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]

Early November finds us in a kind of limbo – those of us who advise public companies on governance and compensation matters are waiting for something big to happen. But there’s plenty of smaller stuff to report on – although most of these items present more questions than answers . . . . On November 4, SEC Chairman gave a speech addressing current regulatory developments. She described the proxy disclosure rules but did not address when they would be adopted or considered. . . . Rep. Maxine Waters has proposed an amendment to the Investor Protection Act of 2009 . . . . [to read more, click on the link above]

There was a fascinating article in the New York Times on Thursday about Merrill Lynch’s 2006 bonus program, which resulted in large payouts to top management even as the company was sold to Bank of America in a distressed sale. The author of the article provides more in-depth analysis in a post in the Times’ DealBook Blog. . . . The Blog post discusses the features of the plan that put a portion of the employees’ bonuses at risk, provided for a partial clawback if return on equity was not adequate, and invested the bonus amounts in stock that was locked up for a year past the three-year term of the plan. . . . I think the Merrill plan had many worthy features that should command the attention of compensation professionals. . . .Here’s a new one – The Corporate Counsel Blog reports that in-house corporate attorneys have joined the blogging world. . . . [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]

I’ve been working on my outline for an upcoming continuing legal education program on how in-house counsel can help avoid or minimize securities fraud liability. I talked to Maslon’s securities litigation partner extraordinaire, Rich Wilson, about the topic, and we came up with the following tips. . . . The simple rule is to disclose material information in a way that’s not misleading. However, Rich cautions that a higher standard of disclosure may be required now. . . .

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.]

As described previously, on July 1, 2009, the SEC approved by a 3-2 vote an amendment to New York Stock Exchange Rule 452 to eliminate broker discretionary voting in uncontested elections of directors. Of all the recent proposals (see the ON Securities Cheat Sheet), this was the first to be adopted, and this change may have the biggest practical impact on corporate governance for most companies. The rule change is effective for shareholder meetings held on or after January 1, 2010, and it is likely to make it more difficult to get affirmative votes in favor of management’s slate of directors. . . .So what should a company do to prepare? . . . . [To read more, click on the Title above.]