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The Securities Edge

Securities Blog for Middle-Market Companies

10 nuggets on corporate governance hot topics

Posted in Corporate Governance
Bob Lamm's Golden Nugget's of Corporate Governance

Photo by Eric Roy/ Golden Nugget Casino, Las Vegas, late 80′s.

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 and securities law. 

The panel, entitled “50 Nuggets in 75 Minutes,” may just be the CLE equivalent of speed dating – each of five panelists covers 10 “nuggets” – practical and other takeaways to help them do their jobs better – in a 75-minute panel.

Here are Bob’s 10 “nuggets,” reprinted courtesy of the Conference sponsors and Broc. 

1.    Engagement is a Two-Way Street – At this stage of the game, shareholder engagement is – or should be – a given, and one of a company’s normal responsibilities.  Along with that is the mantra “engage early and often”; in other words, don’t wait until you are faced with a negative vote recommendation to start reaching out to your major holders. 

What may not be part of the mantra is that engagement is a two-way street.  Your job (and that of your colleagues and even some directors) is to Continue Reading

Video interview: Discussing the Alibaba IPO with LXBN TV

Posted in IPOs

Following up on my recent post on the subject, I had the opportunity to discuss Alibaba’s record-breaking IPO with Colin O’Keefe of LXBN. In the interview, I share my thoughts on some issues worth watching and offer a few takeaways for American companies.

Wrong turn?: Is the SEC looking to further expand its regulatory jurisdiction through the disclosure process?

Posted in Disclosure Guidance
Is the SEC making a wrong turn by regulating corporate governance?

Photo by doncarlo

In the wake of the recent financial crisis, the Dodd-Frank Act created the SEC Investor Advisory Committee with the stated purpose of advising the SEC on (i) regulatory priorities of the SEC; (ii) issues relating to the regulation of securities products, trading strategies, and fee structures, and the effectiveness of disclosure; (iii) initiatives to protect investor interest; and (iv) initiatives to promote investor confidence and the integrity of the securities marketplace. In other words, the committee is to advise on matters historically within the purview of federal securities laws. While this is fine and good, there is some indication that the SEC may again be considering the use of disclosure rules to indirectly regulate matters that are not federal securities law matters (see, e.g., conflict mineral rules, Iran-related disclosure rules, CEO pay ratio disclosure rules, etc.).

The new potential area of regulation for the SEC may be internal corporate affairs. The committee’s agenda for the October 9, 2014 meeting of the SEC Investor Advisory Committee will include a discussion of Continue Reading

Alibaba’s record IPO – How will it affect U.S. technology companies?

Posted in Capital Raising

Photo by JMR_Photography

On September 19, Chinese e-commerce giant Alibaba completed the initial public offering of its stock. The underwriters for the offering subsequently exercised their option to buy additional shares, making this the largest IPO in history at $25 billion. The stock’s price immediately jumped by a huge amount, finishing its first day of trading at $93.89, a 38% increase over its $68.00 IPO price. The stock has since lost some ground, closing at $87.17 on Tuesday.

What does this massive IPO mean for U.S. technology companies? I see four possible areas of impact:

  1. U.S. technology companies may delay their IPOs until they see how the Alibaba stock performs. This could be a short delay if the stock price holds up or does well. Right now U.S. technology companies Hubspot, Lendingclub.com, GoDaddy.com and Box, among others, are expected to conduct IPOs this fall.
  2. If the substantial demand for Alibaba stock holds up, fund managers may reduce their Continue Reading

The JOBS Act – Any results yet?

Posted in Capital Raising
Waiting for the results of the JOBS Act?

Photo by Gueorgui Tcherednitchenko

President Obama signed the JOBS Act into law on April 5, 2012 amid much fanfare and optimism. Small and medium sized fast-growing technology companies and their executives were especially sanguine about this new act as it appeared that it would provide access to much-needed additional expansion capital. These companies were still reeling from the recession and the substantial reduction in available venture capital financing, and they saw the JOBS Act as a potentially positive event. A little more than two years later, has this initial optimism proved to be warranted? Let’s take a look at some of the provisions of the Act.

A new regulatory structure for crowdfunding was initially the most anticipated provision of the JOBS Act. I never believed that crowdfunding would be as beneficial as some people did, but I hoped that it could provide some additional access to capital for smaller companies which were starved for funds. Unfortunately we are still waiting for the SEC’s final crowdfunding regulations. The SEC appears to be caught between two complaining factions here – one which thinks the proposed rules are too restrictive and won’t work, and one which thinks Continue Reading

Nasdaq annual listing fees are going up, up (but not away)

Posted in Announcements

Nasdaq fees are ready for takeoffIn late August, Nasdaq announced changes to their annual listing fees.  Generally, the fees will increase effective January 1, 2015, but Nasdaq is also adopting an all-inclusive annual fee and eliminating its quarterly fees.  The new annual fee will now include fees related to listing additional shares, record-keeping changes, and substitution listing events.  The all-inclusive fee is optional for issuers until January 1, 2018 at which point it becomes mandatory.

Issuers have a choice to make.  Option #1 – An issuer can do nothing and continue to pay an annual fee as well as pay the quarterly fees to list additional shares.  Under this method, an issuer will experience increased 2015 fees ranging from 0% to 40% depending on how many shares an issuer has outstanding.  Generally, the largest increases are for issuers with less than 10 million shares outstanding (14% increase) and for issuers with more than 100 million shares outstanding (40% if there are between 100 and 125 million shares outstanding and 25% if there are more than 150 million shares outstanding).  Think of this option as the same as flying on an airplane.  You get a seat (usually), but if you want anything else you need to pay.

Option #2 – Elect to Continue Reading

Despite First Amendment concerns, the conflict minerals rule is here to stay

Posted in Disclosure Guidance

How Congo Became a Corporate Governance IssueA few months ago, the U.S. Court of Appeals for the D.C. Circuit upheld portions of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, known as the “conflicts mineral rule.” The rule, enacted by Congress in July of 2010,requires certain public companies to provide disclosures about the use of specific conflict minerals supplied by the Democratic Republic of Congo (DRC) and nine neighboring countries. In the D.C. Circuit case, the National Association of Manufacturers, or NAM, challenged the SECs final rule implementing the conflicts mineral rule, raising Administrative Procedure Act, Exchange Act, and First Amendment claims. The D.C. Circuit agreed with NAM on its third claim and held that the final rule violates the First Amendment to the extent the rule requires regulated companies to report to the SEC and to post on their publically available websites information on any of their products that have not been found to be “DRC conflict free.” Despite this adverse ruling, the SEC made it clear that the conflicts minerals rule is here to stay: in a statement on the effect of the D.C. Circuit’s decision, the SEC communicated its expectation that public companies continue to comply with those deadlines and substantive requirements of the rule that the D.C. Circuit’s decision did not affect. So, what is the conflicts mineral rule, how far does it reach, and what are public companies doing to comply?

In an unusual attempt to curtail human rights abuses in Africa through regulation of U.S. public companies, the conflicts mineral rule requires companies to trace the origins of gold, tantalum, tin, and tungsten used in manufacturing and to Continue Reading

The shape of things to come in corporate governance

Posted in Corporate Governance

Looking into the future of changes to corporate governanceInterest 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 speak with investors.  And that’s just for starters.   

These developments represent the latest iteration of what has become part of our normal business cycle – scandals (e.g., Enron, WorldCom, Madoff, derivatives), followed by significant declines in stock prices, resulting in public outrage, reform, litigation, and shareholder activism.   Now that the economy is rebounding, should we anticipate a return to “normalcy” (whatever that may be)?  Are we back to “business as usual”? 

Gazing into a crystal ball can be risky, but I’m going to take a chance and say “no.”  While our economic problems have abated, I believe that the past is prologue – in other words, we’re going to continue to see more of the same: investor pressure on companies, legislation and regulation seeking a wide variety of corporate reforms, and the like.  Some more specific predictions follow: 

  • Increased Focus on Small- and Mid-Cap Companies:  Investors have picked most if not all of the low-hanging governance fruit from large-cap companies.  Sure, there are some issues that may generate heat and some corporate “outliers” that investors will continue to attack.  However, most big companies have long since adopted such reforms as majority voting in uncontested director elections, elimination of supermajority votes and other anti-takeover provisions, and shareholder ability to call special meetings, to name just a few.  If investors (and their partners, the proxy advisory firms) are to continue to grow, Continue Reading

Bob Lamm joins The Securities Edge (and returns to Gunster)

Posted in Announcements

Bob Lamm joins The Securities Edge.

The Securities Edge is excited to announce a new blogger to the fold: Bob Lamm!  After a 12-year “hiatus”, Bob has rejoined Gunster.  

Bob is widely considered a national expert in the securities and corporate governance space and frequently speaks and writes on securities law, corporate governance, and related topics. Bob’s unparalleled depth of experience will prove to be a great addition to The Securities Edge and Gunster. 

Bob has over four decades of in-house experience.  His most recent experience was as Assistant General Counsel and Assistant Secretary with Pfizer.  In addition to Pfizer, Bob’s previous experience includes service as Vice President and Secretary of W. R. Grace & Co., Senior Vice President – Corporate Governance and Secretary of CA, Inc., and Managing Director, Secretary and Associate General Counsel of FGIC Corporation/Financial Guaranty Insurance Company.  Bob also has extensive experience with small- and mid-cap public companies as well as non-profit entities.   

At Gunster, Bob will co-chair the Securities and Corporate Governance Practice Group, where his deep expertise will be welcomed in the Florida market.    

Bob is a long-term member of the Society of Corporate Secretaries and Governance Professionals. He is the immediate past Chair of the Society’s Securities Law Committee and has served on the Society’s Corporate Practices, Finance and National Conference Committees, and as a member of its Board of Directors. He is also a Senior Fellow of The Conference Board Governance Center.  

Bob is a member of the New York State Bar, The Florida Bar, and the American Bar Association (including its Business Law Section and Committees on Corporate Governance and Federal Regulation of Securities). He received a Bachelor of Arts from Brandeis University and a Juris Doctor from the University of Pennsylvania School of Law.

We are all looking forward to reading some great posts from Bob!

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

Posted in Corporate Governance

ISS trying to save its own neck?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 with the SEC Staff’s recent interpretive guidance and less to do with actually improving their product.

Criticism of ISS (and the other proxy advisors) is nothing new.  Public companies have long complained about ISS’s conflicts of interest (ISS “grading” issuers’ corporate governance policies and then charging companies a subscription fee to learn how to improve their “grades”).  Further, ISS constantly churns their corporate governance policies (presumably) to keep their services relevant.  But, the biggest complaint from public companies occurs when ISS makes a recommendation based on erroneous data.  In fact, in a study from the Center on Executive Compensation, 17% of respondents reported erroneous analysis of long-term incentive plans and 15% of respondents reported that Continue Reading