Those of you who’ve been reading my posts for a while know that I depart from securities and governance topics only once each year, to report on my 10 favorite books of the year just gone by. I will point out again that my list consists of the books I read during 2016 and is not limited to books that were published during the year.
By way of introduction, from my literary perspective, 2016 was the best of times and the not-so-good of times. By that I mean that in most years I struggle to limit my choices to my favorite five fiction and non-fiction books, while for 2016 it was hard for me to come up with my remaining books in each category beyond the top one or two.
So much for introductions. My top favorite works of fiction were: Continue Reading
In the few days since the Supreme Court handed down its decision in Salman v. United States, many commentators have said, in effect, that criminal prosecutions for insider trading are alive and well. Alive, yes; well, maybe not.
At the risk of quoting myself, almost exactly two years ago I posted an item on this blog entitled “There ought to be a law”. My belief at the time was that insider trading law is so byzantine that it’s impossible to know where legally permissible behavior becomes legally impermissible behavior. For better or worse (worse, IMHO), nothing has changed all that much. In the Salman decision, SCOTUS says that a prosecutor need not prove that a tipper received something of a “pecuniary or similarly valuable nature” to convict the tipper of illegal insider trading. So far, so good. However, as many commentators have pointed out, Salman leaves any number of other issues wide open.
Congratulations to our esteemed colleague, Bob Lamm, for winning this prestigious award! While we all know that Bob is the guru in the governance space, it’s great that he was recognized for all of his achievements (to date!). Well deserved!
WEST PALM BEACH, Fla. (Nov. 29, 2016) – Gunster, one of Florida’s oldest and largest full-service business law firms, is pleased to announce that Bob Lamm received the Lifetime Achievement award at the ninth annual Corporate Secretary Corporate Governance Awards.
Lamm serves as co-chair of Gunster’s securities & corporate governance practice. He has devoted his career to governance in his prior positions with companies such as Pfizer; CA, Inc.; and W.R. Grace & Co. In addition to his role at Gunster, Lamm acts as an independent senior advisor to the Deloitte Center for Board Effectiveness and as an advisory director of Argyle, and he has actively been involved as a long-term member of the Society for Corporate Governance. In addition, Lamm serves as a senior fellow of the Conference Board Center for Corporate Governance, as well as a director for the Junior Achievement of South Florida.
“As an independent senior advisor, Bob has made an indelible mark. His dedication shows his deep passion for investing in the next generation of independent directors,” said Deb DeHaas, vice chair and managing partner at the Deloitte Center for Board Effectiveness. “Throughout my career, it has been my experience that truly brilliant people are also kind and generous of spirit. In this respect, Bob is a special treasure; an expert lawyer with a big heart and the soul of a teacher, who shares his knowledge without pretension, and always praises the qualities he sees in others,” added Iain Poole, managing director at Argyle. Bill Perry, Gunster’s CEO and managing shareholder stated that “Bob’s commitment to excellence in corporate governance and securities law is exceptional. We are fortunate to call Bob a colleague and as Florida’s law firm for business, we are honored to have him among our ranks.”
On Thursday, Nov. 3, more than 400 industry professionals in the governance, risk and compliance world gathered together in New York to celebrate the best of the best in the industry and celebrate the lifelong accomplishments of all the evening’s honorees. There were over 300 nominations received in 14 different categories.
Internet Archive Book Images
As noted in a recent post, the future of SEC regulation – and perhaps even of the SEC itself – is uncertain in the wake of Donald Trump’s election. However, the SEC Staff, a smart, decent and hardworking group, continues to stick to its knitting despite the turmoil.
The most recent example of the Staff’s diligence is a “Report on Modernization and Simplification of Regulation S-K – As Required by Section 72003 of the Fixing America’s Surface Transportation Act”. The Report was issued on Thanksgiving Eve, and it’s no turkey. Don’t be put off by the incredibly long title or by the fact that SEC regulations have nothing to do with Surface Transportation. The Report provides a good summary of some actions impacting Reg S-K that have been taken to date, and the Staff’s recommendations for actions down the road (assuming there is a road).
Here are some of the highlights of things that may be on the come: Continue Reading
It remains to be seen whether the new administration will actually drain the swamp or do away with political correctness, but one hope that some of us have – regardless of our views on the election – is that the SEC may finally get around to some issues that have been on the back burner for years.
One such issue is a long-overdue overhaul of the rules surrounding shareholder proposals, including the submission and resubmission thresholds for proposals under SEC Rule 14a-8. Many organizations, including the Society for Corporate Governance, have repeatedly urged the SEC to update these rules, which have been in place for many years. However, the SEC has been reluctant to plunge into the area due to the likely political firestorm that would result.
Now, another organization has jumped in. At the end of October, the Business Roundtable published “Modernizing the Shareholder Proposal Process”, a rational and well thought-out series of suggestions for bringing shareholder proposals into the 21st Century.
In the wake of the election of Donald Trump as the next President, there has been a lot of speculation about the effect of a Trump administration on securities law and corporate governance. Looking into a crystal ball is always risky, but here are some observations.
Conflict Minerals: It’s too soon to tell whether Dodd-Frank will be repealed in its entirety, if it will die the death of 1,000 cuts, or if it will stay pretty much as is. What I will say is that few will cry if the conflict minerals provisions are eliminated (and I will not be among those few). Complying with the conflict minerals rules is time-consuming (and therefore costly), and it’s questionable whether many people care. Perhaps of equal or greater importance is that there is some evidence that the conflict minerals requirements are actually hurting the people they were supposed to help.
Pay Ratio: More of the same here. There is some support for pay ratio disclosure among labor pension funds, but that’s about it. Companies don’t like it (duh…), and mainstream investors have no use for it. Given how the Democrats seem to have fared in the industrial states, it’s not clear that they would fall on their collective sword to save this one. Continue Reading
The morning after a surprising election outcome seems as good a time as any to bear in mind the old saw that the more things change the more they stay the same.
And so it goes with corporate governance trends. Lost in the piles of paper and ink (real and virtual) expended on the Wells Fargo scandal is an article that appeared in The Wall Street Journal a few weeks ago suggesting that the beleaguered bank will benefit from its post-oops decision to separate the positions of CEO and Chairman of the Board.
I’ve studied this issue for several years, and I can state with confidence that there is no proof that separating the positions or having an independent Board Chair does anything to improve performance or to avoid problems. The most that can be said is that the studies are inconclusive.
In the midst of the chaos of the presidential election, vicious attacks from Senator Warren, and goodness knows what else, the SEC continues to crank out requests for comment, rules and interpretations.
It’s the latter category that has attracted our attention lately, as the Staff has focused on some technical matters that securities counsel have been pondering for a while.
401(k) plans with a self-directed “brokerage window”
First, in September, the SEC published updated Compliance and Disclosure Interpretations, including one on 401(k) plans that feature a so-called “brokerage window”. It’s been generally assumed that if a plan does not include an employer stock fund in which employee funds can be invested, Securities Act registration is not required. This CDI says “maybe not” – if the plan (a) permits employer and employee contributions to be invested through a self-directed “brokerage window”, and (b) the plan does not prohibit investments in employer stock through the window, registration may be required.
Illustration by Tyler Letkeman
As reported by Broc Romanek in his recent blog post, the SEC recently posted five new CDIs related to the CEO pay ratio rules contained in Item 402(u) of Regulation S-K. In order to provide a very brief summary in a fun way, I’ve composed five haikus addressing the substance of each of the newly released interpretations. Enjoy!
That reasonably reflects pay
Can be utilized
Hourly pay rates
Can we use to calculate?
No! These will not work
To calculate it
You must use recent data
You must include them too, but
Use annualized pay
What about ICs?
If you set their pay
Photo by Kai Schreiber
We are pleased to provide a posting from our colleague, Holly L. Griffin, an attorney in Gunster’s Labor and Employment practice group.
Within the course of one week, the SEC took administrative action against two companies for language contained within severance agreements which restricted employee rights to obtain a monetary award for reports of potential law violations to the SEC. The SEC took aim at two types of provisions which commonly appear in severance agreements: the confidentiality clause and the waiver of rights.
In one of the cases, the company required all employees accepting severance pay to sign an agreement that contained a clause prohibiting disclosure of company confidential information and trade secrets, except when the employee is compelled by law to disclose the information. In the event the employee was required to disclose company confidential information, the agreement required the employee to provide notice to the company. The SEC determined that the confidentiality agreement put former employees between a rock and a hard place if they wanted to report potential law violations; they could either identify themselves as a whistleblower to the company by providing notice, or risk breaching the agreement and forfeiting severance by disclosing confidential information.
In both matters, the companies required all employees accepting severance to sign an agreement that contained a waiver of rights. Although the severance agreements did not prohibit the employees from reporting or participating in an investigation into a potential law violation, they explicitly prohibited the employees from receiving monetary compensation for such reports. The SEC found both companies in violation of an SEC Rule which prohibits public companies from taking action which impede a whistleblower from communicating with the SEC regarding possible law violations. Congress enacted the “Dodd-Frank Act with the stated purpose of encouraging whistleblowers to report potential law violations to the SEC, by offering financial incentives or awards for reports. The SEC determined that requiring employees to waive their right to financial recovery undermines the public policy purpose behind the Dodd-Frank Act and violates SEC rules.
Both companies were required to notify former employees of the ruling and to pay monetary civil penalties, totaling hundreds of thousands of dollars each. One company was also required to amend its severance agreements to include a section titled “Protected Rights,” which notified employees of the right to report any suspected law violation to a governmental agency and to receive an award for providing such information.
What it means Continue Reading