Category: Corporate Governance

PCAOB offers help for audit committees about CAMs

The PCAOB has just released a new resource for audit committees about critical audit matters, designed to “inform audit committees as they engage with their auditors on the new CAM requirements.” The new auditing standard for the auditor’s report (AS 3101), which requires CAM disclosure, will be effective for audits of large accelerated filers for fiscal years ending on or after June 30, 2019.  For audits of all other companies to which they apply (e.g., not EGCs), CAM requirements will be effective for fiscal years ending on or after December 15, 2020. The resource document provides information about CAM basics, as well as PCAOB staff guidance through responses to FAQs and, importantly, questions audit committees could consider asking their auditors. At the same time, the PCAOB also issued a new resource about CAMs for investors.

Delaware Supreme Court allows Caremark duty of loyalty claims against directors to survive dismissal motion

In Marchand v. Barnhill  (June 18, 2019), soon-to-be-retired Chief Justice Strine, writing for the Delaware Supreme Court, started out his analysis with the recognition that “Caremark claims are difficult to plead and ultimately to prove out,” and constitute “possibly the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.”  That’s a rather high bar. What does it take to plead a Caremark case that can survive a motion to dismiss? Marchand provides an illustration—and a warning that directors should be proactive in conducting risk oversight and could face liability if they fail to “make a good faith effort to implement an oversight system and then monitor it.”

California Secretary of State publishes “report” about SB 826, California’s new board gender diversity mandate—UPDATED

This post updates an earlier post  on this topic to reflect information from a  conversation with a knowledgeable representative of the California Secretary of State’s office.  He was able to provide some insight about their process and clarify why some apparent inconsistencies were not really inconsistent.

As reported on thecorporatecounsel.net blog, the California Secretary of State has published on its website two spreadsheets, dated July 1, 2019, which apparently together constitute its mandated “report” under SB 826, California’s new board gender diversity mandate.  The first spreadsheet identifies 537 companies that the Secretary’s office views as subject to SB 826. The next spreadsheet identifies 184 companies that were apparently in compliance with the board gender diversity mandate as of that date.  According to the “methodology,” this data was based on information available for the review period from January 1 to June 30, 2019 in California and SEC filings, as well as information from the NYSE, Nasdaq and miscellaneous other online resources.   An updated report will be published on March 1, 2020.

California Secretary of State publishes “report” about SB 826, California’s new board gender diversity mandate

As reported on thecorporatecounsel.net blog, the California Secretary of State has published on its website two spreadsheets, dated July 1, 2019, which apparently together constitute its mandated “report” under SB 826, California’s new board gender diversity mandate.  The first spreadsheet identifies 537 companies that the Secretary’s office views as subject to SB 826. The next spreadsheet identifies 184 companies that were apparently in compliance as of that date.  According to the “methodology,” this data was based on information available for the period from January 1 to June 30, 2019 in California and SEC filings, as well as information from the NYSE, Nasdaq and miscellaneous other online resources.   An updated report will be published on March 1, 2020.  My own extremely brief spotcheck, however, revealed that these lists are not exactly, um, accurate. (But see this update.)

Rulemaking petition seeks to rein in stock buybacks

Almost 20 organizations, including the AFL-CIO and Public Citizen, have filed a rulemaking petition with SEC “to revise Rule 10b-18 to curb manipulative practices by firms and encourage corporations to fairly compensate American workers.”  In essence, the petition seeks to repeal Rule 10b-18 and requests that the SEC “undertake a rulemaking to develop a more comprehensive framework for regulating stock repurchase programs that would deter manipulation and protect American workers.” In light of the almost—dare I say it—“bipartisan” interest in reviewing the practice of stock buybacks, will the SEC decide that it’s worth taking a look? 

Corp Fin roundtable on short-termism scheduled for July 18

The SEC has just announced that the planned Corp Fin roundtable on short-termism will be held on July 18, 2019.  In originally announcing the roundtable in May, SEC Chair Jay Clayton observed that the needs of “Main Street investors” have changed; they now have a longer life expectancy, and, in light of the shift from the security of company pensions to 401(k)s and IRAs, they now have greater responsibility for their own retirements.  As a result, “Main Street investors are more than ever focused on long-term results.” However,  from time to time, they also “need liquidity. In other words, at some point, long-term investors do become sellers. The SEC’s disclosure rules should reflect and foster these needs—long-term perspective and liquidity when needed.” To that end, the goal of the roundtable is not just to discuss the problems associated with short-termism, but also to promote “further dialogue on the causes of and potential solutions to the issue.”

Tips on CAMs at PLI panel

An article in the Federal Securities Law Reporter reports on some tips gleaned from a discussion of, what else, “critical audit matters” on a PCAOB panel at PLI’s 34th Midyear SEC Reporting and FASB Forum.   The new auditing standard for the auditor’s report (AS 3101), which requires CAM disclosure, will be effective for audits of large accelerated filers for fiscal years ending on or after June 30, 2019.