Corporate Governance

How the Wall Street Reform Act Impacts Smaller Businesses: Executive Compensation

Posted on July 29, 2010
The Act addresses the continuing public outcry over executive compensation in a number of ways. First, it requires that companies subject to the SEC's proxy rules submit executive compensation to a non-binding shareholder vote at least once every three years...

How the Wall Street Reform Act Impacts Smaller Businesses: Shareholder Reporting ? Schedule 13D and Section 16(a)

Posted on July 29, 2010
The Act amends § 13(d) and § 16 of the 1934. Section 13(d) imposes certain reporting requirements on persons who own more than 5 percent of the outstanding securities of a company registered under Section 12 of the 1934 Act. Section 16 imposes other reporting requirements on officers and directors of companies that have securities registered under the 1934 Act (as well as persons owning more than 10 percent of the outstanding securities of such companies) and also imposes potential liability for trading in those securities within a six month period...

How the Wall Street Reform Act Impacts Smaller Businesses: Changes to Pre-Dispute Arbitration?

Posted on July 29, 2010
Since Wilko v. Swan40 (relating to the 1933 Act) and Shearson/Am. Express Inc. v. McMahon41 (relating to the 1934 Act), pre-dispute arbitration agreements in securities matters have unquestionably been enforceable, and most (if not all) agreements between broker-dealers and their customers contain mandatory arbitration provisions...

How the Wall Street Reform Act Impacts Smaller Businesses: Changes to Sarbanes-Oxley § 404 for Smaller Reporting Companies

Posted on July 28, 2010
Section 404 of the Sarbanes-Oxley Act of 2002, as originally enacted, imposed two requirements on all issuers filing periodic reports with the SEC. First, each issuer filing an annual report with the SEC must state that the issuer's management was responsible for establishing and maintaining adequate internal control over financial reporting and also contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the issuer's internal control structure and financial reporting procedures...

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How the Wall Street Reform Act Impacts Smaller Businesses: Corporate Governance Changes

Posted on July 28, 2010
The Act amends Section 6(b) of the 1934 Act to require national securities exchanges to prohibit proxy voting by a broker in connection with the election of directors (other than a vote with respect to the uncontested election of a member of the board of any registered investment company), executive compensation or any other significant matter, as determined by the SEC, unless the beneficial owner of the security has specifically instructed the broker to vote in such way...

How the Wall Street Reform Act Impacts Smaller Businesses (Summary)

Posted on July 27, 2010
On June 29, 2010, after months of wrangling, the House-Senate Conference Committee issued the conference report on the Dodd-Frank Wall Street Reform and Consumer Protection Act, a 2,319 page amendment to H.R. 4173 (the 'Act'). The House of Representatives approved the bill on June 30, 2010, the Senate approved it on July 15, 2010, and it became law when President Obama signed it on July 21, 2010...

How the Wall Street Reform Act Impacts Smaller Businesses

Posted on July 27, 2010
Herrick Lidstone, a partner at Burns, Figa & Will, PC, here in Colorado, has written a thoughtful piece on the new finance legislation and its impact on smaller businesses.  We are privileged to publish the analysis on The Race to the Bottom...

How the Wall Street Reform Act Impacts Smaller Businesses: Investor Protection and Changes to Regulation D

Posted on July 27, 2010
Investor Protection – Amendments to the 1933 Act (footnote 11) and the 1934 Act (footnote 12) Changes to SEC Regulation D The SEC adopted Regulation D in 1982 (footnote 13) to provide a safe harbor exemption from registration for certain securities offerings of securities...

The Dodd-Frank Wall Street Reform Act and the Preemption of Delaware Law (A New Sheriff in Dodge)

Posted on July 26, 2010
Recognizing that Delaware has seen its authority substantially weakened, where has it gone?  Mostly to the Securities and Exchange Commission, a process begun in ernest in SOX and continued in the DFA. As we have already noted, the SEC has been placed in the center of say on pay...

The Dodd-Frank Wall Street Reform Act and the Preemption of Delaware Law (Shareholder Access)

Posted on July 24, 2010
The provision on shareholder access also has preemptive effect.  Shareholder access is probably the most important governance provision in the Dodd-Frank Wall Street Reform Act.  Had the Act been silence, the Commission had a strong argument that it had the authority to compel access...

The Dodd-Frank Wall Street Reform Act and the Preemption of Delaware Law (Compensation Clawbacks)

Posted on July 23, 2010
Another place where preemption occurred was in connection with clawbacks.  Could there be any other place that demonstrates more clearly the weakness in Delaware law than the need for a federal provision that requires clawbacks of compensation based upon erroneous financial statements?  Nonetheless, no such requirement or practice has emerged under Delaware law...

The Dodd-Frank Wall Street Reform Act and the Preemption of Delaware Law (Say on Pay, Part 2)

Posted on July 22, 2010
There are a couple of things about mandatory say on pay that are potentially quite far reaching.  First, the provision largely leaves to the SEC under its authority in Item 402 to determine exactly what shareholders will be asked to approve.  Currently Item 402 requires disclosure of the compensation of the CEO, CFO and three highest paid executive officers...

The Dodd-Frank Wall Street Reform Act and the Preemption of Delaware Law (Compensation Committee Reform, Part 2)

Posted on July 20, 2010
So how has the compensation process been preempted?   A new Section 10C of the Exchange Act mandates the use of a compensation committee for listed companies.  That step does not alter the existing landscape.  Stock exchanges already require a compensation committee, although now they will lose any discretion (and exemptive authority) over application of the requirement...

University of Denver Sturm College of Law and the Need for Lateral Candidates in the Business/Commercial Law Area

Posted on July 20, 2010
The University of Denver Sturm College of Law anticipates filling several tenure-track and tenured faculty positions to begin in the 2011-2012 academic year.  We are seeking applications from experienced lateral candidates, with a strong preference for those who currently hold a tenure track or tenured position at another institution...

The Dodd-Frank Wall Street Reform Act and the Preemption of Delaware Law (Compensation Committee Reform, Part 1)

Posted on July 19, 2010
We are examining the preemption of Delaware law in the Dodd-Frank Wall Street Reform Act.  One place where there has been an obvious preemptive effect is the process used in determining executive compensation.  Delaware law extends to the board the authority to determine CEO compensation...

The SEC and A Very Unfortunate Leak

Posted on July 17, 2010
The WSJ has reported that the decision to accept the settlement in the Goldman case was only approved by a 3-2 vote.  This is an outrageous leak, to the extent true.  This type of information is highly confidential and ought not to leak to the press...

The Goldman Settlement, A Split Commission, and an Embarassed Dissent

Posted on July 17, 2010
The WSJ has reported that the Goldman settlement was approved by a 3-2 vote, with Commissioners Casey and Paredes dissenting.  The reasons? People familiar with the matter say Republican Commissioner Kathleen Casey questioned the SEC staff Thursday on their decision to abandon the strongest fraud charge and strike a settlement involving a lesser allegation, and given that, how the SEC could justify such a large penalty on a lesser charge...

The Goldman Settlement, A Split Commission, and an Embarrassed Dissent

Posted on July 17, 2010
The WSJ has reported that the Goldman settlement was approved by a 3-2 vote, with Commissioners Casey and Paredes dissenting.  The reasons? People familiar with the matter say Republican Commissioner Kathleen Casey questioned the SEC staff Thursday on their decision to abandon the strongest fraud charge and strike a settlement involving a lesser allegation, and given that, how the SEC could justify such a large penalty on a lesser charge...

The Dodd-Frank Wall Street Reform Act and the Preemption of Delaware Law (Introduction)

Posted on July 16, 2010
As the Dodd-Frank Wall Street Reform Act finally becomes law with the Senate's approval yesterday, we will discuss a number of the provisions, particularly in the realm of corporate governance.   These have largely been lost in the discussion over controversies raning from the new Consumer Bureau to the endu user exemption for trading swaps on an exchange...

Say on Director Pay

Posted on July 15, 2010
With say on pay for top executives about to become law (something we will examine, along with the other corporate governance provisions in Dodd-Frank, over the next series of posts), we note some growing sentiment for say on pay director pay.  As we have noted time and time again, directors in many companies are well paid, sometimes receiving in the vicinity of $700,000 in total compensation...

FinReg and Preventing Future Crises

Posted on July 15, 2010
For comments on CNBC assessing whether the financial regulatory bill will prevent another financial crisis, with Jay Brown, Corporate & Securities Law Professor and CNBC's Eamon Javers, go here. 

Goldman Settles

Posted on July 15, 2010
The SEC announced a settlement with Goldman Sachs in the case arising out of the Abacus deal.  The Company will pay $15 million in disgorgement and a civil penalty of $535 million.  The firm has also agreed to certain internal reforms that contemplate review of written materials by inside and outside counsel and review of deals by a specified committee within the firm...

Compensation and National Culture (Part 3)

Posted on July 14, 2010
We have been discussing the differing approaches used by Europe and the United States in addressing the problem of excessive compensation.  In Europe, the approach has been not to rely on the market but to instead impose caps.  The caps apply to the amount of the bonus and the percentage that can be paid in cash...

Comprehensive Proxy Reform

Posted on July 14, 2010
The Commission today voted to submit a comprehensive concept release examining all aspects of the proxy process.  As the release describes:    Accordingly, in this release, we are reviewing and seeking public comment as to whether the U...

The Dodd-Frank Wall Street Reform Act and the Preemption of Delaware Law (Say on Pay, Part 1)

Posted on July 13, 2010
Delaware law defines a number of mandatory matters that must be submitted to shareholders.  These include the sale of the business (mergers, dissolution, sale of all or substantially all of the assets), amendments to the charter, and the election of directors...

Compensation and National Culture (Part 2)

Posted on July 13, 2010
As noted, the Europeans have taken an approach to executive compensation that focuses mostly on caps.  The policies rely on caps on the size of the bonus relative to total compensation, caps on the amount of the bonus that can be paid in cash, and limits on the availability of the bonus...

Compensation and National Culture (Part 1)

Posted on July 13, 2010
The EU just approved compensation requirements for financial institutions (although they will need to be enforced at the national level).  The US has likewise adopted new regulations designed to reign in executive compensation.  The two approaches, however, are widely different...

The Director Compensation Project: Goldman Sachs Group

Posted on July 12, 2010
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010's Fortune 500 and using information found in their 2010 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence...

The Director Compensation Project: American International Group, Inc.

Posted on July 10, 2010
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010's Fortune 500 and using information found in their 2010 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence...

The Director Compensation Project: Bank of America

Posted on July 08, 2010
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010's Fortune 500 and using information found in their 2010 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence...

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