As some of us contemplate which disclosure rules we’d like to do away with, others are thinking about new rules that would require more disclosure. One possible area of rulemaking relates to disclosure of political contributions. Regardless of one’s views of the merits of such disclosure, significant and vocal groups of shareholders advocate it, and
Ineffective disclosure
It’s not for nothing that I’m a securities lawyer. I sincerely believe in the need for and efficacy of full and fair disclosure, both professionally and personally. That’s one of the many reasons why I have been advocating disclosure reform – or, as we now call it, “effective disclosure” – to assure that important matters
In sickness and in health
Jamie Dimon, CEO of JPMorgan Chase, is reputed to be a decisive person with a strong personality. Of course, that shouldn’t be news to anyone who follows business or who knows what it takes to be CEO of a major company. So it’s interesting that he recently said that he struggled with whether JPM should
Shock and awe at the SEC (and turning it into chicken salad)
Something shocking happened at the SEC yesterday. SEC Chair Mary Jo White directed the SEC Staff to review its long-standing position on when a shareholder proposal conflicts with a company proposal and may be excluded from the proxy statement. As a result, the SEC’s Division of Corporation Finance withdrew a no-action letter that had given Whole Foods the green light to exclude a shareholder proposal on proxy access by including its own (less shareholder-friendly) proposal on the subject. Corp Fin also said that it would not be issuing any additional no-action letters under the rule in question. It’s worth noting that these actions were taken at a sensitive time, as calendar-year companies approach peak proxy season and a major investor campaign is under way to impose proxy access upon companies that have been resisting it.
The SEC’s shareholder proposal rules are very complex, and I won’t go into details here. However, as a general matter, the rules lay out the process by which eligible shareholders can submit proposals for inclusion in a company’s proxy statement. Relevant here is that (1) the rules provide certain conditions under which a company can exclude a proposal and (2) companies can avail themselves of a “no-action” process to get the SEC’s permission to exclude a proposal if the conditions are satisfied. It’s worth noting that the no-action process isn’t dispositive; the proponent or the company can take the matter to court, and there are usually a couple of cases each year in which that happens.Continue Reading Shock and awe at the SEC (and turning it into chicken salad)
The challenges in ‘refreshing’ board committees
Director “refreshment” has become a very hot topic in the governance community. Investors increasingly are calling for replacing longer-serving board members with newer directors, possibly in order to achieve greater board diversity, possibly to get some fresh blood (or fresh thinking) on the board, or possibly to achieve other goals. There is also increased talk about the use (and appropriateness) of age limits, term limits and other processes to assure regular board turnover. For example, Institutional Shareholder Services has suggested that a director serving more than nine years may no longer qualify as independent. As part of this discussion, questions have also been raised about the need for “committee refreshment” – rotating directors off and on committees to keep them fresh and receptive to new ideas.
Governance practitioners have been grappling with the issue of board and committee refreshment for many years, even though the objective may not have been called “refreshment” until recently. For example, corporate secretaries and others have scratched their heads as to how to enforce age limits, how to decide when those limits should be waived or raised, how to grapple with the political and personal issues that can arise when the age limit is waived for one director but not for another, and whether term limits would be preferable to age limits. Recent discussions have also generated pushback from companies and their directors that age and/or long tenure may generate greater, rather than less, independence; after all, a director with 15 or more years of service who has overseen two or more CEOs may feel far less dependent upon the current CEO than a director who has joined the board only recently.
These and other concerns are challenging enough at the board level, but they can be far more challenging at the committee level. In an era when much of the substantive, detailed work of the board is handled by committees, and committee service increasingly calls for subject matter expertise, refreshing a committee is not as simple as putting Mr. or Ms. X on the committee when Mr. or Ms. Y retires. The qualifications and abilities – and, in some cases, expertise – of the replacement need to be considered before he or she can be used to fill the vacancy or simply “rotated on” a new committee.
Continue Reading The challenges in ‘refreshing’ board committees
Bad laws make hard cases
There have been a number of press reports in recent days about attempts by the new Republican majority to repeal all or part of Dodd-Frank. Depending upon whom you choose to believe (assuming you choose to believe anyone in the current political environment), the Republicans want to eviscerate it, and the Democrats refuse to change
Bob's top 10 books of 2014
A few years ago, after I became Chair of the Securities Law Committee of the Society of Corporate Secretaries and Governance Professionals, I did something that I thought would be criticized – I posted a list of the top 10 books I’d read the prior year. I thought I’d be criticized, not only because the topic had absolutely nothing to do with the Committee, but also because of my weird taste in reading. To my surprise, the posting generated a lot of positive responses (and no negative ones, to my recollection). And so I decided make this an annual event.
From my humble perspective, 2014 was not a great year for reading. I read lots of books, but the good ones were few and far between. The good news is that this made it easier for me to choose the 10 I liked the most. BTW – note that these are books that I read in 2014, not necessarily books that were published during the year. So here goes.
Fiction:
- The Moor’s Account, by Laila Lalani – A novel based on an actual Spanish expedition to Florida in that failed, one of the few survivors a Moroccan slave who is the author of the account
- The Invention of Wings, by Sue Monk Kidd – Another historical novel about two sisters in Charleston who became abolitionists
- An Officer and a Spy, by Robert Harris – Still a third historical novel based on the infamous Dreyfus affair in 19th Century Paris
- The Wife, the Maid and the Mistress, by Ariel Lawhon – A delightfully atmospheric take on the disappearance of Judge Crater in Jazz Age New York
- All the Light We Cannot See, by Anthony Doerr – A serious historical novel about intersecting tragic lives in World War II; I didn’t love the ending, but it was a good read
There ought to be a law
A great deal has been written about the recent reversal of two insider trading convictions. Specifically, the U.S. Court of Appeals for the Second Circuit threw out the convictions of Todd Newman and Anthony Chiasson, hedge fund traders found guilty at the District Court level.
The press reports have treated the reversal as a major
What’s good for the goose…
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
You heard it here first
In my first UpTick (“How about never? Does never work for you?”), I questioned statements by SEC Chair White that the remaining corporate governance rulemakings under Dodd-Frank would be out by year-end. Well, the SEC has now updated its regulatory rulemaking agenda and – lo and behold – final action on the pay ratio rule