Governance Center Blog

Sep
09
2011

2012 Proxy Access Shareholder Proposal Wave Can Commence Next Week

You can expect institutional shareholders to start writing shareholder proposals that would call for proxy access procedures for next proxy season as soon as next week. That’s because as of Sept. 13 the amended rule that is part of the Dodd-Frank Act shareholder proxy access rules will go into effect.

Many of these shareholders and the attorneys working with them basically got some clarity on proxy access this week when SEC Chair Mary Schapiro announced that the rulemaking body will not appeal the U.S. Court of Appeals for the D.C. Circuit’s decision to vacate Rule 14a-11. (The court ruled to vacate the rule mainly because it felt the SEC had not taken into account the costs to public companies.) That was the rule that was approved by the SEC last summer that would have given shareholders the ability to put forth their own director nominee slates to compete with company slates without a traditional proxy fight. Read the rest of this entry »

Posted by Gary Larkin at 12:58 PM | 2 Comments »

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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 »

Posted by Gary Larkin at 5:26 PM | 1 Comment »

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Nov
08
2010

Could SEC Whistleblower Bounty Program Harm Internal Compliance?

Although nearly everyone — including the five SEC commissioners — agrees that corporate whistleblowers are the best source for detecting corporate fraud, there is trepidation about the proposed whistleblower bounty program under the Dodd-Frank Act. Many are concerned that the SEC program could undermine or bypass successful corporate compliance programs.

In fact, the SEC staff in its official proposed whistleblower rule released for comment last week addresses this issue:

“We emphasize, however, that our proposal not to require a whistleblower to utilize internal compliance processes does not mean that our receipt of a whistleblower complaint will lead to internal processes being bypassed. We expect that in appropriate cases, consistent with the public interest and our obligation to preserve the confidentiality of a whistleblower, our staff will, upon receiving a whistleblower complaint, contact a company, describe the nature of the allegations, and give the company an opportunity to investigate the matter and report back.” Read the rest of this entry »

Posted by Gary Larkin at 4:04 PM | 6 Comments »

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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 »

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Posted by Gary Larkin at 3:20 PM | 6 Comments »

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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 »

Posted by Gary Larkin at 9:25 AM | No Comments »

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Jul
15
2010

SEC Wants Your Proxy Plumbing Stories

With more than 600 billion shares being voted electronically at more than 13,000 shareholder meetings every year and the growing practice of share lending and the proliferation of short selling by hedge funds, it’s no wonder the so-called “proxy plumbing” is getting “clogged.” But when you consider that shareholders are about to be granted more power than ever, the need for a more accurate and transparent proxy system becomes paramount.

It’s hard to imagine that such a complex system as the proxy voting infrastructure has been operating under rules from the 1980s. That’s the justification for the SEC’s 5-0 vote Wednesday to issue a concept release on making changes to that system, as SEC Chair Mary Schapiro spelled out in a July 9 speech in Chicago at the annual meeting of the Society of Corporate Secretaries and Governance Professionals. [Read Schapiro’s prepared text and watch her comments during the July 14 SEC open meeting.] Read the rest of this entry »

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Posted by Gary Larkin at 3:10 PM | 1 Comment »

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Jul
10
2010

Schapiro: SEC Ready to Tackle Proxy Voting Structure

If you take anything away from SEC Chair Mary Schapiro’s Friday speech to the Society of Corporate Secretaries and Governance Professionals annual meeting in Chicago, it should be this: the regulator plans to act quickly to institute the regulations behind financial reform.

In the meantime, Schapiro told a packed hotel room the SEC on Wednesday plans to vote on issuing a concept release on shareholder voting infrastructure, known by many as “proxy plumbing.” Additionally, Schapiro and her Deputy Chief of Staff Kayla Gillan explained to the hundreds of conference participants Friday that the SEC is looking to update many of the outdated forms registrants use and take another look at risk disclosure requirements. Read the rest of this entry »

Posted by Gary Larkin at 11:45 AM | 1 Comment »

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May
06
2010

Climate Change Disclosure Start of Long Standard-Setting Process

When SEC Chair Mary Schapiro and the rest of the commission issued interpretative guidance on climate change disclosure back in February, they said they were merely just “providing clarity and enhancing consistency” for rules that have existed for decades. Intended or not, the consequence of the guidance has put public companies one step closer to mandatory sustainability reporting.

If you are a director on a public company and have been skeptical about the need for sustainability reporting, specifically climate change disclosure, you may want to take a look at the latest data on who is voluntarily reporting. Read the rest of this entry »

Posted by Gary Larkin at 4:09 PM | 1 Comment »

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Mar
31
2010

Beware: SEC Fishing for Repo’s in Company 10-Ks

Whether or not you’ve heard about the tricky accounting technique Lehman Brothers allegedly used to mask huge losses before filing for bankruptcy protection in 2008, you may want to read this.

It is a so-called “Dear CFO” letter from the SEC’s Division of Corporation Finance. It could be the first step the SEC may take in a deep dive into your financial statements to look at how your CFO accounted for repurchase agreements, securities lending transactions and other transactions involving the transfer of financial assets.

The letter, which went out in March to certain companies, is in response to an examiner’s report on the bankrupt Lehman Brothers. That bank allegedly used an accounting treatment called Repo 105 that has proved to be somewhat controversial. In an interview with CNBC this week reported on in CFO magazine, SEC Chair Mary Schapiro spells out the SEC’s strategy behind the letter. Read the rest of this entry »

Posted by Gary Larkin at 4:59 PM | 1 Comment »

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Dec
18
2009

SEC Wants More Concise Disclosure That is Material

The SEC has three messages for public boards and management next proxy season when it comes to disclosing policies and practices regarding executive compensation, risk and corporate governance: the Compensation Discussion and Analysis (CD&A) should be used to tell their story, all disclosures should take risks into account and should have a threshold for materiality.

In so many words, SEC Chair Mary Schapiro and a majority of commissioners want disclosures, especially the CD&A, to be less voluminous, easier to read and full of content the investors can truly use. The commission is trying to instill in public companies the idea that disclosures should be treated like a “memo” to investors and not just another compliance document.

That is what I believe directors and management should take away from the SEC’s 4-1 approval Wednesday of new rules for disclosures in proxy and information statements. The proxy disclosure enhancements, which go into effect Feb. 28, 2010, would require disclosures in the proxy and financial statements on:

•   The relationship of a company’s compensation policies and practices to risk management.
•   The background and qualifications of directors and nominees.
•   Legal actions involving a company’s executive officers, directors and nominees.
•   The consideration of diversity in the process by which candidates for director are considered for nomination.
•   Board leadership structure and the board’s role in risk oversight.
•   Stock and option awards to company executives and directors.
•   Potential conflicts of interests of compensation consultants as well as the fees paid to consultants and their affiliates.

Read the rest of this entry »

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Posted by Gary Larkin at 11:49 AM | 3 Comments »

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