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Facebook IPO Includes Insider-Friendly Corporate Governance Provisions

Martin Rosenbaum — Thu, 02 Feb 2012 16:35:53 -0600

As nearly everyone knows by now, Facebook, Inc. filed its initial registration statement yesterday with the SEC, leading toward an initial public offering. As the filing reveals, Facebook’s corporate structure includes some corporate governance provisions that founder Mark Zuckerberg and other insiders are certain to “Like”. In a post on the DealBook Blog, “A Big Bet on Zuckerberg,” Steven Davidoff reports that Facebook, Inc. is structured to give Zuckerberg a...

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"Sue-on-Pay" Litigation Update: The Good News and the Bad for Boards

Martin Rosenbaum — Thu, 26 Jan 2012 17:49:22 -0600

In recent weeks, there have been several important developments in litigation against companies that have experienced negative Say-on-Pay votes – what I refer to as “Sue-on-Pay” cases. It’s a good time to put these events into perspective. For public companies concerned about the adverse consequences of a failed Say-on-Pay vote, the recent litigation developments present a classic “good news - bad news” situation. The good news for corporate boards is that...

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A Tally of "Say When on Pay" Votes in 2011

Martin Rosenbaum — Wed, 18 Jan 2012 15:48:14 -0600

With 2011 behind us, it’s interesting to look back at the results of public companies’ “Say When on Pay” shareholder advisory votes regarding the preferred frequency of Say-on-Pay votes, as required under the Dodd-Frank Act. Numerous commentators, including me, spent a lot of time last year “watching the scoreboard” last year – would companies recommend an annual, biennial or triennial vote, and how would the shareholders ultimately vote? Mark Borges...

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A Look Forward to 2012, and Some Highlights of 2011

Martin Rosenbaum — Fri, 30 Dec 2011 16:15:44 -0600

My plans for New Year’s Eve are saved! I don’t need to sit at home on Saturday night waiting for the SEC’s to-be-issued proposed and final rules under the Dodd-Frank Act that have been long been listed on the SEC's Dodd-Frank web page under the category “December 2011 (planned).” I checked again today, and I found that the caption above those items has now been changed to “January – June 2012 (planned).” Further, the items that had been labeled...

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Why Am I Inspired By the Songs of Stephen Sondheim?

Martin Rosenbaum — Wed, 21 Dec 2011 23:37:46 -0600

As I said in my last post, the theme of the Maslon Law Firm’s holiday project is “Inspiration – Pass It On”. My inspiration – “Studying the Songs of Sondheim.” So why am I inspired by the songs of Stephen Sondheim? And can he teach any lessons to those of us who draft disclosure and communication documents for a living? I’ve been a fan of musical theater at least since high school, when I got a chance to play Tevye in Fiddler on the Roof. I still...

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Payback Time: How to Prepare for Required Clawbacks Under Dodd-Frank

Martin Rosenbaum — Thu, 15 Dec 2011 22:29:43 -0600

Compensation attorney and fellow blogger Mike Melbinger recently gave an excellent presentation in Minneapolis on the clawbacks required under the Dodd-Frank Act. His message – start getting prepared now for some complex and sensitive issues. His presentation was sponsored by the Twin Cities Chapters of the National Association of Stock Plan Professionals and the Society of Corporate Secretaries and Governance Professionals. Melbinger’s presentation, “Payback Time: Issues...

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More Proxy Advisor Insights: Through The Looking Glass (Lewis)

Martin Rosenbaum — Mon, 05 Dec 2011 23:03:08 -0600

As I reported in this prior post, the recent Proxy Disclosure Conference sponsored by CompensationStandards.com (subscription site) featured a session called “The Proxy Advisors Speak”, featuring insights from representatives of ISS and Glass Lewis on how to gain their positive recommendations. This is critically important in the upcoming season of Say-on-Pay advisory votes on executive compensation. David Eaton, the Glass Lewis representative, made these points: ...

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ISS 2012 Policy Updates, Continued: Board Response to a High Negative Vote

Martin Rosenbaum — Thu, 01 Dec 2011 01:11:08 -0600

As discussed in my last post, the proxy advisory firm ISS recently issued its 2012 Updates to its U.S. Corporate Governance Policy (PDF). One important change relates to the board’s response to a high negative vote. For companies that experienced a lot of “thumbs down” votes from shareholders at the last annual meeting, ISS’s evaluation of the board’s responsiveness will affect ISS’s recommendation on the upcoming Say-on-Pay vote. Not only that, but this...

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ISS Policy Updates Shed Light on Pay-for-Performance Analysis

Martin Rosenbaum — Sun, 20 Nov 2011 22:46:13 -0600

The proxy advisory firm ISS last week issued the 2012 Updates to its U.S. Corporate Governance Policy (PDF). The Updates outline this year’s changes to ISS’s policies in recommending investor votes at public companies’ shareholder meetings. Essentially, the policies say when ISS will act like the popular kids on Facebook and “like” a company’s postings – see this prior post. These recommendations are especially important in the upcoming proxy season,...

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What Should Public Companies Know About the Proxy Advisors?

Martin Rosenbaum — Sun, 13 Nov 2011 20:57:02 -0600

In the second year of mandatory Say-on-Pay votes on public company compensation, the proxy advisory firms such as ISS and Glass Lewis will be like the popular kids on Facebook: it’s important to get them to “like” the company’s postings. In other words, their positive recommendations are an important factor in winning the Say-on-Pay vote by the widest possible margin. Therefore, one of the best parts of attending the recent Proxy Disclosure Conference sponsored by...

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Proxy Disclosure Conference Teaches the Importance of Pay for Performance

Martin Rosenbaum — Fri, 04 Nov 2011 00:15:13 -0600

I have been attending the Proxy Disclosure Conference and Say-on-Pay Workshop sponsored by CompensationStandards.com (subscription site) in San Francisco. The Conference and Workshop were unique, in that the speakers included representatives of: Proxy advisory firms, including ISS and Glass Lewis. Institutional investors, including CalSTRS, T. Rowe Price and BlackRock. Proxy solicitors, including Georgeson and Innisfree M&A Compensation consultants, including Compensia and...

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Report Sheds Light on Stock Ownership Guidelines

Martin Rosenbaum — Thu, 20 Oct 2011 20:48:48 -0600

Stock ownership guidelines have become a common governance tool for encouraging stock ownership by executives and directors. A recent post on the NASPP Blog by Executive Director Barb Baksa provided useful insight and data on public companies’ stock ownership guidelines. The Blog is sponsored by the National Association of Stock Plan Professionals, and the post reported results from the NASPP’s 2011 Domestic Stock Plan Administration Survey, co-sponsored by Deloitte. The survey...

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How to Encourage Internal Reporting By Whistleblowers

Martin Rosenbaum — Thu, 13 Oct 2011 18:24:04 -0600

Under the SEC’s whistleblower rules (302-page PDF), adopted in May under the Dodd-Frank Act and described in this prior post, whistleblowers are not required to report perceived misconduct internally before going to the SEC. However, the SEC intended the rules to encourage internal reporting. There is evidence that most companies are still considering whether, and how, to maximize the chances that an employee will report internally first. Broc Romanek, in TheCorporateCounsel.net Blog,...

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Companies Disclose How They Considered Prior Say-on-Pay Votes In Setting Compensation

Martin Rosenbaum — Thu, 06 Oct 2011 15:40:48 -0600

The first few companies have complied with a new proxy statement disclosure requirement relating to past Say-on-Pay votes. Item 402(b)(1)(vii) of Regulation S-K requires companies to disclose “ . . . [w]hether and, if so, how the registrant has considered the results of the most recent shareholder advisory vote on executive compensation . . . in determining compensation policies and decisions and, if so, how that consideration has affected the registrant’s executive compensation...

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Recent Court Decision in Cincinnati Bell Sue-on-Pay Case Is a Game-Changer

Martin Rosenbaum — Sun, 25 Sep 2011 23:17:29 -0600

A federal district court in Ohio recently denied the defendants’ motion to dismiss in a “Sue-on-Pay” derivative lawsuit against the officers and directors of Cincinnati Bell. This decision is a game-changer that will further embolden potential plaintiffs and plaintiffs’ attorneys in Sue-on-Pay cases and make directors and officers more likely to settle these cases. The Cincinnati Bell lawsuit claimed that the directors had violated their duty of loyalty by approving...

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Shareholders Can Submit Proxy Access Proposals Starting on September 13; Will They?

Martin Rosenbaum — Mon, 12 Sep 2011 21:28:17 -0600

Last week, the SEC disclosed that it would not appeal the opinion of the D.C. Circuit Court that struck down Rule 14a-11, the proxy access rule that would have allowed shareholders to nominate members of the board of directors and required the company to include these nominees in its proxy statement. Therefore, Rule 14a-11 will not go into effect unless the SEC readopts the rule using procedures that will satisfy the courts. At the same time, the SEC announced that it will allow a companion...

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Steve Jobs' Legacy Includes Lessons on Disclosure Practices and Succession Planning

Martin Rosenbaum — Tue, 30 Aug 2011 17:06:03 -0600

A couple of years ago, when I taught a series of seminars on public company disclosure issues, I started things off with a riddle: Q: What do you get when you cross a piece of fruit with a liver and a pancreas? A: An SEC investigation – IF the fruit is an Apple, and the liver and pancreas belong to Apple CEO Steve Jobs. Of course, I was referring to Apple’s disclosures about Jobs’ health over the past several years, which led to widespread criticism and a well-publicized SEC...

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Opposing Groups Weigh in on Disclosure of CEO Pay Ratio

Martin Rosenbaum — Sun, 21 Aug 2011 22:24:32 -0600

Should public companies be required to disclose the ratio of CEO pay to that of other employees, as provided by the Dodd-Frank Act? And if so, what should be included in the disclosures? Two groups with opposing viewpoints have sent comment letters to the SEC in the past few weeks, and these letters provide insights on the battle. Section 953(b) of the Dodd-Frank Act (848-page PDF) directs the SEC to adopt rules requiring disclosure of the ratio of the CEO’s annual total compensation to...

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Not Just Whistling Dixie: The SEC Whistleblower Chief Speaks

Martin Rosenbaum — Sat, 13 Aug 2011 21:06:08 -0600

Last Friday, the SEC’s whistleblower rules (PDF) went fully into effect, and the Office of the Whistleblower web page went live. The Office’s Chief, Sean McKessy, spoke forcefully about why companies should not be overly alarmed. But the proof will be in the results. The SEC web page now includes links to the necessary forms for submitting tips or claiming bounty awards under the rules, as well as FAQs for tipsters. The page also includes a link to a speech by McKessy, explaining...

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Proxy Access Proposals: What Can We Expect to See Next Year?

Martin Rosenbaum — Thu, 04 Aug 2011 21:43:27 -0600

In “Will Investors File Proxy Access Proposals in 2012?”, in the RiskMetrics Blog, Ted Allen analyzes the possible impact of the D.C. Circuit Court’s ruling (discussed in this prior post) that struck down the SEC’s proxy access rule, Rule 14a-11. Rule 14a-11 grants to large shareholders of public companies the right to nominate directors and have the nominees included in management’s proxy statement. Allen points out that the SEC may lift its stay on the...

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