Category Archives: Corporate Governance

Are lone-insider independent boards too much of a good thing?

by Cydney Posner

At more than half of the companies in the S&P 1500, the CEO is the lone board insider, according to this study and the related article in the WSJ.  Isn’t that a good thing? Maybe not, say the authors, whose study showed that lone-insider boards can lead to lower profits, excessive CEO pay and more financial fraud.  Continue reading

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Filed under Corporate Governance, Executive Compensation

Considerations regarding the defensive health of newly public companies

As discussed in this December 2016 Cooley Alert, this proxy season, the policies of ISS and Glass Lewis provide that they will recommend voting against the re-election of directors of “newly public” companies that, prior to or in connection with their IPOs, adopted bylaw or charter provisions that these proxy advisory firms consider adverse to stockholder rights, such as supermajority vote requirements to amend the company’s charter or bylaws, classified board structures or multi-class capital structures.

Nevertheless, these protective measures were adopted for a reason:  to protect the company from unsolicited takeover attempts, to deter other forms of activism and to support the company’s general “defensive health.” For an excellent analysis of factors that companies — faced with negative recommendations for director as a result of these policies — should consider before making any changes, see “New Pubcos Should Consider Defensive Health in Light of ISS/GL Recommendations,”  just posted on Cooley M&A.

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New revenue recognition standard—are companies overlooking the disclosures?

by Cydney Posner

The warnings are everywhere—it’s time to get serious about revenue recognition. The new standard is expected to result in significant changes to measuring, recognizing and reporting of revenue—regarded as the key line item in the financials for most companies. While the impact of the new standard will be certainly be felt on the bottom line for most companies, even when the new rule is not expected to have any material impact on the financials, the related disclosures may well be material, according to Sylvia E. Alicea, Professional Accounting Fellow, Office of the Chief Accountant, in remarks at the Bloomberg BNA Conference on Revenue Recognition.  Moreover, the SEC is expecting to see robust transition disclosures by the third quarter of this year, and the staff is watching closely. Continue reading

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Filed under Accounting and Auditing, Corporate Governance

Are “other key operating metrics” the new non-GAAP financial measures?

by Cydney Posner

As reported by BNA, the top accounting staff at the SEC are quite satisfied with companies’ responses to the SEC’s assault on abuses of non-GAAP financial measures. The staff’s concern was that companies’ reporting was often inappropriately painting, through the use of non-GAAP measures, healthier-than-justified pictures of companies’ performance, potentially misleading investors.  In response, the staff mounted a campaign against the non-GAAP practices that the staff viewed as abusive. At a 2017 Baruch College Financial Reporting Conference, Mark Kronforst, chief accountant at Corp Fin,  discussing the SEC’s effort, concluded  that “I have to say, I think it was a success.” Wesley Bricker, SEC chief accountant, concurred. Is the SEC now applying that same strategy to other reporting metrics? Continue reading

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Does a long-term view really pay off?

by Cydney Posner

In this February 2017 article in the Harvard Business Review, “Finally, Evidence That Managing for the Long Term Pays Off,” a team from McKinsey and associated consultants attempt to prove empirically what has often seemed intuitively must be true — that companies that manage for long-term value creation, those that can put aside the pressures of quarterly expectations, actually deliver superior results.  What did they find? That if the whole economy had performed at the same level as the companies in their study that followed a long-term strategy, “U.S. GDP over the past decade might well have grown by an additional $1 trillion [and the economy would have] generated more than five million additional jobs over this period.” Continue reading

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Letter from six senators challenges authority of Acting SEC Chair on conflict minerals no-action position

by Cydney Posner

It’s not only the NGOs that have expressed their dismay at the no-action position taken by Corp Fin and Acting SEC Chair Michael Piwowar with regard to compliance by companies with the conflict minerals rule. In this April 26 letter, six U.S. Senators express their doubt about the “legal basis” for the Acting Chair’s “unilateral move” to halt enforcement of the rule. Continue reading

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GAO issues annual report showing only slight progress in disclosures on conflict minerals

by Cydney Posner

The GAO has recently issued its third annual report on conflict minerals. The GAO is required by Dodd-Frank to report annually on the effectiveness of the SEC’s conflict minerals rule in promoting peace and security in the DRC and adjoining countries  (the “covered countries”) as well as on the rate of sexual violence in war-torn areas of the covered countries. (To read about last year’s report, see this PubCo post.) One sentence in the report says it all: “Our review of companies’ conflict minerals disclosures filed with SEC in 2016 found that, in general, they were similar to disclosures filed in prior years.” In light of the provision in the Financial CHOICE Act of 2017 that would repeal the Dodd-Frank conflict minerals mandate, you have to wonder if this will be the GAO’s last report on the topic?  (See this PubCo post.) Continue reading

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