Governance Center Blog

May
19
2011

Worth Reading … Corporate Governance Reports

With proxy season in full gear, a myriad of corporate governance issues once again is front and center at many annual meetings. Whether it’s board structure, diversity, corporate social responsibility, executive compensation or shareholder dialogue, these issues are either included in shareholder resolutions or have become disclosures in the proxy statement.

What better way to truly enjoy the proxy season than with some light reading on those issues and what it all means for boards and everyone else in the corporate governance space. In the past couple of weeks, I have been reading some meaningful commentaries and corporate governance reports about the 2011 season. One is a commentary from a well-known New York law firm on how to achieve “truly good corporate governance.” Another is a report from a blue ribbon panel on the future of corporate boards. And two others are the annual corporate governance reports from two important institutional investors. Read the rest of this entry »

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Apr
27
2011

Conflict Minerals Disclosure, Audit Could Open Sustainability Reporting Window

Through the use of sustainability reporting, a handful of public electronics companies are learning how the processes used in the due diligence of tracking their supply chain can help them get out in front on a little known section of the Dodd-Frank Act.

Section 1502 of Dodd-Frank will require public companies to disclose and possibly audit its manufacturing process when it is believed they may be using so-called conflict minerals from the Democratic Republic of Congo and neighboring countries. It is believed that country uses the proceeds of sales of those minerals to finance sexual and gender-based violence and exploitation in the war-ravaged nation. Under the law, the SEC is supposed to draw up rules that will require companies to conduct supply chain due diligence, third party verification and possibly audits of sources such metals as tin, tantalum, tungsten and gold. Read the rest of this entry »

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Apr
20
2011

Delays in Compensation, Pay-for-Performance and Clawback Rules May be Problematic

Conflict minerals disclosure, mine safety disclosure, resource extraction issuer disclosure, new exchange listing standards for compensation committee and compensation consultant independence, pay-for-performance and pay ratios, clawback rules for executive compensation packages. Which one of these doesn’t belong?

Actually, it’s a trick question because actually they are all part of the voluminous Dodd-Frank Act. And that’s not the only thing they share in common. Final rules for those sections of the law have been delayed by the SEC at least until the end of this year. (In the case of a study on the use of compensation consultants, until July-December 2012.) [See the April 12 Mondaq Business Briefing.] Read the rest of this entry »

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Apr
19
2011

On First Read, Expect Proxy Access to be Retooled for 2012

Wouldn’t it be the ultimate irony if the shareholder proxy access rules approved by the SEC under the Dodd-Frank Act were thrown out by a federal court because they could cost companies too much money? One of the major thrusts behind proxy access over the past couple of decades was that the traditional proxy fights to replace directors has been cost prohibitive to minority shareholders who had to pay for their own ballots.

Most likely the court won’t strike down the rules entirely, but instead will ask the commission to tweak the rules to take into account its concerns about costs of implementing the rules, a major argument made by the federal court hearing the case earlier this month. Read the rest of this entry »

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Apr
14
2011

Should Boards Worry About a ‘Fifth Analyst Call’ for Investors?

In what is probably one of the most-anticipated conference call in Occidental Petroleum’s long history, some key institutional investors will get a unique opportunity April 26 to discuss key issues brought up in the proxy statement. Known unofficially as a “fifth analyst call,” United Kingdom-based F&C Asset Management plans to host the call with institutional investors and key members of the board and management to discuss corporate governance issues.

F&C Asset Management in conjunction with fellow UK investor Railpen Investments introduced the idea of the fifth analyst call earlier this year in a joint statement from Deborah Gilshan, corporate governance counsel at Railpen, and Elizabeth McGeveran, senior vice president at F&C, that was made available to the Harvard Law School Forum on Corporate Governance and Financial Regulation.

They describe the call Read the rest of this entry »

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Mar
31
2011

Do New Proposed SEC Compensation Committee/Consultant Rules Go Far Enough?

After listening to SEC Commissioner Luis A. Aguilar speak during Wednesday’s open meeting where the commission in a 5-0 vote approved proposed rules for exchange listing standards related to compensation committees and compensation consultants as well as new disclosures, I was left wondering whether or not such rules will be effective.

I’m not saying the issue of independence and conflicts of interest regarding compensation committees and consultants should not be addressed by various exchanges (i.e. NYSE EuroNext, Nasdaq OMX). In fact, I’m wondering why the SEC didn’t follow the audit committee model in the Sarbanes-Oxley Act. Title III of SOX (Corporate Responsibility) made it mandatory for public companies to have audit committees while the SEC’s proposed Rule 10C-1 under the Dodd-Frank Act doesn’t go that far with compensation committees. Read the rest of this entry »

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Mar
08
2011

Chamber, SEC May Sow the Seeds for Corporate Governance Compromise

For those of you who spend a great deal of time preparing the myriad of filings for regulators and/or board meetings there were two news events worth noting last week.

The U.S. Chamber of Commerce called for new corporate governance standards that promote investment and aid economic growth and the SEC proposed a new Dodd-Frank rule that requires financial institutions to disclose the structure of incentive-based compensation practices (or bonuses) [Read the New York Times article here.] Read the rest of this entry »

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Feb
22
2011

Dodd-Frank Act in Middle of Battle Brewing Over SEC Funding

While it may not be on the level of the historic protests in the Middle East or the budget battle playing out in Wisconsin, the funding “war” being waged against the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) in the Republican-controlled House of Representatives is worth noting if you are involved in the corporate governance function of your company.

If anything, the future of the more than $1 billion in federal funds is vulnerable as the new House has vowed to cut billions in government spending, including money that would be used to implement major parts of the Dodd-Frank Act. A bigger question for public companies is what the possible de-funding of some of the SEC programs, such as the whistleblower office and bounty, could mean to corporate governance regulation in the near term. Read the rest of this entry »

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Feb
15
2011

Worth Reading … Say on Pay, CD&A Guidance

As public companies and shareholders gear up for the first big wave of SEC-required advisory votes on executive compensation, the frequency of such votes and golden parachute compensation plans in the wake of the Dodd-Frank Act, the search goes on for best practices and advice.

In the past couple of months, there has not been a shortage of both as law firms, compensation consultants, and corporate governance education centers or think tanks. For those of you who need a refresher on the three Say on Pay-related votes this year, here they are: Read the rest of this entry »

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Jan
22
2011

SEC Answers Proxy Access Suit Charges; Court Date Set for April 7

The case that could decide the legality of the shareholder proxy access rules adopted by the SEC will be heard by the U.S. Court of Appeals for the D.C. Circuit April 7 now that the commission filed its initial brief Wednesday.

For the first time since the U.S. Chamber of Commerce and the Business Roundtable filed their lawsuit in September, the SEC has officially lodged its counterargument with the court. The suit was filed about a month after the commission adopted Rule 14a-11, which allows shareholders with at least 3 percent of ownership for at least three years the right to have their own director candidates added to the proxy ballot alongside management’s without having to engage in an expensive proxy fight. The SEC issued a stay in the implementation of the rule in October until the matter is resolved by the court. Read the rest of this entry »

Posted by at 12:36 PM | 4 Comments »

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