Governance Center Blog

Sep
02
2010

Financial Regulatory Reform Series: Shareholder Proxy Access

As part of a series of posts over the next two months, I will focus on the five main corporate governance and executive compensation sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This installment focuses on shareholder proxy access.

Probably one of the most controversial of the measures included in the Dodd-Frank Act, shareholder proxy access for director nominations is a reality most large public companies will have to deal with in the 2011 proxy season now that the SEC has approved a new rule and amended another. Read the rest of this entry »

- Gary Larkin

Aug
27
2010

The Conference Board, Davis Polk Release Proxy Analysis

The enhanced disclosures in the 2010 proxy statements of some of the largest U.S. companies, including some financial institutions, reflect the beginning of a new tighter corporate governance regulatory regime that will only grow as the Dodd-Frank Act is enacted.

That is one of the observations made in a four-part series of Director Notes that are based on an analysis of the 2010 proxy statements of the 30 companies in the Dow Jones Industrial Average by The Conference Board Governance Center and Davis Polk & Wardwell LLP.

The four-part series focuses on disclosures in such corporate governance areas as The Role of the Board in Risk Oversight (DN-010), Board Leadership Structure (DN-011), Board Diversity and Director Qualifications (DN-012) and Compensation-Related Risk and Compensation Consultants (DN-013). [Conference Board members can download the reports for free.]

“Passage of the Dodd-Frank Act will further the transformation of U.S. corporate governance from a board-centered to a shareholder-influenced model,” said Matteo Tonello, director of corporate governance research at The Conference Board. “Since additional disclosure requirements are the centerpiece of this new model, it is critical for corporations to benchmark their practices against those of their peers and adhere to the highest emerging standards of transparency. With this series, The Conference Board continues to fulfill its promise to help member companies meet these challenges.” [Read press release.]

Some of the findings from the research include:
•   Risk oversight models vary, but boards tend to directly review strategic risk issues.
•   Non-financial companies typically report having a dedicated Chief Risk Officer.
•   The CEO/chairman combination remains the prevalent leadership structure in the Dow 30.
•   Specific industry expertise is cited as critical in director selection, and all companies say they consider diversity when identifying director nominees.
•   Companies recognize a correlation between top-executive compensation and risk behavior, using an array of measures to mitigate such risk including clawbacks and stock-holding guidelines.
•   A number of non-financial companies retain compensation consultants through their governance, rather than compensation, committees.
•   Compensation consulting fees can be small relative to other disclosed fees paid to the same consultants for, e.g., actuarial or HR services.

“For financial companies, overseeing risk management has long been understood to be a critical board role,” says Louis L. Goldberg, partner at Davis Polk and co-author of three of the reports. “Not surprisingly, in the wake of recent corporate crises, the business community is recognizing that risk oversight is a quintessential function for boards of non-financial companies as well.”

- Gary Larkin

Aug
26
2010

Proxy Access Ruling Elicits Polarizing Debate

The initial reaction to the SEC’s proxy access rule vote yesterday wasn’t very surprising: C-level executives and directors hate it, shareholder groups love it and corporate governance organizations believe it is ushering in a new era of shareholder board dialogue.

What is a bit eye-opening from some of the comments is the dichotomy between shareholders, the board and management at most public companies. While most shareholder groups view the decision as a way to level the playing field when it comes to nominating directors, many executives see the SEC ruling as the federal government overreaching its grasp once again. It’s almost like listening to the debate on healthcare reform, where the Democrats lauded the decision to give more access to the insurance system and the Republicans decried the act as socialistic and Big Government-like. Read the rest of this entry »

- Gary Larkin

Aug
25
2010

Proxy Access First Reform Measure in Place

It may not be hailed as a shareholder Bill of Rights, but today’s 3-2 SEC vote on shareholder proxy access is the first significant part of the Dodd-Frank Act to be put into place long before the 2011 proxy season. (The rule changes take effect 60 days after they are posted in the Federal Register.)

The reason the SEC could act so quickly on proxy access is that it already had everything in place long before the Democrats pushed through the legislation over the summer. SEC Chair Mary Schapiro just needed the authority to act. Read the rest of this entry »

- Gary Larkin

Aug
19
2010

Swaps Are First Up in Reform Rulemaking Process

As promised, the SEC hasn’t wasted any time with the financial regulatory reform rulemaking process as it tackles derivatives – a big factor in the 2008-2009 financial crisis. It’s probably no surprise that the first concept release and first roundtable focus on the regulation and clearing of mixed swaps.

Less than one month after President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC and the Commodity Futures Trading Commission will hold a public roundtable tomorrow from 9 a.m.-noon ET to discuss issues related to governance and conflicts of interest in the clearing and listing of swaps and security-based swaps.

The roundtable will have two panel sessions: one on types of conflicts involving swaps and another on methods for remediating those conflicts. Members of the public are invited to submit their views on the issue. [Click here to see the agenda and information for dialing into the roundtable via telephone.]

Just last week the SEC issued its first concept release related to the Dodd-Frank Act. That release focuses on “Definitions Contained in Title VII of Dodd-Frank Wall Street Reform and Consumer Protection Act.” [Read the full release and make public comments here.]

The reason for the release is that under the Dodd-Frank Act the agency along with the CFTC and the Board of Governors of the Federal Reserve System are charged with defining certain key terms related to swaps. Those terms are:

Swap
Security-based swap
Swap dealer
Security-based swap dealer
Major swap participant
Major security-based swap dealer
Eligible contract participant
Security-based swap agreement

Both agencies will accept comments for 30 days after the release is printed in the Federal Register, which apparently hasn’t happened yet since no actual date was included.

By the way, one of the first public comments on the SEC Web site was from a Charles Wilcoxson who gives no affiliation. His definition for security swap? “Security swaps are insurance and as such should fall under regulations that cover insurance instruments. Much of the 2008 financial problem seems to have been caused by companies that sold naked insurance (swaps) coverage. When faced with defaults, these insuring companies could not cover the claims.”

- Gary Larkin

Aug
18
2010

Governance Ratings Firm Mergers Put New Light on ISS

If you were on vacation late last month, you may have missed one of the biggest corporate governance news stories of the summer, if not the year. No, it had nothing to do with financial regulatory reform, the BP mess or another fraud unearthed by the SEC. It was the announcement of a merger between The Corporate Library and GovernanceMetrics International.

One can argue that a merger of the leading corporate governance research firm (The Corporate Library) with an international corporate ratings firm (GMI) is good for the marketplace. For one thing, ISS will get some much-needed competition as it goes through some of its own changes after its parent company, RiskMetrics, was purchased earlier this year by MSCI. Read the rest of this entry »

- Gary Larkin

Aug
16
2010

SEC Wants Financial Reform Comments Before Regs

For all you corporate secretaries, general counsel, directors, compensation committee chairs and anyone else involved in corporate governance, your chance to chime in on the anticipated new financial reform regulations is now. As in before the proposed rules or concept releases are even released to the public.

Following up on her commitment to get as much public comment on these historic reforms (a total of 243 rules in total for several federal agencies, including 95 for the SEC), SEC Chair Mary Schapiro announced late last month an unprecedented decision to open up the process so early.

“We recognize that the process of establishing regulations works best when all stakeholders are engaged and contribute their combined talents and experiences,” Shapiro said in a July 27 statement. “We look forward to preliminary public comments in these areas.” Read the rest of this entry »

- Gary Larkin

Jul
23
2010

Governance Center Meeting Season Starts in October

The fiscal year 2011 corporate governance conference season kicks off this October with our annual meeting in New York City and continues with Roundtable Forums and Crash Courses in several cities. Meanwhile, we will make an appearance at the American Institute of Certified Public Accountants (AICPA) National Audit Committee Forum next week in Washington, D.C.

The Roundtable Forums will focus on such issues as:

How to design executive compensation programs that foster sustainable corporate growth while improving accountability and transparency.
Best practices for managing institutional investor relationships, including how to communicate corporate policy changes successfully.
The latest developments in the board’s oversight role, plus a review of prospective new regulations that will affect how boards and management must operate.
Successfully managing major changes in corporate ownership, including private equity, hedge funds, and governmental entities.The dates and locations are:

November 10-11, 2010, New York, NY
February 9-10, 2011, Atlanta, GA
April 7-8, 2011, Chicago, IL
June 16-17, 2011, New York, NY

The Crash Courses will offer a critical self-assessment program for all executives in the governance area working in the offices of general counsel, corporate secretary, investor relations, and internal audit.

The dates and locations are:

January 20-21, 2011, New York, NY
June 8-9, 2011, New York, NY

To register for the events, click here or contact Brandi Mathis, Center manager, brandi.mathis@conference-board.org.

We will announce the exact date and location of our annual meeting for Governance Center members in the next couple of weeks.

As for the AICPA National Audit Committee Forum: Best Practices & Practical Applications, the Governance Center will have an informational booth set up at the July 29-30 event at the Mandarin Oriental hotel in Washington, D.C. There will be information on research and the directors education programs.

The event will feature such speakers as former SEC Commissioner Roel Campos speaking on the monitoring of corporate ethics by audit committees; Lord Clive Hollick, a non-executive director, and Holly Gregory of Weil Gotshal & Manges speaking on international corporate governance trends; and Carl Berquist, CFO of Marriott Corp. speaking on ERM. It is expected there will be some discussion on financial reform since the legislation will exempt small public companies from Sarbanes-Oxley 404 (b), make auditors of broker-dealers subject to Public Company Accounting Oversight Board regulation and change registration requirements for investment advisers.

Governance Center members and readers of this blog can get a $200 discount for the event by using the coupon code SWF when registering. The registration link is here. For more information about the event, contact Sandra McMahon at the AICPA at 919-402-4861.

- Gary Larkin

Jul
23
2010

Enactment of Dodd-Frank Law Spurs Memo Wave

By now, you’ve probably been deluged with alerts, client memos, invitations to webinars and live conferences in the past week all centered on the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act.

If you are a director, C-level executive, corporate secretary or anyone for that matter involved in the corporate governance area, you are most likely asking the question, “How will this affect my company?” Unfortunately, the answer is not so easy. Based on watching hours of testimony, listening to several conference panels and reading reams of blog posts and articles on the topic, I can tell you the spirit of the law is to make corporate governance more transparent, less complex and include more dialogue with shareholders. Read the rest of this entry »

- Gary Larkin

Jul
16
2010

Worth Reading … Financial Reform Thought Leadership

Now that Congress has passed the financial regulatory reform bill with the Senate’s 60-39 vote on Thursday [See July 15 Reuters article here.], the hard work begins not only for regulators but for public companies who will try to make sense of it all.

Many boards and senior management will be looking to their counsel and outside consultants for advice on how to prepare for these changes, most of which will most likely occur in time for the 2011 proxy season. That is why I have prepared a short version of Worth Reading on some thought leadership on financial reform that doesn’t include the politicians. I found the literature both enlightening and resourceful. Read the rest of this entry »

- Gary Larkin

The Conference Board

Recently Updated

Stay Informed

Twitter Feed

Financial Regulatory Reform Series: Shareholder Proxy Access

The Conference Board, Davis Polk Release Proxy Analysis

Proxy Access Ruling Elicits Polarizing Debate

Proxy Access First Reform Measure in Place

Swaps Are First Up in Reform Rulemaking Process

Governance Ratings Firm Mergers Put New Light on ISS

SEC Wants Financial Reform Comments Before Regs

Governance Center Meeting Season Starts in October

Enactment of Dodd-Frank Law Spurs Memo Wave

Worth Reading … Financial Reform Thought Leadership