All posts by Cydney Posner

Senator Warren introduces the Accountable Capitalism Act

According to this column in the LA Times, it’s the “single most pernicious idea in modern American finance.”  Can you guess? It’s the idea “that the corporation exists to ‘maximize shareholder wealth,’” the columnist proclaims. “As the mantra has evolved since it was declared by conservative economist Milton Friedman in 1970, it has come to mean ‘maximize shareholder wealth to the exclusion of everything else.’ The harvest has been stagnating worker wages, squeezed suppliers, noxious government economic policies, and the steady flow of corporate income to the top 1%. It’s long past time to bury this bad idea in the grave.” Needless to say, many would take issue with the columnist’s view, but probably not Senator Elizabeth Warren, who has recently introduced the “Accountable Capitalism Act,” which would mandate that specified large companies have as a corporate purpose identified in their charters—their new federal charters—the creation of a “general public benefit.” 

Cooley Alert: SEC adopts final disclosure update and simplification amendments

Take a look at this latest Cooley Alert: SEC adopts final disclosure update and simplification amendments.It’s riveting from start to finish!

SEC lowers fee rates for fiscal 2019, which begins October 1, 2018

On August 24, the SEC announced that it was reducing the fees it charges issuers to register their securities. In fiscal 2019, the fee rates for registration of securities and certain other transactions will be $121.20 per million dollars, down from $124.50 per million dollars last year. 

Corp Fin to post staff orders and more

Corp Fin announced yesterday that it plans to continue to enhance the transparency of staff actions by posting on EDGAR in issuers’ filing histories a range of documents relating to staff actions.

SEC adopts final disclosure update and simplification amendments

In her statement at the SEC open meeting held in 2016 to vote on issuing the proposing release for the SEC’s “Disclosure Update and Simplification,” SEC Commissioner Kara Stein protested that the proposal was, as she euphemistically framed it, so “hyper-technical” that many potential commenters may not be able “to truly access and understand what is being proposed.”  Apparently, even in its final state, the release was so hyper-technical that none of SEC Commissioners could even bear to talk about it. Could that be why there was no open meeting to discuss adoption of the final rules? Just guessing, of course.  What we saw instead was a Friday afternoon drop of this announcement and this 314-page release on the final rules. The SEC has also kindly provided this “demonstration version” of the rule amendments, essentially a blacklined version of the amendments. The final rules represent a component of the SEC’s disclosure effectiveness project, as well as an effort to implement one of the mandates of the FAST Act.  The final rules become effective 30 days after publication in the Federal Register, and the staff will review the impact of the amendments within five years thereafter.

Is semiannual reporting on the horizon?

On the White House lawn before he boarded a helicopter for the Hamptons and his New Jersey golf club for the weekend, reporters had the opportunity to lob a few questions at the president.  While most of the questions were about security clearances and the criminal trials of his former staff, a different topic suddenly emerged in connection with an early morning tweet about quarterly reporting. The president said that, in his discussions with leaders of the business community regarding ways to improve the business environment, Indra Nooyi, the outgoing CEO of Pepsico, had suggested that one way to help business would be to trim the periodic reporting requirements from quarterly to semiannually. The argument is that the change would not only save time and money, but would also help to deter “short-termism,” as companies would not need to focus on meeting analysts’ expectations on a quarterly basis at the expense of longer term thinking. (For more on short-termism, see, e.g., this PubCo post.) He agreed that “we are not thinking far enough out,” and had asked the SEC to look into it.

Comp Committees take note: stock buybacks as a mechanism for manipulation

You’ve surely seen all the press about companies spending much of their savings from the 2017 Tax Cuts and Jobs Act on stock buybacks. See, for example, this article.   And this article reports on a JP Morgan prediction for this year of over $800 billion in stock buybacks.  According to this article in CFO.com, S&P 500 firms repurchased $166.3 billion worth of shares just during the first quarter of 2018, up 18.7% from a year ago. A common rationale for conducting a stock buyback is that the shares are undervalued—thus signaling optimism about the company’s future. In addition, buybacks are often viewed as a useful way to provide shareholders with a cash distribution or to offset dilution.   However, in some cases, the author of this study contends, the real motivation may be more opportunistic—managing EPS and increasing executive compensation, regardless of the operational success of the company, where EPS is a performance measure.  Comp committees: take note.