In my last post, I expressed some thoughts about the need to address our history and continuing practice of racial discrimination and inequality.  I’m still thinking about specific actions that I can take to put my actions where my mouth is.  However, in the meantime, I want to share a communication I received today from Paul Washington.

Paul is currently the Executive Director of the ESG Center (formerly the Corporate Governance Center) of The Conference Board.  I have known Paul for more years than he or I care to think.  He is a consummate lawyer, having served (among other things) as a Supreme Court clerk, as Corporate Secretary and Deputy General Counsel of Time-Warner, and as Chair of the Society for Corporate Governance.  I have the honor of being a Fellow of the ESG Center, one of the major perks of which is the opportunity to continue to work with Paul.

At any rate, here’s Paul’s note:

  • Be prepared to talk with – and engage – your board on racism, especially at consumer-facing companies. Don’t be afraid to ask your board for advice or board members to meet directly with employees on this topic.
  • Executive leadership is key. CEO leadership and visibility are critical. But it’s important to engage the entire C-suite and other business leaders.
  • Consider holding “courageous conversations”where you can hear first-hand stories from employees at all levels. Companies sometimes have been hesitant to have such discussions because they can raise the specter of workplace discrimination claims. But that may well be a risk worth taking – and one that can be mitigated by ensuring you have a robust system in place to investigate any issues that come up.
  • Be prepared for a sustained, broad-based effort. After the initial statements, it’s a good idea to pause to think more deeply and broadly about what the company can do. Companies can have a direct impact through their workforce and workplace policies, as well as through their corporate citizenship efforts. But they can also have a broad and lasting impact through their business investment decisions, how they produce and distribute their products and services, and the public policy stands they take that go beyond the company’s immediate economic interests.
  • Be sensitive to other diversity imperatives, but there’s no need to dilute the company’s efforts. It’s important to acknowledge the multiple forms of discrimination that take place, but there’s a singular opportunity to address discrimination against African-Americans, which can help serve as a catalyst for all of a company’s diversity, equity, and inclusion efforts.

Thank you, Paul.

Readers of this blog know that my posts tend to be on the light side – even when addressing subjects I regard as important, I find it hard to avoid at least a touch of sarcasm or irony.  Each posting also includes a picture intended to be humorous.

This is not a usual posting, however.  This time, I’m writing from my heart on a subject that can’t be treated with humor, irony, or sarcasm.  And no pictures this time.  It’s about our country’s heritage and our future, and I’m about as serious as I can be.

The subject in question is race, or race relations.  I know I am not alone in being profoundly upset about recent developments.  But what really upsets me is that where we are today is really not about recent developments.  Rather, our country is coping with what may be its original, 400 year-old sin, slavery, and the legacy of that original sin that even 150 years later we can’t seem to shake.

We can and must do more and do better.  One of the many posters I saw on TV during the protests was one saying “Silence is Violence.”  I agree.  If we stay silent in the face of discrimination, its manifestations, and its consequences, we will at best find ourselves exactly where we are today 150 years from now (assuming that we don’t destroy ourselves or our planet before that).  At worst, we will do just that – destroy ourselves.  We need to examine and change our institutions, our practices and, frankly, our minds and the minds of those around us. Continue Reading I’m serious

Image by JayJayV from Pixabay

As noted in a prior post, every now and then the SEC Enforcement Division likes to remind companies of the requirement to disclose personal benefits, or perquisites.  I’d even hazard a guess – completely unsubstantiated by research – that enforcement actions regarding perquisite non-disclosure make up a significant percentage of enforcement actions concerning proxy statements.

And yet, companies seem to keep forgetting about perks disclosure.  In some cases, the companies’ disclosure controls may not capture perquisites, but my hunch – again, unsupported by research, but this time supported by experience – is that companies and, in particular, their executives, manage to persuade themselves that the benefits in question have a legitimate business purpose and thus are not personal benefits at all.  Over the course of my career, I’ve heard hundreds if not thousands of reasons why a seemingly personal benefit should be treated as a business expense.  Here are just a few: Continue Reading When it comes to perquisites, caveat discloser


Image by succo from Pixabay

About two years ago, I wrote a post about director compensation, quoting the old saw that pigs get fat but hogs get slaughtered. Given what I’ve been reading of late, I think it’s time for a refresher, but this time I’m discussing executive, rather than director, compensation.

With the onset of the COVID-19 pandemic, a number of companies or their executives took action to reduce pay.  In some cases, salaries were reduced to $1 a year or eliminated entirely.  So far, so good.  However, there were also cases in which the executives were given so-called mega-grants of equity to make up for their sacrifices.  That may have raised a few eyebrows, but the eyebrow-raising may have been mitigated or overlooked because the grants were made when the stock markets had dropped precipitously and many companies’ shares were trading at 52-week lows.

Of course, what goes down must come up, so when the stock markets rallied (and, in general, have continued to rise to levels that seem absurd in the face of what’s going on these days), the noble executives who sacrificed pay made out like bandits. Or hogs.  No sane person would argue that the stock markets have any rational connection to corporate performance generally, much less to that of a particular company.  However, the rising tide has floated a number of boats, including the holders of those mega-grants. Continue Reading Of shields and swords, pigs and hogs

Image by David Mark from Pixabay

Aristotle is said to have coined the phrase “nature abhors a vacuum.”  Far be it from me to question Aristotle, but while he was right, I think his view was too narrow — the abhorrence of vacuums goes far beyond nature and extends to investors and the media, among many others.  Companies that hide behind closed doors and ignore or deny requests for information from investors and the media run the risk of finding themselves without a welcoming audience when they eventually choose to communicate.

Let’s be clear – any securities lawyer worth his or her salt knows that sometimes the best thing to say is “no comment” or its equivalent.  I’ve given that advice very often. The problem is that in my experience, most of the time when a company says “no comment” or “we don’t respond to rumors,” the rumor is likely true.  Conversely, when the rumor is just that, a rumor, companies tend to squeal like a proverbial stuck pig.  For some reason, companies that engage in this sort of behavior fail to understand how it plays out among investors and the media.

It has also been my experience that securities attorneys all too often think they are smarter than their clients’ communications and investor relations advisors and disregard the advisors’ recommendations.  Even a smart lawyer isn’t likely to know more than these advisors about IR or communications – in fact, many lawyers are terrible communicators.  So it’s worth listening to and considering those advisors’ recommendations instead of dismissing them out of hand.  Personally, I’ve learned a great deal from investor relations and communications advisors. Continue Reading Aristotle was right (or, “tell your story or someone else will”)

Image by Klaus Hausmann from Pixabay

The pandemic seems to raise new challenges every day – or possibly every hour – in both our personal and work lives.  However, at least one of the challenges is not so new; namely, if and when to disclose that a CEO or other senior officer is infected with coronavirus.

I have expressed my views on disclosure of a CEO illness a couple of times in the last few years (see here and here).  Simply stated, I think a CEO’s serious or potentially serious illness should almost always be disclosed.  In some cases, he or she is the alter ego of the company; the CEO’s name is practically a household word, and his or her name is synonymous with that of the company.  However, even when that is not the case, the CEO is (or at least should be) the most important person in the company.  Certainly, if you read proxy statement disclosures, the CEO’s compensation is frequently justified on the basis that his/her leadership is very important, if not critical, to the company’s future; why else would or should he/she make the really big bucks and have so many financial reasons to stay with the company?

Continue Reading Disclosure as disinfectant

Image by Sumanley xulx from Pixabay

Pandemics may come and go, but governance marches on.  That’s the message BlackRock seems to have sent earlier this week, when it distributed its “Engagement Priorities for 2020.”  Of course, the document was completed well before the onset of the COVID-19 pandemic.  However, you’d think that BlackRock, ordinarily a reasonable player in the governance sandbox, would have added a last-minute addendum to the document or at least made public statements acknowledging that the current situation is extraordinary and might be taken into account in evaluating how companies are doing in that sandbox.

Not so, apparently.  In fact, some BlackRock spokespeople have suggested that the crisis will separate the governance wheat from the chaff.  I suppose that’s true to some extent, but when a company is struggling for its very existence, with many jobs at stake, is it really necessary that it worry about having non-executive board leadership?  (Those of you who’ve read this blog probably know my views on board leadership.  For those of you who have not followed my screeds, I have seen independent board leadership work wonderfully, and I’ve also seen it fail miserably.  So, to me, it’s really not that big a deal.)

Continue Reading Plague, shmague, as long as you have an independent board chair

Some of our clients and friends may have seen this, but I hope followers of this blog will agree that it bears repeating.  Please stay healthy and safe.

Bob Lamm


March 16, 2020

A timely message from Gunster

Dear Gunster Clients and Friends,

We realize this is a difficult and unprecedented time. Our clients, colleagues and communities are foremost in our minds as we continue to closely monitor the COVID-19 outbreak. Our thoughts are with all those presently impacted by the coronavirus and the health professionals working to care for them.

At this time, all 12 Gunster offices across Florida are open for business. As the COVID-19 situation evolves we will closely monitor guidance from the Centers for Disease Control and Prevention and local health officials around the country. Decisions about our business operations will be based upon their recommendations.

In the event the outbreak should result in any office closures in any of our locations, we are prepared to provide you with uninterrupted service remotely and to be responsive to your legal and business needs. Should this happen, we will inform you as quickly as possible. Again, at the present time, we are open for business. 

We wish everyone well as we collectively navigate this global health challenge. Rest assured that as circumstances continue to develop, one thing will remain the same: We will make our decisions with the well-being of our team members, clients and communities as our highest priority.

Please contact us with any questions or concerns.

Be well,

H. William ‘Bill’ Perry
Managing Shareholder

George S. LeMieux
Chairman, Board of Directors

The SEC is re-examining one of the most important disclosures companies provide – Management’s Discussion and Analysis, or MD&A.  I’ve read lots of MD&As in my time, and to be completely candid, many of them – or at least too many of them – are poor.

There are lots of ways in which MD&As are poor, but my principal complaints are as follows:

  1. They don’t provide the “A” in MD&A – the analysis. Sales are up?  Great!  Why were they up?  Well, that’s anyone’s guess.  “Increased market acceptance of our product.”  Also great, but does “greater acceptance” mean that more units sold?  That customers were willing to pay more for each unit, so the company raised the price?  That the company expanded the markets in which the product is sold?  Beats me.
  2. Instead of discussing the “why’s,” companies do a cut and paste of key line items in their financial statements, sometimes with a “Percentage Change” column, indicating how much each line in, say, the P&L changed from period to period. In other words, they’re doing what any reader can do, which is precisely what prior SEC glosses on MD&A disclosure have said not to do.  And then they copy and paste sections of the notes to financial statements about how revenue is determined.  Again, no “why.”

I could rattle off a list of other weaknesses of many MD&As, but let’s move on.

Continue Reading Analyze This!

Image by Susan Cipriano from Pixabay

I don’t know very much about the federal budget process, but I do know that any budget proposed by the White House – regardless of its occupant – isn’t worth spending time on, and that by the time the budget is passed, it often looks nothing like the original proposal.

Still, I am intrigued by one item in the 2021 budget proposed by the White House – specifically, the effective elimination of the Public Company Accounting Oversight Board by merging it into the SEC.

I’ve never been a huge fan of the PCAOB.  For starters, the legislation that created it – the Sarbanes-Oxley Act – gave it a peculiar charter that limited its influence and its ability to change things that presumably needed changing.  Perhaps as a consequence, the PCAOB has often struck me as an agency whose mission was developing solutions to nonexistent (or at least obscure) problems and whose members and staff were excessively sensitive to any sort of pushback, starting with overt hostility if anyone referred to the then-new PCAOB as “P-COB.”

Some examples:

  • Some years ago I attended a program for audit committee chairs. (I was there to discuss effective disclosure.)  Part of the program involved some PCAOB members and staff discussing quantitative metrics by which audit committees could assess the quality of the audits of their companies.  When the assembled chairs said this was unnecessary or worse, the PCAOB folks became rather defensive, stating, among other things, that they were not really developing quantitative tests of audit quality (despite the fact that the metrics seemed to me to be doing precisely that) and that if there was opposition to the approach they would drop the matter.  (FYI – government agencies are not known to drop matters after several years of study and several millions of dollars of expenditures.)
  • When the PCAOB overhauled the “standard” audit report a few years later, a number of commentators (myself among them) suggested that the overhaul proposal would eliminate the “pass-fail” approach of the standard audit report and would make it harder for investors to understand what audits do – and, more important, what they do not do. Again, pushback and not a little hostility.

And the PCAOB has not been without a number of self-made challenges, including the leak of confidential information, the failed crusade for mandatory auditor rotation, severe criticism of the process by which the PCAOB conducts and deals with the results of auditor inspections, and so on.

I don’t for a moment dispute the ability and integrity of the PCAOB members and staff; like their counterparts at the SEC, they take their responsibilities seriously and work hard.  However, in the absence of a clear mission and a better mandate, it’s not clear to me that the PCAOB has accomplished much that wouldn’t have been accomplished anyway – perhaps through the oversight of the SEC rather than the creation of a new and sort-of independent agency.

So, while I think it is highly doubtful that this aspect of the budget proposal will move forward – after all, merging the PCAOB into the SEC would require changes to SOX that seem very unlikely  – I am intrigued by this not-so-modest proposal.