4532941987_9004c36616_mIn a June 27 speech to the International Corporate Governance Network, SEC Chair Mary Jo White engaged in a bit of full disclosure herself:

“I can report today that the staff is preparing a recommendation to the Commission to propose amending the rule to require companies to include in their proxy statements more meaningful board diversity disclosures on their board members and nominees where that information is voluntarily self-reported by directors.”

As noted in her remarks, the SEC adopted the current disclosure requirements on board diversity in 2009.  However, the requirements were added to other board-related disclosure requirements at the last minute, when it was reported that Commissioner Aguilar refused to support the other requirements unless diversity disclosure was also mandated.  As a result, the diversity requirements were never subjected to public comment, did not define “diversity,” and seemed to require disclosure only if the company had a diversity “policy”.   When companies failed to provide the disclosure because they had no policy, the SEC clarified that if diversity was a factor in director selection then, in fact, the company would be deemed to have a policy, thus requiring disclosure.


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For those who think nothing ever gets done in Washington, last week must have been a challenge. From outward appearances, both the SEC and the PCAOB seem to be working overtime, possibly in order to ruin our holiday weekend or at least lay some guilt on us for not spending the weekend reading what they’ve put out.

First, on July 1 the SEC published rule proposals on the last of the so-called Dodd-Frank “four horsemen” (or, as the SEC Staffers called them, the “Gang of Four”) compensation and governance provisions – specifically, clawbacks. It’s too soon for even nerds like me to have gone over the proposed rules in any detail, but at first blush they disappoint in a few respects. Among other things, they appear to call for mandatory recoupment of performance-based compensation whenever the financials are restated, without regard to fault or misconduct; even a “mere” mistake will trigger the clawback. Moreover, neither the board, nor the audit committee, nor the compensation committee will have any discretion or any ability to consider mitigating circumstances. Last (for now), they do not seem to provide any exemptions or relief for small companies, emerging growth companies or the like. Interestingly, equity awards that are solely time-vested will not be considered performance-based compensation for purposes of the proposed rules. Of course, these are only proposed rules, and they will eventually take the form of exchange listing standards rather than SEC rules, but the basic approach is absolute and draconian, and it’s difficult to envision them changing very much.


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