ON Securities

At Thanksgiving, our thoughts naturally turn to gluttony of all sorts. So it seems like a fitting time to recognize a few companies for granting awards to their executives that look so ridiculous they practically beg Congress to speed up compensation reform. . . . So pass the cranberry sauce and gravy, here are my nominees for the “Compensation Turkeys of the Year”, all reported by footnoted.org in the past few weeks . . . . Of course, Goldman Sachs makes the list for its announcement that it is setting aside around $17 billion for compensation and bonuses, calculated to be more than $700,000 on average for each of the company’s 31,700 employees. . . . Last week I reported that RiskMetrics Group came out with its 2010 updates to its proxy voting guidelines, summarized here. . . .

Several new reports have been published that provide valuable information about what’s going on in the public company world . . . . Pearl Meyer & Partners released a survey report covering companies’ attitudes toward Say-on-Pay, which is currently required for TARP recipients but will not be required for other public companies until at least 2011 . . . . Frederick W. Cook & Co. released a report of its study of non-employee director compensation at the 100 largest New York Stock Exchange companies and the 100 largest Nasdaq companies . . . . One more update – hot off the presses: I noticed that RiskMetrics today published some of its 2010 policy information, which applies to all shareholder meetings occurring on or after February 1, 2010 . . . . [to read more, click on the link above]

I attended a compelling legal education program this week, taught by Egil “Bud” Krogh. Political junkies know that Krogh was a young assistant White House counsel in the Nixon years. As a leader of the “Plumbers” unit, he authorized the 1971 break-in of the offices of Daniel Ellsberg’s psychiatrist after the leak of the Pentagon Papers. After the break-in came to light in the Watergate hearings, Krogh pleaded guilty, served time in prison, was disbarred and later reinstated. Bud now lectures on the topic of legal ethics, based on his recent book, Integrity: Good People, Bad Choices, and Life Lessons from the White House. His premise: in a pressure-filled environment such as the White House, intense loyalty to individuals can blind you to your higher principles. . . . . Krogh’s description of an environment that can put pressure on decision-making is familiar to anyone called on to say yes or no to any proposal by a corporate officer. . . . [H]ow do some decisions, even decisions by good people, go astray? A great example can be found in the options backdating scandals. . . . I asked Krogh how to advise an attorney . . . how to avoid the pitfalls of losing perspective in a pressure-filled situation . . . . [to read more, click on the link above]

Mark Borges, the well known compensation consultant with Compensia, gave a very interesting talk this week at a joint meeting of the Society of Corporate Secretaries and Governance Professionals and the Twin Cities Compensation Network. Mark was gracious enough to give me permission to post his presentation, which is full of useful updates on governance and compensation reform and tips on how to get ready. . . . Mark made these points, among many others . . . . [to read more, click on the link above]

I was interested to read the most recent Towers Perrin survey of D&O insurance practices of around 2,600 public and private companies and non-profits. . . . it is helpful to have a reference point for the range of coverage amounts and retention amounts for companies of various sizes. This survey also reports on various insurance trends, including . . . . Last week I mentioned the excellent materials prepared by Deloitte Tax for a presentation on trends in executive compensation, . . . A few other compensation trend observations worth noting . . . . [to read more, click on the link above]

I just went through some of the hundreds of comment letters on the SEC’s controversial proposal to adopt Rule 14a-11 on proxy access. . . . Several comment letters, including the letter from the U.S. Chamber of Commerce, describe explicit theories about why the proposed rule should be struck down by the courts if adopted. .. .It seems apparent that, if the SEC adopts Rule 14a-11, the enforcement of the rule will be tied up in court, and the rule could eventually be struck down. . . . Either way, the amendment to 14a-8 is likely to be effective long before Rule 14a-11. . . . [To read more, click on the title above]

The past few weeks have been fairly slow in terms of new developments in securities law, corporate governance and executive compensation. However, summer’s over, and I’m expecting a flurry in the next few weeks. Take a look back at the ON Securities Cheat Sheet – a lot of these developments are likely to change as we head into the fall . . . . Last weekend I saw my all-time favorite film about blogging – okay, maybe the only film I have seen about blogging. “Julie & Julia” follows two parallel true stories . . . . I watched Julie’s story with my “blogger hat” on, and I tried to figure out what made her blog successful. . . .[to read more, click on the title above].

There have been several recent articles on the SEC’s proposed proxy access rule, Rule 14a-11. . . . A Wall Street Journal article last week (subscription required for full article) reported that “. . . the measure looks like it will be passed by the Securities and Exchange Commission in November.” . . . . However, this post by Dave Lynn in the Corporate Counsel blog last Friday puts the proposal’s status in perspective and raises doubts that shareholder access is a “done deal”. . . . [to read more, click on title above]

On Friday, the House of Representatives passed the Corporate and Financial Institution Fairness Act of 2009. The Senate still needs to consider similar legislation, and any differences will need to be resolved. . . . For most public companies, the bill will . . . . [to read more, click on the title above]

It’s a pretty good bet that non-binding shareholder advisory votes on executive compensation (“Say-on-Pay”) will be adopted this year and will become mandatory for public companies, probably starting with the 2010 proxy season. . . . So, what does Say-on-Pay look like in practice, and what is the likely outcome of the shareholder vote? . . . . Assuming Say-on-Pay is required to be on the ballot in 2010, what should companies do now? . . . .We have just posted an updated version of the ON Securities Cheat Sheet under the Resources listing on the home page of this Blog. . . . [To read more, click on the title above.]