- Interactive Data: In early 2009, the U.S. Securities and Exchange Commission (“SEC“) released final rules requiring all public companies to provide financial statements in interactive data format, in an attempt to make financial information more accessible to investors. The largest accelerated filers (with public floats greater than $5 billion) are currently required (as of June 15, 2009) to comply with this requirement and the remaining large accelerated filers face a June 15, 2010 deadline, with the remaining filers following suit a year later.
- Broker Discretionary Voting: the SEC approved the New York Stock Exchange’s proposal to eliminate broker discretionary voting for director elections. This applies to companies holding meetings after January 1, 2010. This change could be significant in decreasing the ease with which issuer nominees are elected.
Proposal Rules and Regulations
- Shareholder Say-on-Pay: In July, the SEC proposed rules implementing Section 111(e) of the Emergency Economic Stabilization Act of 2008, which required recipients under the Capital Purchase Program to include in their proxy materials an annual advisory shareholder vote on executive compensation. This requirement likely will be extended to all reporting companies in the near future.
- Executive Compensation: Also in July, the SEC proposed enhancements to executive compensation disclosure, including more disclosure relating to how compensation policies may affect risk, the use of compensation consultants and reporting of stock and stock options. Proposed rules would provide for independence standards for compensation committee members akin to the requirements for the members of audit committees.
- Corporate Governance: Also in July, the SEC proposed enhanced disclosure requirements relating to director experience, a company’s particular choice of leadership structure and legal proceedings. The proposal also solicits comments about whether disclosure regarding director diversity should be required.
- Voting Results: Finally, in July, the SEC proposed a new Form 8-K requirement directing companies to disclose the results of a shareholder vote within four business days of the end of the meeting. Currently, the results would not be required until the next Form 10-Q or Form 10-K.
- Shareholder Rights Plans: More public companies are allowing shareholders a vote on poison pills, reported sharkrepellent.net, a company that compiles data on public company governance trends. This year has seen increased activity in the area of poison pills, with more and more companies facing depressed share prices opting to adopt plans to protect against unwanted, opportunistic suitors.
- Sarbox Clawbacks: Section 304 of the Sarbanes-Oxley Act requires a CEO or CFO who received a bonus or other incentive- or equity-based compensation to reimburse the company should the company be required to restate its financial information due to “misconduct.” Early on, the SEC did not file many enforcement actions, and when it did it targeted CEOs and CFOs who actively engaged in the fraudulent conduct. But this may be changing as last month the SEC forced a CEO who was not alleged to have engaged in fraudulent conduct to disgorge bonus and profits from stock sales.