Posts Tagged ‘Gillian McPhee’

Considerations for Directors in the 2014 Proxy Season and Beyond

Posted by Amy L. Goodman, Gibson, Dunn & Crutcher LLP, and John F. Olson, Gibson, Dunn & Crutcher LLP and Georgetown Law Center, on Monday January 27, 2014 at 9:19 am
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Editor’s Note: Amy Goodman is a partner and co-chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP and John Olson is a founding partner of Gibson, Dunn & Crutcher’s Washington, D.C. office and a visiting professor at the Georgetown Law Center. The following post is based on a Gibson Dunn alert by Ms. Goodman, Mr. Olson, Gillian McPhee, and Michael J. Scanlon.

As we begin 2014, calendar-year companies are immersed in preparing for what promises to be another busy proxy season. We continue to see shareholder proposals on many of the same subjects addressed during last proxy season, as discussed in our post recapping shareholder proposal developments in 2013. To help public companies and their boards of directors prepare for the coming year’s annual meeting and plan ahead for other corporate governance developments in 2014, we discuss below several key topics to consider.

…continue reading: Considerations for Directors in the 2014 Proxy Season and Beyond

Shareholder Proposal Developments During the 2013 Proxy Season

Editor’s Note: Amy Goodman is a partner and co-chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP. The following post is based on a Gibson Dunn alert by Ms. Goodman, Gregory S. Belliston, Elizabeth A. Ising, Gillian McPhee, and Ronald O. Mueller.

Shareholder proposals continued to attract significant attention during the 2013 proxy season. This post provides an overview of shareholder proposals submitted to public companies during the 2013 proxy season, including statistics, notable decisions from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) on no-action requests [1] and other Staff guidance, majority votes on shareholder proposals and litigation seeking to exclude shareholder proposals.

1. Shareholder Proposal Statistics and Voting Results

According to data from Institutional Shareholder Services (“ISS”), shareholders submitted approximately 820 proposals to date for 2013 shareholder meetings, up from approximately 739 proposals submitted for 2012 shareholder meetings. [2] The most common 2013 shareholder proposal topics, along with the approximate number of proposals submitted, were:

…continue reading: Shareholder Proposal Developments During the 2013 Proxy Season

ISS, Glass Lewis, and the 2013 Proxy Season

Posted by John F. Olson, Gibson, Dunn & Crutcher LLP and Georgetown Law Center, on Monday February 11, 2013 at 9:20 am
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Editor’s Note: John F. Olson is a founding partner of Gibson, Dunn & Crutcher’s Washington, D.C. office and a visiting professor at the Georgetown Law Center. The following post is based on a Gibson Dunn alert by Amy Goodman, Elizabeth Ising, Sean Feller, Gillian McPhee, Allison Balick and Kasey Levit Robinson.

Institutional Shareholder Services (“ISS”) and Glass, Lewis & Co., Inc. (“Glass Lewis”), the two major proxy advisory firms, recently released updates to their proxy voting policies for the 2013 proxy season. The ISS U.S. Corporate Governance Policy 2013 Updates (the “ISS Policy Updates”), which are available at http://issgovernance.com/policy/2013/policy_information, apply to shareholder meetings held on or after February 1, 2013. ISS also has released updated Frequently Asked Questions (the “ISS FAQs”), available at the link above, relating to its 2013 policies. The Glass Lewis Proxy Paper Guidelines for the 2013 Proxy Season (the “Glass Lewis Guidelines”) will be effective for annual meetings held on or after January 1, 2013. A summary of the updates to the Glass Lewis Guidelines is available here. This alert reviews the most significant ISS and Glass Lewis updates and suggested steps for companies to consider in light of these updated proxy voting policies.

…continue reading: ISS, Glass Lewis, and the 2013 Proxy Season

Key Year-End Considerations for Public Companies

Posted by John F. Olson, Gibson, Dunn & Crutcher LLP and Georgetown Law Center, on Friday November 23, 2012 at 12:09 pm
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Editor’s Note: John Olson is a founding partner of Gibson, Dunn & Crutcher’s Washington, D.C. office and a visiting professor at the Georgetown Law Center. This post is based on a Gibson Dunn alert by Amy Goodman, Elizabeth A. Ising, Gillian McPhee and Ronald O. Mueller.

With the arrival of fall, calendar-year companies are gearing up for what promises to be another busy proxy season, preparing for new rules that will impact their disclosures and governance practices, and planning their 2013 board and committee calendars. To assist public companies in these endeavors, we discuss below ten key items for corporate secretaries and in-house counsel to consider.

…continue reading: Key Year-End Considerations for Public Companies

PCAOB Adopts New Audit Standard on Communications with Audit Committees

Posted by John F. Olson, Gibson, Dunn & Crutcher LLP and Georgetown Law Center, on Monday September 3, 2012 at 9:37 am
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Editor’s Note: John Olson is a founding partner of Gibson, Dunn & Crutcher’s Washington, D.C. office and a visiting professor at the Georgetown Law Center. This post is based on a Gibson Dunn alert by Gillian McPhee and Michael Scanlon.

At an open meeting held on August 15, 2012, the Public Company Accounting Oversight Board (“PCAOB”) voted to approve new Auditing Standard No. 16, Communications with Audit Committees. Although the new standard retains most of the preexisting communication requirements, there are a number of new areas that the auditor must discuss with the audit committee, and there are some areas where the auditor must seek specific responses from the audit committee. The new standard, available at http://pcaobus.org/Rules/Rulemaking/Docket030/Release_2012-004.pdf, is intended to benefit investors by enhancing the relevance and quality of communications between the auditor and audit committee, facilitating audit committee oversight of financial reporting and fostering improved financial reporting.

Background and Effective Dates

The PCAOB initially proposed Auditing Standard No. 16 for comment in March 2010 and issued a revised proposal in December 2011 following an initial comment period and feedback received at a September 2010 roundtable. Auditing Standard No. 16 expands on and supersedes existing standards on communications with audit committees (interim standards AU sec. 380, Communication With Audit Committees, and AU sec. 310, Appointment of the Independent Auditor), and makes conforming changes to related standards. The new standard requires SEC approval and, if approved, will apply to audits of public company financial statements for fiscal years beginning on or after December 15, 2012.

Auditing Standard No. 16 is the first standard that the PCAOB has adopted following enactment of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, a new PCAOB standard will not apply to audits of “emerging growth companies” (“EGCs”) unless the SEC determines that the application of the standard is “necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition, and capital formation.” At its August 15 meeting, the PCAOB expressed its view that the SEC should approve the application of the new standard to EGCs.

…continue reading: PCAOB Adopts New Audit Standard on Communications with Audit Committees

Considerations for Directors in the 2010 Proxy Season

Posted by John F. Olson, Gibson, Dunn & Crutcher LLP and Georgetown Law Center, on Tuesday February 23, 2010 at 9:16 am
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Editor’s Note: John Olson is a founding partner of Gibson, Dunn & Crutcher’s Washington, D.C. office and a visiting professor at the Georgetown Law Center. This post is based on a Gibson Dunn alert by Mr. Olson, Amy Goodman, Elizabeth Ising, Gillian McPhee and Aaron Briggs.

The current economic and regulatory landscape poses unprecedented challenges for public companies and their boards of directors. They are facing scrutiny from shareholders, Congress, regulators and the public, and new proposals to address the causes of the financial crisis have been emerging on almost a daily basis for over a year now.

Some of these proposals have been adopted and some remain under consideration at a time when calendar-year companies are preparing for the 2010 proxy season, complicating the planning process. Of particular note, in December, the Securities and Exchange Commission (“SEC”) adopted new proxy disclosure rules that likely will be a focal point for public company directors, as the new rules relate to disclosures regarding the composition and operation of boards of directors. [1] This memorandum is an update of our client alert covering considerations for public company directors in the current environment issued on October 15, 2009.

…continue reading: Considerations for Directors in the 2010 Proxy Season

SEC Adopts Final Rules on Enhanced Proxy Statement Disclosures

Posted by Eduardo Gallardo, Gibson, Dunn & Crutcher LLP, on Monday December 21, 2009 at 9:45 am
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Editor’s Note: Eduardo Gallardo is a partner focusing on mergers and acquisitions at Gibson, Dunn & Crutcher LLP. This post is based on a Gibson, Dunn & Crutcher client memorandum by Ron Mueller, Amy Goodman, Gillian McPhee, Dina Bernstein, and Anthony Shoemaker.

At an open meeting held on December 16, 2009, the Securities and Exchange Commission (“SEC”) approved a set of proposed rules to enhance the information provided to shareholders in company proxy statements regarding a number of risk oversight, compensation, board leadership and composition and other corporate governance matters.  The SEC approved the final rules by a 4-to-1 vote, with Commissioner Kathleen Casey dissenting.  The SEC released the text of the final rules on the same date they were adopted, with the 129 page adopting release available here.

The new rules have an effective date of February 28, 2010, except that a rule change on how equity awards are reported in the Summary Compensation Table applies to all companies with fiscal years ending after December 20, 2009.  Because all of the rule changes other than the equity reporting rule call for enhanced disclosures, companies presumably could, but would not be required to, voluntarily comply with all of the new rules even if they file their definitive proxy statements before February 28, 2010.

…continue reading: SEC Adopts Final Rules on Enhanced Proxy Statement Disclosures

SEC Approves Amendments to NYSE Corporate Governance Listing Standards

Posted by John F. Olson, Gibson, Dunn & Crutcher LLP and Georgetown Law Center, on Saturday December 19, 2009 at 10:05 am
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Editor’s Note: John Olson is a founding partner of Gibson, Dunn & Crutcher LLP and a visiting professor at the Georgetown Law Center. The following post is based on a Gibson, Dunn & Crutcher client memorandum by Mr. Olson, Brian J. Lane, Ronald O. Mueller, Amy L. Goodman, Gillian McPhee, and Elizabeth Ising.

On November 25, 2009, the Securities and Exchange Commission (“SEC”) approved amendments to the corporate governance listing standards of the New York Stock Exchange (“NYSE”). The changes will take effect on January 1, 2010.

As discussed in more detail below, the amendments, which the SEC approved in the form proposed in the NYSE’s original release: (1) codify certain staff interpretations, (2) clarify various disclosure requirements, and (3) incorporate applicable SEC disclosure requirements into the NYSE listing standards. Because most of the amendments conform the NYSE listing standards to existing SEC rules, or are of a clarifying or updating nature, they should necessitate only minimal changes to a listed company’s governance practices and disclosures. The most significant change is the new requirement that companies notify the NYSE in writing after any executive officer becomes aware of “any” non-compliance with the corporate governance listing standards, rather than any “material” non-compliance, as currently required.

The SEC release approving the NYSE amendments can be found here. The NYSE filing outlining the proposed amendments includes a mark-up showing the proposed changes to the text of the corporate governance listing standards.

…continue reading: SEC Approves Amendments to NYSE Corporate Governance Listing Standards

Considerations for Public Company Directors in the Current Environment

Posted by Eduardo Gallardo, Gibson, Dunn & Crutcher LLP, on Thursday October 22, 2009 at 9:02 am
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(Editor’s Note: This post is based on a Gibson, Dunn & Crutcher LLP memorandum by Amy Goodman and Gillian McPhee.)

The current economic and regulatory landscape poses unprecedented challenges for public companies and their boards of directors.  They are facing scrutiny from shareholders, Congress, regulators and the public, and new proposals to address the causes of the financial crisis have been emerging on almost a daily basis for over a year now.

Many of these proposals remain under consideration at a time when calendar-year companies are beginning preparations for the 2010 proxy season, complicating the planning process.  The uncertainty of the current environment means that, with respect to many issues–such as the SEC’s proxy access proposals–companies and their boards find themselves in a “wait and see” mode.  Directors should remain informed during this time as new developments occur, and they should be prepared to respond at an accelerated pace.  To assist boards in addressing the potential changes that lie ahead, this memorandum outlines key issues for directors to consider over the coming months.

1.  Executive Summary

As discussed in more detail below, as boards prepare for the potential changes that lie ahead, there are a number of key areas to consider.  These include:

a. Director Elections.  Boards and companies should take a holistic approach to the director election process, considering the potential impact that the loss of broker discretionary votes will have on director elections at the upcoming annual meeting, as well as the effect of majority voting, “notice and access” (also known as “e-proxy”), and expected voting recommendations of the major proxy advisory firms.

b. Executive Compensation Practices and Disclosures.  Boards and compensation committees should evaluate their companies’ compensation practices and policies in light of the current environment, including the strong possibility of federal legislation requiring an advisory vote on executive compensation, or “say on pay.”  For the 2010 proxy season, new required disclosures are anticipated relating to the risks created by employee compensation plans and the use of compensation consultants.  In view of these considerations, companies should assess their compensation disclosures, with particular focus on the Compensation Discussion & Analysis.  In addition, boards and compensation committees should be aware of executive compensation practices that institutional investors and proxy advisory firms frown upon (such as tax gross-ups) and those that they advocate, such as “hold-through-retirement” provisions and “clawback” policies.

c. Board Leadership.  Boards and companies should expect a continued spotlight on the issue of board leadership in the coming months.  In anticipation of new required proxy disclosures about board leadership structure, boards should consider why their current leadership structure is appropriate.  At companies that combine the positions of chair and CEO, consideration should be given to what, if any, steps should be taken to enhance the independent leadership of the board.  In addition, the board should consider this issue as part of the succession planning process.

d. Risk Oversight.  Boards and companies should consider whether the board has the appropriate structure and processes in place for overseeing the major risks facing the company.  The board should be comfortable that it understands these risks and how the risks relate to the company’s business and strategy.  Boards, and those who advise them, should think carefully about how the board is spending its time and see that the board has adequate time to address critical issues such as strategy and risk.
e. Shareholder Engagement.  Boards should be attentive to what their companies are doing to engage shareholders and recognize that, more than in the past, directors may need to play a greater role in reaching out to shareholders.  Initiating a dialogue before a major issue arises helps build a relationship so that the company is not approaching a major shareholder for the first time to talk about a critical subject.

f. Shareholder Proposals for the 2010 Proxy Season.  For the 2010 proxy season, we expect that shareholder proposals seeking the appointment of an independent chair and proposals seeking an advisory vote on executive compensation will continue to be popular.  In addition, executive compensation in general is likely to be a frequent subject of shareholder proposals.  Finally, shareholders’ ability to call special meetings and supermajority voting provisions also are likely to be focal points in the next proxy season.

…continue reading: Considerations for Public Company Directors in the Current Environment

NYSE and NASDAQ Propose Rule Changes

Posted by Eduardo Gallardo, Gibson, Dunn & Crutcher LLP, on Sunday September 20, 2009 at 4:25 pm
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(Editor’s Note: This post from Eduardo Gallardo is based on a Gibson, Dunn & Crutcher LLP client memorandum by Amy Goodman, Gillian McPhee and Joelle Khoury.)

On August 26, 2009, the New York Stock Exchange (“NYSE”) filed proposed amendments to its corporate governance listing standards with the Securities and Exchange Commission (“SEC”). The NYSE has proposed that they take effect on January 1, 2010. The proposals must be approved by the SEC before they become final, and will be the subject of a 21-day comment period following publication in the Federal Register.

The NYSE proposals would amend the corporate governance listing standards to: (1) codify certain staff interpretations; (2) clarify various disclosure requirements; and (3) incorporate applicable SEC disclosure requirements into the listing standards. Because most of the proposed changes would conform the NYSE listing standards to existing SEC rules, or are of a clarifying or updating nature, they should necessitate only minimal changes to listed company governance practices and disclosures. [1]

Below is an overview of the proposals in the NYSE filing, which includes a mark-up showing the proposed changes to the text of the corporate governance listing standards.

In addition, in August 2009, the NASDAQ Listing and Hearing Review Council sent a paper to companies listed on The NASDAQ Stock Market LLC (“NASDAQ”) seeking comment on whether NASDAQ should adopt a “comply or disclose” approach with respect to certain corporate governance practices. The paper is discussed in more detail below.

NYSE – The Proposed Amendments – A Brief Overview

A primary purpose of the proposed amendments is to update the NYSE’s corporate governance listing standards in light of the SEC’s 2006 adoption of Item 407 of Regulation S-K, which requires disclosure about director independence and certain other aspects of a company’s corporate governance practices. In this regard, the proposals would eliminate each disclosure requirement currently included in the NYSE corporate governance listing standards that also is required by Item 407 and reference the SEC requirements. Although the NYSE acknowledges in the proposing release that this approach may appear redundant, it will permit the NYSE to take action (including delisting) against companies with deficient Item 407 disclosure, as these companies also will be deemed out of compliance with NYSE rules. In addition, as discussed below, the changes would permit companies to make disclosures about certain matters on their websites instead of in their proxy statements.

The following provides a brief overview of the most significant amendments that the NYSE has proposed:

Director Independence Disclosure: The NYSE is proposing to replace its current director independence disclosure requirements with a requirement that listed companies provide the disclosures required by Item 407, which require that companies describe, for each director, by specific category or type, any transactions, relationships or arrangements that the board considered in determining that the director is independent. Current NYSE listing standards permit boards to adopt and disclose categorical standards to assist them in assessing independence, and allow companies to make a general disclosure that their independent directors meet these standards. Accordingly, if adopted, the proposals would eliminate the concept of categorical standards from the NYSE listing standards. However, we expect that the boards of many companies will continue to maintain these standards, because they provide a useful tool for assessing director independence.

Executive Sessions of Non-Management Directors: The NYSE listing standards require that non-management directors hold regular executive sessions. Because some companies have expressed a preference for holding regular executive sessions of only the independent directors, the proposals would clarify that this satisfies the NYSE requirement.

Communications with Directors: The NYSE listing standards require companies to provide “interested parties” with a method to communicate with the presiding director, or the non-management or independent directors as a group. The NYSE proposes clarifying that “interested parties” is not limited to shareholders.

Requirements for Audit Committees: Under current NYSE listing standards, if a member of a listed company audit committee simultaneously serves on the audit committees of more than three public companies, “and the listed company does not limit the number of audit committees on which its audit committee members serve to three or less,” then the board must determine that this service would not impair the member’s ability to serve on the listed company’s audit committee, and the company must disclose this determination in its proxy statement. According to the proposing release, the wording of this provision has led to uncertainty about whether the determination and related disclosure are necessary if a listed company does not limit outside audit committee service to three public company audit committees. The proposals would clarify that both the determination and disclosure are required whether or not a company limits the number of audit committees on which its directors may serve to three or less.

Codes of Conduct: The NYSE listing standards require that companies “promptly” disclose any waivers of their codes of conduct granted to executive officers and directors. The proposals would clarify that companies must disclose waivers within four business days, consistent with SEC requirements governing Form 8-K disclosure of waivers from a company’s code of ethics applicable to its CEO and senior financial officers. The proposals also would specify that companies can make the disclosure through a press release, on their websites or on a Form 8-K. The NYSE notes in the proposing release that this timing varies slightly from the guidance in the staff’s Frequently Asked Questions, which state that companies may make the disclosure using one of these alternatives within two to three business days.

Notification of Non-Compliance with Corporate Governance Listing Standards: The NYSE listing standards currently require that companies notify the NYSE in writing after any executive offer becomes aware of a “material” non-compliance with the corporate governance listing standards. The proposals would amend this provision to require notification when an executive officer becomes aware of any non-compliance.

Certification Requirements: Under the current NYSE listing standards, listed company CEOs annually must certify to the NYSE that they are not aware of any violation of the NYSE corporate governance listing standards, qualifying the certification to the extent necessary. The certification is due within 30 days of a company’s annual shareholder meeting. In addition, in their annual reports to shareholders, companies must disclose that they filed the previous year’s CEO certification and any certifications required by SEC rules. According to the proposing release, this requirement has caused significant confusion because it relates to filings that were made in the previous year, and the NYSE believes it is no longer necessary in light of the SEC rules requiring Form 8-K disclosure of any material non-compliance with exchange rules. In view of these considerations, the NYSE is proposing to eliminate the disclosure requirement relating to these certifications, but is retaining the certification requirement.

Website Discussion of NYSE-Mandated Corporate Governance Disclosures: The NYSE is proposing to give companies the option to make specific corporate governance disclosures required only under the NYSE’s rules on their websites, instead of in the proxy statement. However, if they choose to make such disclosures on their website, that fact and the company’s website address must be provided in the proxy statement. These disclosures would include information about:

• contributions made by the company to any non-profit organization where an independent director is an executive officer, if the contributions exceeded the greater of $1 million or 2% of the organization’s revenues in any single fiscal year during the past three years;

• the identity of the director chosen to preside at executive sessions;

• the method for interested parties to communicate directly with the presiding director or the non-management or independent directors as a group; and

• the board’s determination that an audit committee member’s service on more than three public company audit committees does not impair the member’s ability to serve effectively on the company’s audit committee (discussed above).

Website Requirements: The NYSE has proposed minor changes to various aspects of its rules on website disclosure, including:

• Creating new subsections on web posting and disclosure within each of the provisions governing audit, compensation and nominating/governance committee charters, corporate governance guidelines and codes of conduct. These provisions would set forth existing NYSE requirements that companies post these documents on their websites, disclose in the proxy statement that the documents are available on the website, and provide the website address.

• Eliminating the requirement that companies make hard copies of their governance documents available in print on request in light of fact that the documents are available on company websites.

• Moving the requirement that listed companies maintain a publicly accessible website out of the corporate governance listing standards and into a stand-alone section (Section 307.00) of the Listed Company Manual. This is intended to clarify that the requirement applies to companies that are subject to web posting requirements under any part of the Listed Company Manual (and not just the corporate governance listing standards).

• Specifying that, to the extent any provision of the Listed Company Manual requires a company to make documents available on its website, the website must be accessible from the United States, must clearly indicate, in the English language, the location of the documents and must include a printable version of the documents in English.

Provisions Applicable to Specific Circumstances: The NYSE also is proposing certain changes and clarifications to the transition periods applicable to companies listed in conjunction with an initial public offering, spin-off or carve-out with regard to timing for compliance with its corporate governance requirements. In addition, the NYSE is proposing to add sections detailing the compliance requirements applicable to companies when they list upon emergence from bankruptcy, transfer from another market, cease to be controlled companies or cease to be foreign private issuers (as discussed below).

Foreign Private Issuer Disclosure: The NYSE also has proposed changes applicable only to foreign private issuers:

• The NYSE rules currently require that foreign private issuers disclose significant differences between their home country corporate governance practices and NYSE requirements applicable to U.S. companies. Foreign private issuers may make these disclosures in their annual shareholder report or on their websites. However, as a result of a rule change effective for filings relating to fiscal years ending on or after December 15, 2008, SEC rules now require this disclosure in the Form 20-F. Accordingly, the NYSE is proposing to require foreign private issuers that file annual reports on Form 20-F to include a statement of significant differences in the Form 20-F. All other foreign private issuers will continue to have the option of disclosing this statement either in their annual reports or on their websites.

• The NYSE is proposing to set forth specific timing requirements for compliance with its corporate governance listing standards for companies that cease to be foreign private issuers. Under the proposals, companies generally would have to comply with the corporate governance listing standards within six months of the date they fail to qualify for foreign private issuer status under applicable SEC rules, which enable foreign private issuers to test their status annually at the end of the most recently completed second fiscal quarter (“determination date”).

• The NYSE is proposing to add a transition period on shareholder approval of equity compensation plans for companies that cease to qualify as foreign private issuers. Under the proposals, these companies will have a limited transition period with respect to certain equity compensation plans that were not shareholder-approved, so that companies can make additional grants under the plans without shareholder approval after they cease to qualify as foreign private issuers. Subject to certain exceptions, the transition period generally would end on the later of six months after the date a company ceases to qualify as a foreign private issuer or the first annual meeting after that date, but in no event later than one year after the determination date.

NASDAQ Request for Comment on “Comply or Disclose” Approach

On August 3, 2009, the NASDAQ Listing and Hearing Review Council sent a paper to NASDAQ companies seeking comment on whether it should adopt a “comply or disclose” approach for certain corporate governance practices as an alternative to additional, substantive requirements, noting that some non-U.S. markets follow a “comply or disclose” model and that it “offers flexibility to companies and transparency to investors and allows practices to evolve in a logical manner.” Accordingly, the NASDAQ paper solicits comment about a range of practices, including board leadership, resignation policies for directors that fail to receive majority votes, annual director elections, and shareholder ratification of a company’s outside auditor. Any required disclosures would appear either in a company’s proxy, in the case of most U.S. companies, or in its annual report filed with the SEC for all other companies. Comments are due by October 30, 2009.

What Companies Should Do Now

For NYSE companies, most of the amendments conform the listing standards to existing SEC rules or are of a clarifying or updating nature. Accordingly, if the amendments are adopted, they should necessitate only minimal changes to companies’ corporate governance practices and disclosures. The most significant potential amendment is the proposal to require that companies notify the NYSE in writing after any executive officer becomes aware of any non-compliance, as opposed to a “material” non-compliance, with the corporate governance listing standards. Companies may wish to comment on this aspect of the proposal.

In addition, NYSE companies will need to review their proxy disclosures and governance documents (including committee charters and D&O questionnaires), to determine whether any section references to the NYSE listing standards need updating. We expect that companies will need to update their D&O questionnaires this fall in any event, in light of pending SEC proposals to require enhanced proxy disclosure about compensation and corporate governance matters. [2] Companies also should consider whether they will eliminate disclosures about the filing of CEO certifications and the undertaking to provide hard copies of governance documents upon request, although companies may want to continue this latter offer as a matter of good investor relations.

NASDAQ companies should consider whether to comment on the NASDAQ paper. If NASDAQ decides to move forward with additional corporate governance requirements, companies may find a “comply or disclose” approach preferable because it would preserve flexibility and allow them to adopt the practices that work best for them. Accordingly, it may be useful for companies to provide input to NASDAQ as it moves forward with this process.

Footnotes:

[1] The NYSE originally filed an earlier version of these proposals with the SEC in 2005, and later amended the proposals following the SEC’s comprehensive changes to its proxy disclosure rules in 2006, but no SEC action was taken on these proposals.
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[2] Proxy Disclosure and Solicitation Enhancements, SEC Release No. 33-9052, 34-60280, 74 Fed. Reg. 35,076 (July 17, 2009).
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