditing standards related to an auditor’s assessment of risk with the SEC. The proposed standards were approved by the PCAOB back in August and, if approved by the SEC, will become effective for audits of fiscal periods beginning on or after December 15, 2010.
I’ve received too many emails to count from members wondering if the SEC’s proxy access adopting release has been published in the Federal Register yet given that the SEC approved the adopting release at an open Commission meeting three weeks ago (answer: it has not). Even more folks have asked why it hasn’t yet, given that it seemed like the SEC was in a rush to do so so that the clock would start ticking towards when access would apply during the proxy season (answer: I don’t know, but the delay is unusual).
This email from a member gives the explanation of the math involved, tied to the final rules being published in the Federal Register:
As you are aware, the final proxy access rules indicate (pages 224-225) that if the window period for 14a-11 nominations has elapsed prior to the effective date of the rules (60 days following publication in the Federal Register), then shareholders of this company won’t be able to make 14a-11 nominations for the 2011 proxy season).
So, given the 120-150 day window period, by my math, if the rules were published in the Federal Register, say on September 15th, the rules would be effective on November 14th, which would mean that companies who mailed their 2010 proxy statement prior to March 14, 2010 would have a window period that fully pre-dated the effective date of the rules for this proxy season – thus meaning that these companies would not be subject to proxy access for the 2011 proxy season (this would include a fair number of calendar year-end companies, increasing by the day). While I don’t think the rules are ambiguous in their application, I find it surprising that the final rules have not yet been published, given the Commission’s previous stated desire that proxy access rules be in effect for the 2011 proxy season.
By the way, I do know that the access rules won’t be published in the Federal Register today because a preview of the following day’s content is made available each day on this site and it wasn’t listed yesterday…
Poll: Why Do You Think the Proxy Access Rules Haven’t Been Published Yet?
It looks like more companies are willing to take the risk of negative press – and shareholder anger – and hold virtual-only annual meetings. For example, check out this letter writing campaign against Symantec for planning to hold such a meeting, spearheaded by the “United States Proxy Exchange.” Here is Symantec’s proxy statement, which explains how it’s annual meeting will work (eg. questions will be permitted to submitted in ‘real time’).
The Big Four and Their Growing Consulting Practices: Deja Vu in Europe?
For those of us practicing more than a few years, you will recall how the largest auditing firms spun off their consulting practices in ’02 (post-Enron thing) since the risks of conflict of interests was too great when it came to the auditors doing their audit work (eg. see this article). According to this article in The Guardian, the Big Four has grown its consulting groups in Europe to the point where the revenue from these groups constitutes as much as a quarter of the firm’s revenue stream. Not a good thing…
PCAOB Extends “Communications with Audit Committees” Comment Period
Not only has the PCAOB extended its “communications with audit committee” comment period, it has calendared a roundtable for September 21st on the topic – and posted this briefing paper.
For those seeking CLE credit, here’s a list of states in which credit is available for watching the Conferences live in Chicago and by video webcast. Note that the list is broken out for each of the Conferences – and note that a few states are listed as “pending” (check back to determine if the Conferences are approved in those states as we will be updating the list).
Act Now: As happens so often, there is now a mad rush for folks to register for these Conferences that begin on Monday, September 20th. With an aggregate of over 50 panels (including the “18th Annual NASPP Conference”), if these Conferences don’t help get you prepared for the upcoming proxy season of change, nothing will. You can either register for the three days of the “18th Annual NASPP Conference” (in Chicago) – or the two days of the “5th Annual Proxy Disclosure Conference” & “7th Annual Executive Compensation Conference” (in Chicago or by video webcast) or a combination of both. Note that we just extended the length of the last panel of the” 5th Annual Proxy Disclosure Conference” to cover proxy access in more depth. Register Now.
SEC to Propose Rules Requiring More Short-Term Debt Disclosure
Coming up on Friday, the SEC will hold an open Commission meeting to consider proposing new rules that would requires companies to disclose more about their short-term borrowings. This is not a Dodd-Frank rulemaking; rather, it’s a rulemaking driven by Lehman and general financial crisis concerns around companies incurring significant indebtedness through short-term borrowings that are ultimately not reflected in period-end balances.
Holding the Virtual Annual Meeting: Factors to Consider and Practice Pointers
– Cathy Conlon, Vice President, Strategic Development, Broadridge
– Carl Hagberg, Independent Inspector of Elections and Editor of The Shareholder Service Optimizer
– Lisa Beth Lentini, Senior Corporate Counsel, Best Buy
– Scott McMillen, Vice President & Senior Corporate Counsel, The Charles Schwab Corporation
– Doug Stewart, Senior Attorney, Intel Corp.
If you’re not yet a member of TheCorporateCounsel.net, get the rest of 2010 for free when you try a 2011 no-risk trial.
In this podcast, Dave Lynn and Marty Dunn engage in a lively discussion of the latest developments in securities laws, corporate governance, and pop culture. Topics include:
– Marty’s favorite concerts in 2010
– What to expect in the 2011 shareholder proposal season
– The latest SEC Staff comment trends
– Key areas for comment on the proxy plumbing concept release
Top 10 Concerns for Directors: Executive Compensation #1
In this recent survey conducted by Corporate Board Member and FTI Consulting, executive compensation topped the list with 41% of the respondents listing it as a major concern (all the more reason to attend our upcoming week of executive pay conferences). Here is the list:
It’s interesting that proxy access is listed at the bottom, somewhat confirming my belief that those who view access as an apocalyptic event may be overreacting…
I cannot overemphasize how important it is for every employer in America with non-qualified deferred compensation plans or employment, severance or change in control agreements that are subject to Code Sec. 409A (which includes just about all of them) to review its compliance with 409A one more time before December 31, 2010. This is because the IRS has given us one last chance to correct drafting issues in compensation plan documents and agreements that are subject to 409A, without penalty, under Notice 2010-6.
That is the good news. The bad news is that Notice 2010-6 does much more than just offer correction methods. It contains numerous examples of situations that the 409A final regulations did not clearly address – and provides for significant penalties for many plan provisions that a normal person might view as a foot fault. Therefore, even if you (and your counsel) thought your plans and agreements fully complied with 409A by the previous December 31, 2008 deadline, changes made by Notice 2010-6 may require you to take another look.
Revising plans and agreements to comply with Notice 2010-6 should be easy. What employers have found more troubling are the notice requirements of the Notice. If the necessary plan revision rises to the level of a “document failure” under the Notice, the employer that makes a “correction” must attach a statement to its original federal income tax return for the taxable year in which it makes the correction, which includes the name and taxpayer identification number of each employee affected by the document failure, the name of the plan or agreement with respect to which the failure occurred and four other specific items of information. If an employee is required to include an amount in income during a subsequent year to be eligible for the relief under the Notice, the employer also must attach this statement to its federal income tax return for the subsequent to the taxable year as well.
The employer must provide a similar statement to each affected employee, by the date it is required to provide Form W-2 or 1099 to the employee, which the employee must attach to his or her income tax return.
Therefore, employers may want to think hard about whether any revisions they make to plans and agreements are substantive corrections of document failures or mere clarifications.
The SEC’s new proxy access rule won’t take effect until November, but an investor, Discovery Equity Partners, already has announced its intent to use the rule to nominate two board candidates at Tier Technologies in this amended Schedule 13D. In a Sept. 7 letter to the company’s board, Michael Murphy, a managing partner at Discovery, said it intended to use SEC Rule 14a-11 to nominate up to two board candidates at the company’s 2011 meeting.
Reston, Virginia-based Tier Technologies provides transaction-processing services and software to federal, state, and local agencies. Given its current market capitalization, the company presumably would not be exempt from the new access rule. As of Sept. 8, the company had a $90.6 million market cap; the new SEC rule has a three-year phase-in period for companies with less than $75 million in public float.
Chicago-based Discovery and affiliates, which have a 13.5 percent stake, has been active at Tier Technologies in the past. In 2009, Discovery waged a proxy contest to elect two candidates. Management nominated just seven candidates for the nine open seats, so the dissident’s two nominees were elected.
In January 2010, Discovery said it would nominate three candidates, but the company announced an agreement with the investor in March. Under that settlement, the company reduced its board to seven directors, separated the roles of chairman and CEO, and provided reimbursement to Discovery for the 2009 proxy fight. In exchange, Discovery agreed not to nominate any candidates at the 2010 meeting and to support management. In August, the company named a new CEO, Alex Hart, to replace former CEO Ronald Rossetti, who stepped down in June.
Proxy Access: The Latest Reactions to the New Rules
Ted Allen also does a good job in this blog illustrating some of the views on both sides of the debate over whether proxy access is a good thing and whether its adopted formula will work. In addition, this Agenda article also touches on these points, including some of the math involved as noted in this excerpt:
Shareholder advocates had mixed reactions to the rule. While they were largely disappointed with the 3%-for-three-years restriction, they were happy to even be granted proxy access at all. It will be challenging for activist investors such as public pension funds to meet the threshold requirement, explains Amy Borrus, deputy director at the Council of Institutional Investors. However, she says she doesn’t think it will be impossible. Ricardo Duran, a spokesman at Calstrs, says that while it will be difficult to meet the 3% holding for three years in the large-cap segment of its portfolio, “Calstrs officials feel that it can be achieved.”
In an Aug. 12 letter to the SEC, several state pension funds illustrate the difficulties of meeting the 3% threshold, particularly with large-cap companies. The funds claim it would take 20 of the largest public pension funds that have stock in Goldman Sachs Group to hold in aggregate 2.88% of the company’s securities. What’s more, Calpers has released prior data showing the 10 largest public pension funds together hold less than a 2.5% stake at Bank of America, Microsoft, IBM and Exxon Mobil.
Poll: How Many Shareholders Will Try Proxy Access During the Next Year?
Please take a moment to participate in this anonymous poll regarding how many shareholders will try to use proxy access over the next year:
This is a question that has been asked long before the SEC’s recent adoption of proxy access. Media articles for quite some time have intimated that reporters were told that a court fight was inevitable if the SEC adopted access. Other recent articles have included denials that anything litigious would be in the works from the trade associations that tend to sue the SEC. This Reuters article from last week once again gives the impression that a court fight is inevitable. We shall see…
The WSJ has reported that the decision to accept the settlement in the Goldman case was only approved by a 3-2 vote. This is an outrageous leak, to the extent true.
This type of information is highly confidential and ought not to leak to the press. When there were leaks that the Goldman case had been authorized by a 3-2 vote, we criticized the leak and recommended that the Commission rely more often on executive sessions.
The article in the WSJ noted that the 3-2 vote occurred in a “30-minute closed-door session,” an apparent reference to an executive session.
Executive sessions are closed to most of the staff and typically open only to those who are in a must know situation. Despite the precaution, the leak occurred. Given the smaller number of officials aware of what transpired at the meeting, the Agency should conduct an investigation and attempt to identify the source of the leak. Indeed, we think that is an appropriate function for the Inspector General and a better use of his time than investigating whether whether the Goldman case was politically timed.
Leaks from the SEC have become fairly common this decade for some reason. Perhaps it’s a byproduct of the Internet, which makes it so much harder to lock down information. Perhaps it’s because the mainstream media – as well as a slew of social media “reporters” – actively follow the SEC these days. But it is notable that the key proxy access thresholds were not leaked before that rulemaking’s open Commission meeting. Pretty hard to do considering how much advance interest there was in that rulemaking…
Mailed: September-October Issue of The Corporate Executive
The September-October Issue of The Corporate Executive includes pieces on:
– A Legacy of the Bush Administration Comes to an End: Planning Now for 2011 Tax Rate Increases
– Which Tax Rates Are Really Changing (and for Whom)?
– Paying 2011 Bonuses in 2010?
– Accelerating Vesting for Restricted Stock and Unit Awards
– Section 83(b) Elections for Restricted Stock
– Possible Actions for Non-Qualified Stock Options
– Internal Pay Equity–Getting a Head Start
– Institutions and Proxy Advisors Will be Focused on Internal Pay Equity
– Respected CEOs Weighing In
– How Should Internal Pay Equity be Used by a Compensation Committee?
– What Is the Right Ratio – Why the Historical Analysis Is So Important
– Your Upcoming Proxy Disclosure – An Opportunity for the Company to Tell Its Own Story
– How to Make the Calculations – How to Craft the Proxy Disclosures
