SDASM Archives
SDASM Archives

Even as we speculate about the likelihood and potential impact of massive deregulation here in the US, the EU is going in the opposite direction.  Earlier this month, the European Parliament passed a Shareholder Rights Directive that contains some “interesting” provisions, including the following:

  • Say-on-Pay: Issuers would be required to hold prospective and retrospective say-on-pay votes (i.e., shareholders would have to approve pay plans in advance as well as how those plans worked out). These votes would be binding unless a member state opts out of this provision.
  • Director Pay: While director pay has generated more scrutiny here in the US, the EU proposes to do something about it – specifically, it appears that director pay would also be subject to shareholder approval, though it’s not clear whether the mechanics would be the same as those for executive compensation. Note that shareholder proposals seeking a say-on-pay vote on director compensation have fared poorly here in the past.
  • Related Party Transactions: “Material” related party transactions would be subject to shareholder approval.

While these items seem pretty scary, the Directive includes some features that companies are likely to approve: Continue Reading Shore patrol

Cornell University Library
Cornell University Library

New York Surrogate Gideon Tucker (1826-1899) is credited with originating the maxim that “no man’s life, liberty or property are safe while the legislature is in session.”  Were Surrogate Tucker around today, he might have added boards of directors to those who should be wary of legislative action.

There are numerous weird bills rumbling around the hallowed halls of Washington these days, but one of the bills that is making me unhappy is the Cybersecurity Disclosure Act of 2017.  The good news is that the bill is very short.

The bad news is threefold. Continue Reading Beware when the legislature is in session

U.S. National Archives
U.S. National Archives

If you have ever had to search for an exhibit originally filed with the SEC years ago, you know it can take forever, particularly when the exhibit consists of an original document that has been amended several times, each amendment having been separately filed.

You will soon have to search no more, because the SEC is about to make it easier for you.  On March 1, the SEC adopted a final rule requiring public companies to include a hyperlink to each exhibit listed in the exhibit index to all filings subject to Item 601 of SEC Regulation S-K.  The rule will take effect on September 1 for most companies.  (“Smaller reporting companies” and companies that are neither “large accelerated filers” nor “accelerated filers” and that submit filings in ASCII get a one-year reprieve.)

Continue Reading The missing (hyper) link

 

I recently attended the Winter Meeting of the Council of Institutional Investors and thought you would like to know what the Council and its members are thinking.

The British Library
The British Library

What was NOT discussed – proxy access

First, one dog that didn’t bark was proxy access.  There was virtually no mention of the subject. I can only assume that proxy access has been adopted by a sufficient number of companies that it is no longer controversial or even worth discussing.

Coming to a company near you – majority voting…

What was worth discussing was majority voting in uncontested director elections, and if you are a mid- or small-cap company, you’d be well advised to think about it.  Among other things, the Council sent a letter last year on the subject to the companies in the Russell 3000, and was not encouraged by the responses.  Most large-cap companies have it, and it seems to be inevitable that smaller companies will be pressured to adopt it as well.  Frankly, I don’t think it’s worth fighting over, and early adoption might give a company a leg up on other governance challenges. Continue Reading News from the institutional investor front

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 My 10 Best Books of 2016

14779792521_b054cf2506_zIn 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.

Continue Reading Insider trading: there still ought to be a law

Bob Lamm wins Lifetime Achievement AwardCongratulations 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
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 SEC Staff’s Thanksgiving Gift: No Turkey

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.

Continue Reading A modest proposal about more modest proposals

3102056181_031bf572a9_zIn 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 SEC’s brave new (Trump) world