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Category Archives: Corporate Governance

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What’s good for the goose…

Posted in Bob's Upticks, Corporate Governance, SEC Enforcement

A few weeks ago - “From the same wonderful folks who brought you conflict minerals (among other things)” – I complained about Senator Blumenthal’s attempt to tell the SEC what to regulate and how to regulate it.  I had an equal and opposite reaction to the recent news that Commissioner Gallagher and former Commissioner Grundfest had gone after the Harvard Shareholder Rights Project, in effect telling the Project (AKA Lucian Bebchuk) that its actions violate the federal securities laws.

I agree with some (though not all) of Commissioner Gallagher’s views.  I’m also troubled by the notion of an esteemed academic institution taking aggressive, one-size-fits-all positions on corporate governance matters.  However, in this case, I’m inclined to think that Commissioner Gallagher should have taken a higher road – encouraging discussion, maybe even holding an SEC Roundtable on the topic.  And if he really thinks that there’s a violation here, perhaps he should have whispered in the ear of the Enforcement Division that it might want to look into this.  Instead, he’s behaving somewhat like a bully – not that the Good Professor is likely to be quaking in his boots about it.

Also, it strikes me as downright inappropriate for a Commissioner to make a statement about a matter that the Commission could conceivably have to rule on if the matter ever does result in an enforcement action.  At a minimum, he’d have to recuse himself on the matter, which could mean the difference between victory and defeat.  And given recent criticisms of the SEC for (1) pursuing more matters as administrative proceedings than court cases and (2) unfairly touting its enforcement record, does Commissioner Gallagher think he's enhanced the stature of the SEC by doing this?

Your thoughts?

Bob

Directors and Officers Beware: You could be individually liable for your entity’s Bank Secrecy Act or Office of Foreign Assets Control violations

Posted in Corporate Governance

In recent years, the Financial Crimes Enforcement Network (“FinCEN”) and federal regulators of the financial services industry have more aggressively enforced the Bank Secrecy Act (“BSA”) and the economic sanctions imposed by the US Treasury’s Office of Foreign Assets Control (“OFAC”).  While this should in of itself be a matter of particular attention to the… Continue Reading

ISS and Glass Lewis publish 2015 voting policies

Posted in Corporate Governance, Uncategorized

Institutional Shareholder Services and Glass Lewis have issued their voting policies for the 2015 annual meeting season.  For the most part, both proxy advisory firms’ 2015 policies are refinements of those already in place.  However, companies should carefully review their 2015 annual meeting agendas against the updated policies to anticipate possible issues.  A summary of… Continue Reading

Game on: ISS and Glass Lewis issue 2015 voting policies

Posted in Bob's Upticks, Corporate Governance

Last week I posted an UpTick about the rollout of ISS’s voting policies for 2015.  This week saw what appears to be the completion of that rollout, and we were also blessed with the publication of Glass Lewis’s 2015 voting policies.

On a quick read, neither set of voting policies seems to contain anything shocking, but both sets continue the march towards what the proxy advisors see as shareholder democracy.  To paraphrase Jules Feiffer, I sympathize with their aspirations, but in some ways it looks like shareholder tyranny.  Both ISS and GL are adamant about two types of by-law amendments: those that make the loser pay in meritless lawsuits and those that arguably impact shareholder rights without getting shareholder approval.  ISS also tinkers with shareholder proposals on CEO/board chair separation.  GL is also concerned about by-law amendments and continues to rail against companies that don’t satisfactorily implement majority-approved shareholder proposals.  GL also continues to focus “material” transactions with directors.

I really do sympathize with at least some of the aspirations of ISS and GL.  However, their policies reinforce the notion – with which I’m not at all sympathetic – that shareholders have the right to second-guess each and every decision that the board makes.  For example, why does ISS think that shareholders are in a better position than the board to determine the board’s leadership structure?  And if the board has no business deciding on its own leadership structure, why give it the power to do anything at all?

We’ll be posting a more detailed analysis of the 2015 voting policies on The Securities Edge within the next few days.  For the time being, let us know what you think of them (or of my views).

 

Bob

Oops, they did it again – ISS proposes new voting policies

Posted in Bob's Upticks, Compensation, Corporate Governance

Britney Spears has nothing on Institutional Shareholder Services, better known as ISS.  ISS is rolling out proposed new voting policies for the 2015 proxy season.  ISS often uses more words to tout how transparent it is than to explain its voting policies clearly, and the draft policies being considered for 2015 are no different.

One new proposed policy addresses voting on shareholder proposals on independent board chairs.  ISS proposes to expand the list of factors that will be considered in developing a voting recommendation and to look at these factors in a more “holistic” manner.  (The current policy is to support the proposals unless the company meets all of the criteria.)  So this seems like a good thing.  However, ISS indicates that the new policy is not expected to change the percentage of independent chair proposals that it will support.  The obvious question is, then, how will the new policy really work?  Your guess is as good as mine (which frankly isn’t very good).

The other new proposed policy provides additional information regarding the “scorecard” that ISS will use to evaluate equity plans.  Like the independent chair policy above, some more criteria are laid out, but it’s impossible to tell how the factors – or, indeed, the new scorecard, will be weighed or will work – thus assuring that companies seeking shareholder approval of equity plans will have to continue to use ISS’s consulting service to find out whether a new plan will pass muster.

I could just as easily have referred to Yogi Berra as to Britney Spears, because if this isn’t déjá vu all over again, I don’t know what is.

Your thoughts?

Bob

10 nuggets on corporate governance hot topics

Posted in Corporate Governance

On September 30, Bob Lamm moderated a panel at a “Say-on-Pay Workshop” held during the 11th Annual Executive Compensation Conference in Las Vegas, Nevada.  The Conference is an annual event sponsored by TheCorporateCounsel.net and CompensationStandards.com – and emceed by our good friend, Broc Romanek – and features many of the pre-eminent practitioners in corporate governance… Continue Reading

The shape of things to come in corporate governance

Posted in Corporate Governance

Interest in corporate governance has increased exponentially over the last several years, as has shareholder and governmental pressure – often successful – for companies to change how they are governed.  Since 2002, we’ve seen Sarbanes-Oxley, Dodd-Frank, higher and sometimes passing votes on a wide variety of shareholder proposals, and rapid growth in corporate efforts to… Continue Reading

Trying to save its own neck? ISS works to assure “data integrity”

Posted in Corporate Governance

On Thursday, Institutional Shareholder Services Inc. (ISS) announced the launch of a new data verification portal to be used for equity-based compensation plans that U.S. companies submit for approval by their shareholders.  This is a welcome change to ISS policy; although call me a cynic, but I believe this new policy has more to do… Continue Reading

Delaware vs Florida: Where should you incorporate?

Posted in Corporate Governance

There is an attraction for companies to incorporate in Delaware, likely due to the abundance of well-known publicly traded corporations that have chosen to incorporate there. However, it is not necessarily true that the Delaware General Corporation Law (“DGCL”) is better than corporate laws of other states; it is just more developed due to the… Continue Reading

Congress to the rescue?: Congressman hints at legislation to rein in proxy advisory firms

Posted in Corporate Governance

Who says Congress isn’t popular?  Well, Congress may become much more popular with public company executives if Congressman Patrick McHenry (R-NC) can make good on his recent promise to challenge the power of proxy advisory firms if the SEC doesn’t act.  In a recent keynote speech at an American Enterprise Institute conference on the role… Continue Reading

Nasdaq reverses course on compensation committee independence

Posted in Corporate Governance

Apparently, corporate governance cannot be dictated by the stock exchanges.  As we had blogged about last year, Section 952 of Dodd-Frank required each national securities exchange to review its independence standards for directors who serve on an issuer’s compensation committee.  Each national securities exchange had to ensure that its independence definition considered relevant factors such… Continue Reading

Separating the positions of CEO and Chairman: The debate rages on

Posted in Corporate Governance

Are the CEO and the Chairman of the Board the same executive at your company?  While there can be very good reasons to have these positions held by the same person, the separation of these posts continues to be a hotly debated topic.  Since the early 1980s, much attention has been paid to corporate boards… Continue Reading

When does hedging or pledging of company stock by insiders equate to bribery?

Posted in Corporate Governance

The answer: when ISS is evaluating a public company’s corporate governance under its revised policies for the 2013 proxy season. We previously blogged about the potential insider trading issues that could theoretically arise when insiders pledge company stock to secure loans. Now, with the implementation of the revised ISS governance standards, there are additional reasons… Continue Reading

Starting the New Year off right: In-house counsel disclose their New Year’s resolutions

Posted in Corporate Governance

As we start 2013, I thought it would be fun to ask in-house counsel what their New Year’s resolutions were.  I wasn’t looking for the usual “go to the gym more/ lose weight/ get organized” type answers, but rather what corporate secretaries/ securities counsel would want to improve upon in 2013 in their professional lives. … Continue Reading

Are investors’ interests served by proxy advisory firms?

Posted in Corporate Governance

As we say “goodbye” to 2012 we say “hello” to another proxy season full of angst caused by the self-appointed czars of corporate governance, the proxy advisory firms.  Although ISS and Glass Lewis have been making voting recommendations for more than a decade, over the past two years their power over voting outcomes has increased. … Continue Reading

GUEST BLOGGER: Lessons learned in corporate governance from the Jerry Sandusky tragedy

Posted in Corporate Governance

Mr. Lamm is Assistant General Counsel and Assistant Secretary at Pfizer Inc. and a Gunster alumnus.  The views expressed in this posting are Mr. Lamm’s personal views and should not be attributed to Pfizer Inc. or to Gunster. While nothing good has come out of the Jerry Sandusky sexual abuse scandal at Penn State, I… Continue Reading

Proposed compensation committee independence rules will impact some issuers more than others

Posted in Corporate Governance

Issuers listed on the NYSE or Nasdaq should pay close attention to the rules proposed by the exchanges last week because the proposed rules will impact compensation committees; however, the impact may be a “tale of two exchanges” because the impact is more significant to Nasdaq-listed companies.  As you may recall, Congress included several provisions… Continue Reading

Margin calls: The insider trading trap

Posted in Corporate Governance

Imagine the following scenario. Your company is publicly traded. As such, senior management is keenly aware of the potential for executives and employees trading in the company’s securities on the basis of material nonpublic information in violation of Section 10(b) of the Exchange Act and the infamous Rule 10b-5 promulgated thereunder. To prevent improper trading,… Continue Reading

NASDAQ aims to ease indepedence rules, offer limited relief to issuers

Posted in Corporate Governance

Issuers who would not otherwise meet the NASDAQ independence rules may now breathe (a small) sigh of relief. On May 30, the SEC published notice of NASDAQ’s proposed change to Listing Rule 5605. Generally, Rule 5605 requires issuers to maintain an “independent” audit, compensation, and nominating committees. There is an exception to the independence rules… Continue Reading

Could directors be personally liable if Facebook paid too much for Instagram?

Posted in Corporate Governance

It is a basic tenant of corporate law that directors of a corporation are not liable for business decisions as long as the directors acted with a reasonable level of care in making these decisions. This is referred to as “the business judgment rule.” Because directors are not guarantors of corporate success, the business judgment… Continue Reading

Groupon has accounting problems (again)

Posted in Corporate Governance, Technology Company Issues

One of the most well-known and popular Internet companies, Groupon, Inc., has again encountered significant accounting problems. These problems appear to be potentially severe. This situation is very negative for Groupon, but it also has troubling ramifications for the entire technology industry and especially for technology companies that have recently gone public. There is also… Continue Reading

Your company may be ‘publicly traded’ without your knowledge – and there may be a price to pay

Posted in Corporate Governance

When someone refers to a company as being “publicly traded” we normally understand that to mean that it has sold shares to the public through an initial public offering (or “IPO”) and is listed on a national securities exchange (like the NYSE or Nasdaq) and makes periodic filings with the SEC. However, some smaller companies… Continue Reading

First Proxy Access Proposal Received

Posted in Corporate Governance

Late last week, a shareholder activist filed, what is believed to be, the first proxy access resolution for this proxy season.  The target of the proposal, MEMC Electronic Materials, Inc., is an S&P 500 company that manufactures and sells wafers and related products to the semiconductor and solar industries.  As discussed in a previous blog… Continue Reading

Proxy Access Still on the Table

Posted in Corporate Governance

Despite the SEC’s decision not to appeal the recent decision by the U.S. Court of Appeals for the D.C. Circuit to vacate the proxy access rules, proxy access is still alive and well.  In Tuesday’s release by the SEC, the SEC noted that the amendment to Rule 14a-8, which had been stayed pending the litigation… Continue Reading