All posts by Cydney Posner

CII advises on disclosure of board evaluation processes

The Research and Education Fund of the Council of Institutional Investors has released a new report regarding disclosure of board evaluation processes in proxy statements. Robust board evaluation processes are considered a key element in strengthening board effectiveness and, as a result, institutional investors have expressed an intense interest in the review process.  While companies have been discussing their board evaluation processes in their proxies with increasing frequency, CII suggests that these discussions could be more robust.

Corp Fin reopens for business

Today, Corp Fin posted a statement regarding its return to normal operations. For the most part, “absent compelling circumstances,” Corp Fin expects to address filings, submissions and requests in the order submitted. The message is this: expect everything to take longer than usual as the staff plays catch-up.

SEC back to normal?

Unless you’ve been unplugged and hiding under a rock recently, you’ve heard that the federal government shutdown has ended—at least for the next three weeks.  In a statement today, SEC Chair Jay Clayton said that the SEC has “resumed normal staffing levels and is returning to normal operations.”  What that will mean in practice, we don’t really know yet, given the likelihood of significant backlogs that accumulated over the past month. Clayton advised that the leaders of  Divisions, such as Corp Fin, are consulting with the staff and “are continuing to assess how to most effectively transition to normal operations.”  Corp Fin is expected to publish a statement (as are other offices) “in the coming days regarding their transition plans,” which will be available on the SEC website.

New House bill to curb potential abuse of 10b5-1 plans

As noted in thecorporatecounsel.net blog, the Chair of the House Financial Services Committee, Maxine Waters, has introduced H.R. 624, the “Promoting Transparent Standards for Corporate Insiders Act,” which could require some significant tweaks to Rule 10b5-1 plans and disclosure about them. Co-sponsored by the Ranking Republican Member on the Committee, Patrick McHenry, the legislation would require the SEC to conduct a study of whether specified amendments to the rules governing 10b5-1 plans should be adopted, report back within a year and then adopt rule amendments consistent with the findings of the study. The high-level bipartisan sponsorship of the legislation suggests that there is a reasonable chance that it could move forward, but certainly does not guarantee that it will survive in the Senate.  You might recall that the JOBS and Investor Confidence Act of 2018 (the erstwhile JOBS Act 3.0), which included similar provisions regarding Rule 10b5-1, passed the House by a vote of 406 to 4, but made no progress in the Senate. (See this PubCo post.) The new leadership must think that the chances for enactment are better with a standalone bill.

BlackRock CEO promotes corporate “purpose”: should corporations step into the governmental vacuum?

In this year’s annual letter to CEOs, BlackRock CEO Laurence Fink once again advocates the importance of a long-term approach, at the same time mourning the prevalence of political dysfunction and acknowledging the resulting increase in public anger and frustration: “some of the world’s leading democracies have descended into wrenching political dysfunction, which has exacerbated, rather than quelled, this public frustration. Trust in multilateralism and official institutions is crumbling.”  For a moment, I thought he was going to veer off into “American carnage,” but instead his focus is on the responsibility of corporations to step into the breach: “Unnerved by fundamental economic changes and the failure of government to provide lasting solutions, society is increasingly looking to companies, both public and private, to address pressing social and economic issues. These issues range from protecting the environment to retirement to gender and racial inequality, among others.” 

LIBOR phase-out—issues to consider

You may recall that at the end of last year, SEC Chair Jay Clayton and Corp Fin Chief Accountant Kyle Moffatt were warning at various conferences about some of the risks the SEC was monitoring, among them the LIBOR phase-out, which is expected to occur in 2021. As reported by the WSJ,  Moffatt indicated that “to the extent that the phaseout of Libor is material to a company,…we would definitely expect a company to disclose that fact and describe the implications of the phaseout, including any associated risks, to investors.’” (See this PubCo post.) But, in making that assessment and any related disclosure, what should companies consider?

Should we get rid of EPS?

Much has been written about the problems associated with the prevalence of short-term thinking in corporate America. As noted in a post from The Harvard Law School Forum on Corporate Governance and Financial Regulation, an academic study revealed that “three quarters of senior American corporate officials would not make an investment that would benefit a company over the long run if it would derail even one quarterly earnings report.”  (See this PubCo post and this article in The Atlantic.)  Apparently, that was no joke. As reported in Forbes, for the first six months of 2018, companies in the S&P 500 spent $367 billion on stock buybacks—which can drive increases in quarterly EPS without increasing the underlying long-term economic value of the company—while capex totaled only $317 billion.  ls there a way to engineer a course correction?

IPO mix and match?

You might want to take a look at this interesting column from Bloomberg’s Matt Levine, talking about some recent developments in the IPO market.  Apparently, a second company is contemplating conducting an IPO through a direct listing, a listing process run outside of the conventional underwritten offering in which the company files with the SEC to allow certain of its outstanding shares to be sold directly into the market, without the traditional help from the underwriters in marketing the deal. Although the company does not raise any funds itself, it becomes a public company and provides a market in which shares may sold by selling shareholders at prevailing market prices. The process may be particularly appealing to companies that are very well known and well funded, but want to trade publicly, since the costs of going public are generally lower and the process can be somewhat quicker than a traditional IPO.

Shutdown updates from Corp Fin—how did they do that?

You’ll recall that, at the end of last year prior to the shutdown, Corp Fin posted a series of FAQs designed to help companies in the registration process (or contemplating offerings) but expected to be caught in the shutdown. (See this PubCo post.)  Corp Fin has now updated those FAQs, revising numbers 4 and 5 and adding new numbers 6 and 9, briefly summarized below. (The mystery is how Corp Fin was able to prepare the updates if no one was permitted to work?)

Cooley Alert: SEC Adopts Final Hedging Disclosure Rules

If you’re looking for some entertaining reading, look no further!  It’s the Cooley Alert version of The Big Short: SEC Adopts Final Hedging Disclosure Rules. Why wait for the movie adaptation when you can read the Alert now?