All posts by Cydney Posner

Trends and practices in director engagement with shareholders

In this article, representatives of The Conference Board and Rutgers Law School discuss the current phenomenon of  director engagement with shareholders.  While company managements have long engaged with shareholders at annual meetings and investor presentations, the notion of director engagement with shareholders is a more recent development.  Why is shareholder engagement increasingly being added to the job description of the corporate director?  The article posits several theories for the trend and, based on a survey of corporate secretaries, general counsel and investor relations officers at public companies, identifies the most common engagement topics, provides data on frequency of engagement and highlights emerging practices  related to director engagement.

New Statement on Key Reminders for Audit Committees

Yesterday, SEC Chair Jay Clayton, SEC Chief Accountant Sagar Teotia and Corp Fin Director William Hinman posted a “Statement on Role of Audit Committees in Financial Reporting and Key Reminders Regarding Oversight Responsibilities.”  As the year draws to a close, given the vital role of audit committees in the financial reporting system, the Statement is intended to provide “observations and reminders on a number of potential areas of focus for audit committees.  Issuers and independent auditors also should be mindful of these considerations with an eye toward ensuring that audit committees have the resources and support they need to fulfill their obligations.”

Happy New Year Everyone!

SEC proposes to amend auditor independence rules

Recently, SEC Chief Accountant Sagar Teotia hinted at possible forthcoming changes to the auditor independence rules, remarking that, in connection with the recent changes related to lending relationships, the SEC “also received comments on other aspects of auditor independence rules.  In conjunction with that feedback, the Chairman directed the staff to formulate recommendations to the Commission for possible additional changes to the auditor independence rules for potential rulemaking.” However, the nature of the potential changes remained something of a mystery. The proposal to amend the auditor independence rules has now been released.  According to the press release issued today, the proposal is intended to modernize aspects of the independence rules to minimize the potential for “relationships and services that would not pose threats to an auditor’s objectivity and impartiality [to] trigger non-substantive rule breaches or potentially time consuming audit committee review of non-substantive matters.”  It is important to keep in mind that violations of the auditor independence rules can have serious consequences not only for the audit firm, but also for the audit client.  For example, an independence violation may cause the auditor to withdraw its audit report, requiring the audit client to have a re-audit by another audit firm.  As a result, in most cases, inquiry into the topic of auditor independence should be a menu item on the audit committee’s plate. The comment period will be open for 60 days.

A female majority at the SEC?

Reuters is reporting that the next SEC Commissioner will be Caroline Crenshaw, who is expected to be the Democratic nominee to fill the spot currently held by Robert Jackson. He is expected to leave the SEC next year. 
Happy holidays everyone!

New disclosure guidance on confidential treatment and disclosure of international IP risks

Corp Fin has posted two new CF Disclosure Guidance Topics. Topic No. 7,  Confidential Treatment Applications Submitted Pursuant to Rules 406 and 24b-2, supersedes SLBs 1 and 1A and relates to the process for submission of requests for confidential treatment, not under the new streamlined approach adopted earlier this year (although the Topic does take up the new process for extensions), but rather under the old alternative approach that still lives but is now rarely used. Topic No. 8, which relates to Intellectual Property and Technology Risks Associated with International Business Operations, provides helpful guidance regarding disclosures that Corp Fin believes companies should consider with respect to intellectual property and technology risks that could arise in connection with international operations, especially in locations where protection of intellectual property may be a bit dicey.  The new topics make clear that they are just that—staff guidance—and have no legal force or effect nor do they alter or amend applicable law or create new or additional obligations. Nevertheless, the new guidance, especially Topic No. 8 regarding IP risk disclosure, provides useful checklists of issues to consider and is definitely worth a look.

Happy holidays everyone!

How will companies and CEOs meet the challenges of corporate social responsibility?

This PubCo post discussing the Business Roundtable’s adoption of a new Statement on the Purpose of a Corporation  concluded by observing (rhetorically) that the question teed up by the new BRT Statement was what all of the signatories would actually do to fulfill the commitments in the Statement. Apparently, some NGOs are now asking that question for real, and, ironically, one of the first recipients is a well-known leader of the pack on commitments to all stakeholders. 

EDGAR closed Christmas Eve and Christmas Day

In case you missed it, the SEC’s EDGAR system will be closed on both Tuesday and Wednesday, Christmas Eve and Christmas Day, because the federal government will be closed on both days.