Corporate Governance

The SEC, Social Responsibility, and Conflict Minerals: Crossing the Disclosure Rubicon (Part 3a)

Posted on December 30, 2010
The SEC has encouraged public companies to use web sites but has stopped short of requiring the practice.  Web sites are, therefore, largely unregulated, although they are subject to the antifraud provisions.  Section 13(p) of the Exchange Act, however, requires Internet posting of information about the use of conflict minerals...

The SEC, Social Responsibility, and Conflict Minerals: Crossing the Disclosure Rubicon (Part 3)

Posted on December 30, 2010
Section 13(p) of the Exchange Act imposed an obligation to disclose the use of conflict minerals acquired from the Congo and neighboring countries.  The SEC has proposed rules designed to implement the provision.  See CONFLICT MINERALS, Exchange Act Release No...

The SEC, Social Responsibility, and Conflict Minerals: Crossing a Disclosure Rubicon (Part 2)

Posted on December 29, 2010
Section 1502 of Dodd-Frank required the implementation of disclosure requirements for "conflict minerals."  It is a narrow approach to disclosure and designed to shed light on a very particular practice.  Moreover, eventually, the disclosure requirements will presumably disappear once the conflict in the Congo ends...

The SEC, Social Responsibility, and Conflict Minerals: Crossing the Disclosure Rubicon (Part 1)

Posted on December 29, 2010
There was a time when the SEC's role in the corporate governance process was largely limited to disclosure.  In theory, states developed substantive standards while the SEC was assigned responsibilities for disclosure.  The separation was never quite as clear as commentators suggested and, indeed, in a number of instances, the SEC tried to use disclosure to affect substantive practices...

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Bubbles Happen: Partisan Divide, the Minority Report, and the Financial Crisis Inquiry Commission (Part 2)

Posted on December 28, 2010
We are discussing the Report of the Republican Minority on the Financial Crisis Inquiry Commission.  The Report was issued on December 15 in an effort to meet the deadline set out in the enabling statute.  While meeting the deadline is a laudatory goal, it should not come at the expense of quality...

Bubbles Happen: Partisan Divide, the Minority Report, and the Financial Crisis Inquiry Commission (Part 1)

Posted on December 28, 2010
The Financial Crisis Inquiry Commission was created in 2009 in the Fraud Enforcement and Recovery Act of 2009 and tasked with the responsibility for examining the causes of the financial crisis. The membership was to be bipartisan, with six appointed by the majority parties in the House and Senate (controlled by the Democrats at the time) and four by the minority (Republican appointees)...

The Director Compensation Project- McKesson

Posted on December 27, 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- Wal-Mart Stores, Inc.

Posted on December 24, 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...

Apple and a Short Sighted Approach to Governance (Part 2)

Posted on December 23, 2010
Despite some complaints about Apple's system of governance, it in fact has in place relatively traditional Corporate Governance Guidelines.  Moreover, Apple instituted an advisory vote on executive pay ("say on pay") last year before it was legally required...

Miller v. Thane International, Inc.: Material Misrepresentation Analyzed

Posted on December 23, 2010
On August 8, 2010, the Ninth Circuit affirmed the district court's holding in Miller v. Thane International, Inc., 615 F.3d 1095 (9th Cir. 2010), a class action lawsuit that was resolved against plaintiffs after a three day bench trial.  The case tested the boundaries of the causation requirement under the securities laws...

The Accounting Industry and the Specter of Catatrophic Risk (Part 1)

Posted on December 22, 2010
Andrew Cuomo, the Attorney General of NY (and soon to be governor), filed civil fraud charges against E&Y over auditing work done for Lehman Brothers.  The Complaint is here.  The concerns arose over the role played by the accounting firm in the use of "Repo 105" transactions by Lehman...

The Accounting Industry and the Specter of Catastrophic Risk (Part 3)

Posted on December 22, 2010
What would happen if the existence of one of the Big Four was again threatened? The 2008 Report by Treasury's Advisory Committee on the Auditing Profession discussed the concentration and noted that among the largest companies, the Big Four control the market...

The Accounting Industry and the Specter of Catastrophic Risk (Part 2)

Posted on December 22, 2010
Could another one of the Big Four disappear?  While the possibility might seem unlikely, so was the situation with Arthur Andersen back in 2002. Arthur Andersen's reputation was certainly damaged by the accounting concerns raised about Enron.  But until the firm was indicted in March 2002, only 5% of its clients had departed...

Executive Compensation and the Financial Crisis: A Problem In Search of a Solution (Still) (Part 8)

Posted on December 21, 2010
What about bank regulators in the compensation process?  Don't expect much.  The Fed will rely on "guidance."  Moreover, with respect to the largest financial firms, the Federal Reserve apparently plans to eschew consistent policies in favor of a case by case review...

E&Y, Lehman and the Attorney General of New York

Posted on December 21, 2010
We have some thoughts on the case brought by the Attorney General of New York and will post on it tomorrow.  For now, the Complaint filed today can be found here.

Blaming Regulation FD for Insider Trading

Posted on December 21, 2010
There is, apparently, a massive insider trading investigation underway by the SEC and the US Attorneys Officve that is looking into the distribution of material non-public information by "expert-networks".  The Journal reported on some criminal indictments that have just emerged in that investigation...

Executive Compensation and the Financial Crisis: A Problem In Search of a Solution (Still) (Part 7)

Posted on December 20, 2010
Are there any permanent reforms or are matters destined to go back to the pre-crisis practices?  Efforts so far have been limited to the modest reforms in Dodd-Frank.  They include say on pay, improved requirements for compensation committees, and clawbacks...

Longer Posts, Twitter, and an Evolving Blogosphere

Posted on December 20, 2010
The Blogosphere has long been a state of nature, with few barriers to entry and few guarantees of quality.  Twitter came along and in some respects made the Blogosphere look dated.  Those with things to say preferred tweets to posts. But, in fact, as a column in Wired Magazine (The Short and the Long of It, Clive Thompson) discusses, the presence of tweets and other short form methods of communication have caused evolution in the Blogosphere and, to some degree, resulted in greater order to the blogging process...

Executive Compensation and the Financial Crisis: A Problem In Search of a Solution (Still) (Part 6)

Posted on December 17, 2010
How about the bonus pools and the partnership style form of compensation? First, bonus pools of large financial firms appear to be holding steady at around 50% of net earnings (although announcements for 2010 bonuses have yet to be collectively disclosed)...

Executive Compensation and the Financial Crisis: A Problem In Search of a Solution (Still) (Part 4)

Posted on December 16, 2010
During the crisis, some effort was made to change executive compensation practices.  TARP recipients were required to limit their bonuses to a percentage of salary, at least for top officials.  The limits did not include stock.  One possibility, therefore, was that the limits on bonuses would not reduce total compensation but would either result in increased stock awards or increased base salaries...

Executive Compensation and the Financial Crisis: A Problem In Search of a Solution (Still) (Part 5)

Posted on December 16, 2010
So, have things changed in the post-crises era? As the CII Study noted, "the most significant changes were increases in deferred compensation."  It is not, however, an auspicious shift.  Again, according to the Report: Since we have already seen that vested stock on Wall Street was subject to more stringent restrictions than virtually anywhere else in the economy, moves since the crisis to defer pay longer and increase the proportion of pay deferred are not promising...

Executive Compensation and the Financial Crisis: A Problem In Search of a Solution (Still) (Part 3)

Posted on December 15, 2010
We are examining whether compensation practices that were identified as a possible cause of the financial crisis have changed.        What are some of the factors that propelled compensation in the pre-crisis period to such astronomical heights?  The CII sponsored report (Wall Street Pay, Size, Structure and Significance for Shareowners,  Paul Hodgson, Senior Research Associate, with Greg Ruel, Advisory Services Manager, and Michelle Lamb, Research Associate, The Corporate Library, Nov...

Executive Compensation and the Financial Crisis: A Problem In Search of a Solution (Still) (Part 2)

Posted on December 15, 2010
We are examining whether compensation practices that were identified as a possible cause of the financial crisis have changed.        As we noted in the last post, the Council for Institutional Investors sponsored a report on excutive compensation...

Executive Compensation and the Financial Crisis: A Problem In Search of a Solution (Still) (Part 1)

Posted on December 14, 2010
Executive compensation was a hot topic during the financial crisis.  Concern existed on two fronts:  The absolute amount and the form of compensation.  The astronomical amounts contrasted sharply both with the high unemployment rate and sector's dependency on government bailout funds...

The Director Compensation Project - Verizon

Posted on December 13, 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 - Proctor & Gamble

Posted on December 11, 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 - AT&T

Posted on December 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 - Wells Fargo & Company

Posted on December 09, 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: Cardinal Health

Posted on December 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 ...

The Director Compensation Project: Chevron

Posted on December 07, 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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