In Case You Missed It - Interesting Items for Corporate Counsel - May 2015

by Stoel Rives LLP

  1. The SEC proposed pay for performance rules, here, to implement Section 953(a) of Dodd-Frank, which requires disclosure of “information that shows the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions.” The proposed rules would amend Item 402 of Regulation S-K to add yet another compensation table, this one showing CEO and average other NEO summary compensation and compensation actually paid (excluding unvested equity awards and adjusting for pension benefits), total shareholder returns and peer group total shareholder returns. The peer group would be either the group included in the performance graph required by Regulation S-K Item 201(e)(1)(ii), which shows cumulative shareholder return, or the group used for benchmarking under Regulation S-K Item 402(b). Summaries of the proposed rule are here, here and here. The comment period ends July 6, 2015. Theoretically, these rules could be finalized in time for next year’s proxy statement. Of course, that reminds us that the proposed pay equity disclosure rules mandated by Dodd-Frank Section 953(b), here, still are not effective, even though they were proposed in 2013. (These rules would apply to the next full fiscal year after adoption, which means that if adopted today, a calendar-year-end company would disclose pay equity information for 2016 in the proxy statement it files in 2017.)
  2. Apropos pay for performance, we find interesting the argument made by oil billionaire Harold Hamm, founder and CEO of Continental Resources, that his wife shouldn’t get the appreciated value of most of his company in their divorce because the increase wasn’t his doing (and thus its appreciated value was exempt from the divisible estate). See here. Rarely do you see good luck cited by an executive as the reason for his success, although certainly you see bad luck, and those pesky “market forces,” often cited as an excuse for poor performance. Also interesting is the report by ISS, here, which notes that average CEO pay in the U.S. increased nearly 13% in 2015, largely through increases in retirement assets.
  3. The CFA Institute released an updated model Compensation Discussion and Analysis template, here.
  4. Recent SEC proposals on pay for performance and the adoption of final Regulation A+ rules (here) remind us of the host of governance and disclosure rules that linger under the JOBS Act and Dodd-Frank. These include:
    • Crowdfunding rules, here.
    • Regulation D process rules, here.
    • Hedging disclosure rules, here.
    • Compensation clawback rules, not yet proposed under Dodd-Frank Section 954, see here.
    • Possible changes, someday, on the recommendations of the Investor Advisory Committee created by Dodd-Frank Section 911, including to the definition of “accredited investors,” here.
  5. Disclosure of campaign contributions is not required by SEC rules, but noise about such disclosures continues and has been the subject of SEC rulemaking requests, see here and here, and a favorite of shareholder activists (see here). The Campaign for Accountability (catchy name) filed a lawsuit claiming that the SEC has arbitrarily and capriciously failed to act on the rulemaking petition submitted by Stephen Silberstein, see here. Presumably, the lawsuit is for publicity, because it seems, on its face, stupid. Count on the decibel level increasing with the onset of the presidential campaign and a renewed call that President Obama issue an order requiring government contractors to disclose campaign contributions, here. (Recall that the Administration abandoned a similar effort in the run up to the 2012 election. See here.)
  6. Early returns on proxy access votes are discussed here. As of April 27, shareholders had rejected proxy access proposals at six of the 10 companies that had voted. (Two of the six had adopted an alternate company proxy access proposal in advance of the meeting.) An update for the week of May 3, here, shows shareholders rejected proposals at three of eight companies that recommended no votes. The tack at most companies is to simply include the shareholder proposal and recommend a “no” vote. Generally, arguments against a proxy access proposal are that it’s a solution in search of a problem, that the company’s board is good and its governance practices strong, that the proposal strips power from the independent nominating committee charged with selecting directors and that proxy access is expensive, a distraction, gives special interest groups control to the detriment of shareholders generally and encourages short-termism. In the meantime, CalPers and the NYC Comptroller have filed a host of notices of exempt solicitation under Rule 14a-2(b)(1) (solicitations that urge shareholders how to vote but do not solicit proxies, which is allowed but for which a notice must be filed that shows up on the company’s EDGAR page) in which they rail against some of these common arguments. See, e.g., here.
  7. The NYC Comptroller, never one to slack, also signed onto a letter with the NY State Comptroller urging the SEC to consider enforcement action to force oil and gas companies to improve climate change disclosure, here. The letter echoes the themes of the letter recently sent by Ceres, here, although the plea in the Ceres letter is to step up comment letters to offending companies.
  8. Recall that Form SD, including the second conflict minerals report for most, is due June 1, 2015. Some observations on early 2015 conflict minerals reports are here. A recent report by Global Witness and Amnesty International, here, points to “alarming gaps” in U.S. corporate transparency based on last year’s reports. Criticism of Global Witness’s “misleading findings” and “baffling” assessment criteria is here. With no meaningful SEC guidance on the adequacy of 2014 filings, no news about the SEC’s appeal of the portion of its conflict minerals rule that was struck down on First Amendment grounds (here) and a feeling of general malaise about the topic despite Global Witness’s efforts to make it interesting, expect this year’s reports to be nearly identical to 2014 reports.
  9. The U.S. Department of Justice released “Best Practices for Victim Response and Reporting of Cyber Incidents,” here, generally suggesting that you (a) take steps to prevent cybersecurity breaches and have an action plan in place, (b) quickly respond to a breach by implementing your response plan, including assessing initial damage and stanching the information flow, document your process and gather data on the breach and communicate with internal personnel, law enforcement and victims of the breach so they can protect themselves and (c) after the breach, remain vigilant and remediate any identified deficiencies. The report also gives tips on what not to do, including continuing to use your breached system, retaliating and curling up into a ball and weeping. Emphasizing the import of all of this, Verizon published its 2015 Data Breach Investigations Report, available here. And just for the heck of it, recent SEC cybersecurity guidance to registered investment funds and investment advisers is here.
  10. The PCAOB published “Audit Committee Dialogue,” here, in which it shares with audit committees the insights it has garnered through annual inspections of audit firms, including identifying key recurring areas of concern and new risks the PCAOB is monitoring.
  11. A sneaker, perhaps, for those with foreign subsidiaries is the Bureau of Economic Analysis requirement, here, to file a report on Form BE-10 (available here), by May 29, 2015 for most. Likely, there will be no adverse consequence for failing to file, suggested by the BEA’s response to the general question “I received a ‘Notice of Failure to File’ stating that my company has not complied with the reporting requirement. What should I do?” (Answer: “file.”) But do you really want to be the company the BEA decides to fine just to send the message that it’s serious? (And if you know about the requirement and still don’t file, that’s a willful violation that could have consequences. So, um, sorry for bringing this to your attention.)
  12. A survey of emerging growth company corporate governance practices adopted in connection with their IPOs is here.
  13. And finally, two tidbits to add to last month’s exhaustive (exhausting?) coverage of whistleblower issues:
    • The Occupational Safety and Health Administration clarified the standard it uses for whistleblower investigations, here.
    • The SEC awarded $1 million to another internal audit type, here, and $600,000 in its first whistleblower retaliation case, here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Stoel Rives LLP | Attorney Advertising

Written by:

Stoel Rives LLP

Stoel Rives LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.