The Advisors' Blog

– Broc Romanek, CompensationStandards.com

I have posted the transcript for the recent webcast: “Executive Compensation Litigation: Section 162(m) Disclosures.”

– Broc Romanek, CompensationStandards.com

Here’s news from this blog by Davis Polk’s Ning Chiu & Alan Denenberg:

At the recent Securities Regulation Institute, Keith Higgins, the head of the SEC Division of Corporation Finance, indicated that the SEC staff will be looking for less detailed disclosure in the S-1 regarding a company’s historical practice and grant by grant valuation description for establishing the fair value of the company’s common stock in connection with stock-based compensation in IPO registration statements.

Currently, companies provide lengthy discussions of how stock was valued and ultimately the difference between the estimated IPO price and the historical fair value of stock at various points in time as private companies. Companies disclose in MD&A the analysis to support their judgments and estimates regarding the valuations. Staff comments often request a description of significant intervening events within the company and changes in assumptions as well as weighting and selection of valuation methodologies employed that explain the changes in the fair value of common stock up to the filing of the registration statement. The questionable value of the disclosure was raised in the SEC’s own report examining its disclosure requirement, which we discussed here, noting that commenters recommended eliminating or reducing this disclosure, arguing the information is not significant to investors.

It appears that going forward, the SEC staff will no longer require or expect the level of detail that companies have been providing, and instead a few paragraphs describing the historical valuation methodology and what it will be post-IPO will be considered sufficient. However, the SEC staff will still expect a more thorough discussion in the comment letter in order to help the staff ensure that it agrees that the accounting is correct.

– Broc Romanek, CompensationStandards.com

This Compliance Week blog describes a recent PwC paper that analyzed Corp Fin areas of concentration in comment letters…

– Broc Romanek, CompensationStandards.com

I have posted the transcript for the recent webcast: “Executive Compensation Litigation: Proxy Disclosures.”

– Broc Romanek, CompensationStandards.com

I have posted the transcript for the recent webcast: “The Latest Developments: Your Upcoming Proxy Disclosures.”

– Broc Romanek, CompensationStandards.com

With income inequality in the news due to last night’s State of the Union address, I thought I would note some of the reactions to this WSJ op-ed by Tom Perkins, co-founder of top Silicon Valley VC firm Kleiner Perkins (his former firm has disavowed the remarks). One reaction is captured beautifully in this blog by Mark Suster – and here’s a another one from NY Times’ Paul Krugman. Comparing the woes of the top 1% earners to the killing of Jews by the Nazis? I can’t believe the WSJ ran that tone deaf piece.

In fact, Perkins himself can’t believe it as he apologized afterwards (for his Nazi comparison, not his”don’t vilify the 1%” remarks). As this article notes, Perkins is no stranger to drama – he supported Murdoch as a director on News Corp’s board during the UK phone-hacking scandal.

In comparison, this NY Times op-ed by a former Wall Street banker is great. Here’s the opening paragraph:

In my last year on Wall Street my bonus was $3.6 million — and I was angry because it wasn’t big enough. I was 30 years old, had no children to raise, no debts to pay, no philanthropic goal in mind. I wanted more money for exactly the same reason an alcoholic needs another drink: I was addicted.

But then the NY Times ran this column about a bankrupt NYC law firm partner who ‘only’ makes $375k per year. I can’t imagine a whole lot of people shed tears over that one…

– Broc Romanek, CompensationStandards.com

Last week, there were numerous front page articles about how JPMorgan CEO Jamie Dimon’s pay went up after a tough year for the company. Perhaps most interesting is the description of how the compensation committee meetings have gone down – pretty wild that this type of information is being leaked to the press! How does that happen?

This NY Times article notes “hashing out the pay package after a series of meetings that turned heated at times, according to several executives briefed on the matter.” The article also noted: “The debate pitted a vocal minority of directors who wanted to keep his compensation largely flat, citing the approximately $20 billion in penalties JPMorgan has paid in the last year to federal authorities, against directors who argued that Mr. Dimon should be rewarded for his stewardship of the bank during such a difficult period. During the meetings, some board members left the conference room to pace up and down the 50th-floor corridor.”

Also check out the video on Sallie Krawcheck on JPMorgan’s billions in fines: “A Real Cost of Doing Business.”

– Broc Romanek, CompensationStandards.com

Since last year’s Apple court decision on unbundling, litigation spilled over into the employee plan context including the Groupon class action described in this Cooley news brief. In addition, Corp Fin has focused more on this tricky topic through the comment process. On Friday, Corp Fin issued these three CDIs to clarify its unbundling positions under Rule 14a-4(a)(3) including this one in the plan context:

– Question 101.03: omnibus plan amendment increasing shares reserved for issuance, increasing max amount payable to a single employee, adding restricted stock to types of award eligible to be granted and extending plan’s term

Seeing this CDI was great – and coincidental – timing as a question along these lines had just been posted in the Q&A Forum!

– Broc Romanek, CompensationStandards.com

Last month, I blogged about an academic study on international say-on-pay. Now the CFA Institute’s Matt Orsagh has written this summary about another study on international say-on-pay (this one written by two guys from the Fed)…

– Broc Romanek, CompensationStandards.com

Here’s news from this blog by Davis Polk’s Ning Chiu:

Last week, ISS posted a number of updated documents on their policies, including a revised set of summary guidelines and concise guidelines (hint: the summary guidelines are more useful and contain the list of factors that impact their own analysis of what makes a director not independent). It includes ISS’ new policy regarding evaluation of board responsiveness to majority-supported shareholder proposals that we previously discussed.

In mid-December, ISS updated its compensation FAQs. Although it has not yet posted its full set of non-compensation FAQs in full, it released a brief set of questions and answers to address companies’ adoption of a bylaw that disqualifies any director nominee who receives third-party compensation, without putting such a bylaw to a shareholder vote. In these cases, ISS indicates that it may recommend a vote against or withhold from director nominees as a material failure of governance, stewardship, risk oversight, or fiduciary responsibilities. There is no discussion as to the factors that ISS would weigh in its decision, and we note that ISS has already taken a negative view against at least one company before it adopted this policy.

It is also expected that ISS will be updating its Governance QuickScore ranking system at the end of the month, and making additional policy changes to account for new shareholder proposals such as the “confidential voting” one, which aims to prohibit management and boards from access to voting reports for solicitation purposes prior to the annual meetings.

Those who do not subscribe to Glass Lewis services can access an overview of its guidelines, which includes its own set of what constitutes an affiliate, non-independent director. In addition to independence, Glass Lewis has numerous policies regarding director elections that might be surprising, for example, the firm recommends against the audit committee chair if an audit committee does not meet at least four times a year, and members of the compensation committee if at least two other compensation committees on which they served received “F” grades for pay for performance.