Tag: disclosure of perks
Cooley Alert: Should the SEC Revisit Executive Security Perquisite Disclosure?
You might want to look at this recent Cooley Alert, Should SEC Revisit Executive Security Perquisite Disclosure?, from our Public Companies and Compensation and Benefits Groups. Following the alarming murder of an insurance company CEO recently, the need for protection and security for CEOs and other executives is now high on the agenda, as are questions about how these items should be reported. Under the guidance set forth in the SEC’s 2006 release, an “item is not a perquisite or personal benefit if it is integrally and directly related to the performance of the executive’s duties. Otherwise, an item is a perquisite or personal benefit if it confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the company, unless it is generally available on a non-discriminatory basis to all employees.” According to the release, the “concept of a benefit that is ‘integrally and directly related’ to job performance is a narrow one.” But, the Alert contends, maybe that approach should be revisited.
SEC Enforcement charges Express for failure to disclose CEO perks
The SEC has announced settled charges against Express, Inc., a multi-brand American fashion retailer formerly listed on the NYSE, for failing to disclose over a three-year period almost $1 million in perks provided to its now former CEO. What were those perks? About a half of that amount was attributable to the perk that seems to trip up so many companies (and flashing favorite target of SEC Enforcement): use of company-owned or -leased aircraft and other travel expenses for personal purposes. The SEC also charged that the company “did not have adequate controls, policies, or procedures in place to effectively identify and analyze potential compensation for disclosure.” However, the SEC did not impose civil penalties on the company, which filed for bankruptcy, in light of its cooperation. According to Sanjay Wadhwa, the Acting Director of Enforcement, “[p]ublic companies have a duty to comply with their disclosure obligations regarding executive compensation, including perks and personal benefits, so that investors can make educated investment decisions….Here, although Express fell short in carrying out its obligation, the Commission declined to impose a civil penalty based, in part, on the company’s self-report, cooperation with the staff’s investigation, and remedial efforts.”
How should the board consider security concerns for executives?
After the alarming murder of an insurance company CEO last week, questions about protection and security for CEOs and other executives are suddenly high on the agenda for boards of directors. A big concern: will there be copycat attempts? According to a security officer for a threat management software company, quoted on CNBC.com, “Everyone’s scrambling to say, ‘Are we safe?’….This is an inflection point where the idea of executive protection is now raised to the board level. Everyone I know in the industry is feeling this.” This anxiety is only compounded by the volume of information available online disclosing executives’ addresses and itineraries. As discussed in this new article from the Harvard Business Review, while incidents of workplace violence are “unfortunately too common” in the U.S., CEO targeting is “relatively rare.” But that risk level may have changed: in “today’s world of grievance and anger, easy access to weapons and information, and high-profile attacks on public figures, companies must take seriously their duty of care for executives and employees alike.” The article presents a framework for C-suites and boards “to balance competing interests of need, efficacy, and cost to ensure executive protection….How does a company strike the right approach in preventing the low likelihood, but very high consequence of an attack on a CEO?”
Enforcement again brings charges for failure to disclose perks
Failure to disclose executive perks continues to be a flashing target for SEC Enforcement. Just last year, there were two actions against companies for disclosure failures regarding perks—Hilton Worldwide Holdings Inc. (see this PubCo post) and Argo Group International Holdings, Ltd. (see this PubCo post). And earlier this year, Enforcement brought settled charges against Gulfport Energy Corporation and its former CEO, Michael G. Moore, for failure to disclose some of the perks provided to Moore (see this PubCo post). Now, the SEC has once again filed settled charges against a company, ProPetro Holding Corp., and its co-founder and former CEO, Dale Redman, for failure to properly disclose executive perks—including, once again, personal use of aircraft at the company’s expense—as well as two stock pledges. While the topic is not new, the different types of blunders and slip-ups—which seem to be unique to each case—can be instructive. In this case, the focus was—in addition to absence of a policy regarding personal travel reimbursement, inadequate internal controls around perks and failure to disclose paid personal travel expenses—an inadequate process for completion and review of D&O questionnaires.
Failure to disclose perks remains in the SEC spotlight
Disclosure of executive perks is once again in the SEC Enforcement spotlight. Just last year, there were two actions against companies for disclosure failures regarding perks—Hilton Worldwide Holdings Inc. (see this PubCo post) and Argo Group International Holdings, Ltd. (see this PubCo post). Now, Enforcement has brought settled charges against Gulfport Energy Corporation, a gas exploration and production company that filed for Chapter 11 in November, and its former CEO, Michael G. Moore, for failure to disclose some of the perks provided to Moore as well as related-person transactions involving Moore’s son. The case serves as a reminder that the analysis of whether a benefit is a disclosable perk can be complicated.
Enforcement again targets failure to disclose perks
Failure to disclose perks seems to be a fairly attractive target for SEC Enforcement these days. In another fiscal year-end action, Enforcement has charged Hilton Worldwide Holdings Inc. with failure to disclose in its proxy statements various perks and personal benefits provided to its executive officers. This action has the distinction of being the result of the staff’s use of risk-based data analytics to uncover potential violations related to corporate perks. The case serves as a reminder that the analysis of whether a benefit is a disclosable perk can be complicated and is not the same as the “business purpose” test used for tax purposes.
SEC charges company with violations of the rules related to non-GAAP financial measures
by Cydney Posner The Corp Fin staff have been dropping hints for quite a while about potential enforcement actions in connection with abuses of non-GAAP financial measures (see, e.g., this PubCo post), and an interesting one has now materialized. In an Order released today, the SEC announced settled charges against MDC […]
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