Final judgment entered in conflict minerals case, National Association of Manufacturers v. SEC

by Cydney Posner

Today, the D.C. District Court entered final judgment in National Association of Manufacturers v. SEC, holding that Section 1502 of Dodd-Frank and Rule 13p-1 and Form SD, Conflict Minerals, violate the First Amendment to the extent that the statute and the rule require regulated entities to report to the SEC and to state on their websites that any of their products “have not been found to be ‘DRC conflict free.’”  In addition, pursuant to the APA, the Court held the rule unlawful and set it aside but only to the extent that it requires regulated entities to report to the SEC and to state on their websites that any of their products “have not been found to be ‘DRC conflict free.’” (For background on the case, see this PubCo post.) Continue reading

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Is relative TSR still the performance metric of choice?

by Cydney Posner

According to a just-released report from Equilar, an executive compensation and corporate governance data firm, “relative total shareholder return” continues to be the most common performance measure used in long-term incentive plans for CEOs among S&P 500 companies.  However, after years of increasing prevalence among companies in this group, use of rTSR flattened out in 2015 as a performance metric for CEO pay. At the same time, use of return on capital and earnings per share as performance metrics each “saw a bump,” the related press release indicated. Does this data portend a change? Continue reading

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Investigate Piwowar?

by Cydney Posner

Not everyone is pleased by the actions taken by Acting SEC Chair Michael Piwowar directing the SEC staff to review the conflict minerals and pay-ratio disclosure rules.  In fact, today, four Senate Democrats on the Senate Banking Committee have called for an investigation into whether he has the authority to delay or revisit those rules, which were adopted by the SEC as mandated by Congress in Dodd-Frank. Whether the Senators make any headway with the requested investigation remains to be seen. Continue reading

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State Department ventures into conflict minerals

by Cydney Posner

Bloomberg BNA is reporting that the State Department has launched a new review of  “how best to support responsible sourcing of conflict minerals,” which will continue through April 28. Although it’s not known whether the SEC is involved in the State Department’s efforts, BNA suggests that the review “could help determine the next step in a potential rethink” of the SEC conflict minerals rule. Continue reading

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Do board self-evaluations help produce a high-functioning board?

by Cydney Posner

In this paper from the Rock Center for Corporate Governance at Stanford University, Board Evaluations and Boardroom Dynamics, the authors suggest that board self-evaluations aren’t all they’re cracked up to be. While, based on a recent study, 89% of directors believe their boards have the skills and experience necessary to oversee their companies, at the same time, survey respondents expressed “significant negative sentiments. Board evaluations do not appear to be effective at the individual level.”  In fact, the authors report, the “typical director believes that at least one fellow director should be removed from their board because this individual is not effective. These are troubling statistics that suggest that many companies do not use board evaluations to optimize the contribution of their members.” By focusing only on the functioning of the board as a whole without adequate attention to individual performance, have board self-evaluations become simply pro forma exercises that do not really identify or address the problems that impede effective board operation? Continue reading

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SEC approves T+2

by Cydney Posner

At an open meeting this morning, the SEC voted to adopt an amendment to Rule 15c6-1 under the Exchange Act to shorten the standard settlement cycle for most broker-dealer transactions from three business days after the trade date (T+3) to two business days (T+2), unless otherwise expressly agreed to by the parties at the time of the transaction. According to the press release, the “amended rule is designed to enhance efficiency, reduce risk, and ensure a coordinated and expeditious transition by market participants to a shortened standard settlement cycle.”   September 5, 2017, which follows a long weekend, has been set as the compliance date.  Continue reading

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European Parliament approves conflict minerals rules for the EU

by Cydney Posner

Last week, the  European Parliament approved, by a vote of 558 to 17 with 45 abstentions, new rules on conflict minerals, 3TG—tin, tungsten, tantalum and gold.  Proceeds from the sale of conflict minerals, which are used in the production of products such as mobile phones, cars and jewelry, are sometimes used to finance armed conflict in high-risk areas. The rules are designed to prevent the sale of conflict minerals from continuing to fuel this violence.  According to the press release, the rules impose supply chain due diligence requirements based on the OECD Guidance on companies importing 3TG into the EU. The rules are expected to cover up to 95% of imports as of January 1, 2021.  Following the European Parliament vote, the EU conflict minerals regulation will be finalized when formally approved by EU member countries and published in the EU Official Journal and will go into effect in 2021.

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