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MSCI, the parent company of ISS, recently announced that Gary Retelny, a member of MSCI’s Executive Committee and its Corporate Secretary, has been appointed President of ISS.  As ISS is clearly an influential force in corporate governance developments, we asked Mr. Retelny about his new position. Davis Polk: What are your primary goals and expectations for ISS as we approach the 2012 proxy season? Gary Retelny: With only a few days “on the job” as ISS’ President, I still have a lot of listening and learning to do before I can articulate specific goals.  I hope to meet frequently with all our constituencies and provide a variety of forums for meaningful dialogue and of course, debate.  I can tell you generally though that as we look toward the 2012 proxy season, I will be working to ensure that ISS’ policies and related research continue to be increasingly transparent, fair and impartial.  I would note that we will soon be releasing the results of our 2011-2012 policy survey and in October will release draft policy updates and invite comments on the draft.  I urge interested parties to participate in the comment process.
5 years 7 months ago
Bankruptcy mills are high volume law practices that advertise aggressively and provide poor quality legal services.  Typical attributes of a bankruptcy mill are as follows: a)  rely heavily on poorly supervised non-attorney staff; b) lack adequate controls over workflow (correspondence to 3rd parties & clients) and court deadlines; c)  cut corners both ethically and substantively; d) minimal attorney involvement; e) routinely fail to file necessary documents, and frequently show up to hearings unprepared, and f) Have usually been admonished by the court on more than one occasion. Unfortunately, with bankruptcy filings soaring, many unaware consumers have turned to “bankruptcy mills” for help with their financial difficulties.  Most “bankruptcy mills” advertise heavily on television and radio while flooding homeowners in foreclosure with direct mail.  When a consumer chooses a “bankruptcy mill” they assume that they will be working closely with a lawyer on their case.  However, with bankruptcy mills, this is often not the case.  The economics are such that with a mill they have a very high ratio of cases to attorneys.  I have seen “bankruptcy mills” that literally have hundreds of open cases for each attorney working at the firm.
5 years 7 months ago
As previously posted on June 24, several derivative lawsuits have been filed against companies that have failed their "say-on-pay" votes. The lawsuits seek a recovery for alleged excessive executive compensation. Earlier this month, Dex One Corporation became the eighth company sued. The Dex One lawsuit, filed in the Eastern District of North Carolina, claims that officers and directors breached their fiduciary duty to the company by awarding large increases in compensation to the management team while the company was in bankruptcy, followed by a share price decline of more than 95 percent.  Since our last post on this topic, several companies with say-on-pay lawsuits have updated their disclosure. Cincinnati Bell indicated that two additional derivative lawsuits were filed naming the company's directors and named executive officers as defendants, and Hercules Offshore also disclosed the existence of a second lawsuit. As was the case with the two lawsuits against Occidental that followed on the heels of its first say-on-pay litigation, these additional suits are substantially similar to the initial complaints.  No further settlements have been announced. 
5 years 7 months ago
The 2011 Corporate Board of Directors Survey from Stanford's Rock Center and Heidrick & Struggles suggests that active CEOs may not make the best board members.  We asked Professor David Larcker, corporate governance expert at Stanford, to discuss those and other findings. Davis Polk: Active CEOs are generally considered prized board candidates due to their leadership experiences.  Do your survey results dispute that view? Prof. Larcker: I don’t think our survey disputes it so much as qualifies it.  What we see in the survey results is that there are advantages and disadvantages to different types of directors, including active CEOs.  When identifying new candidates for the board, the nominating and governance committee needs to balance the leadership and knowledge aspects with concerns about whether an individual really has the time to devote to being an engaged board member.  The survey responses suggest that, when all of these factors are taken together, active CEOs might be roughly equivalent to the quality of other board members. Davis Polk: The survey also focuses on concerns with board turnover.  Is board turnover at appropriate levels?  What can boards do to better manage turnover?
5 years 7 months ago
Bankruptcy has had a bad reputation over the decades for some good and some bad reasons. The good reasons for a bad reputation all boil down to the issue of fraud: people who have assets and are hiding them from creditors, or people who went into business and ran up debt they could not afford, or consumers who bought "stuff" with credit (cards) with no ability to repay. In the later case, it's rather hard to repossess a vacation cruise, and in the former, if the money from profits is spent, it's gone for good. Unless intent to commit fraud can be shown, normally a Bankruptcy will wipe out debt.Let's take a step back and discuss what a Bankruptcy does. Quite simply when a bankruptcy is filed, it protects the debtors from creditors. The are two main types of PERSONAL BANKRUPTCY - Chapter 7, where you eliminate debt without any repayment but surrender personal property and real estate that is not protected by law for the benefit of the creditors. A Chapter 13, requires that you have money left over every month AFTER paying REGULAR LIVING EXPENSES, and from the money remaining each month pay creditors on a pro rata basis.The primary reasons for filing a bankruptcy are not voluntary at all: 1. Medical bills and illnesses 2. Loss of a job or substantial reduction in hours 3. A birth or death in the family 4. A two income household becoming a one income family 5.
5 years 7 months ago
A new Chapter 13 controversy is brewing over whether a debtor can take an additional $200 “Old Car” operating allowance on the means test for paid-off vehicles that are more than six (6) model years old or that have more than 75,000 miles.  While the United States Trustee has generally conceded the issue, a number of Chapter 13 trustees have not.  In the Southern District of California where I practice, one of our Chapter 13 trustees has joined the new trend in trying to challenge the extra “Old Car” operating allowance. Recently this issue has increased in significance since the Supreme Court had decided Ransom v. FIA Card Services.  In Ransom the Supreme Court of the United States (“SCOTUS”) held that a debtor may not take an ownership allowance on a paid-off vehicle.  Ransom v. FIA Card Services, 562 U. S. ____ (2011).    So if you are not able to take the “Old Car” allowance it’s a double whammy.  You cannot set aside an expense for replacement (“ownership allowance”) and you probably have a vehicle that is out of warranty and more costly in repairs and maintenance.
5 years 7 months ago
The SEC issued a press release today confirming that it is not seeking rehearing of the court decision to vacate the proxy access rule it had adopted, Rule 14a-11.  Of particular interest is the last paragraph of the release, indicating that the related amendments to Rule 14a-8 will go into effect when the court's decision is finalized, which is expected to be September 13th, absent further Commission action. At the time of the filing of the lawsuit in fall 2010, the Commission issued a stay on both Rule 14a-11 and related amendments to the Commission's rules pending resolution of the matter, including the amendment to Rule 14a-8.  The Commission's order indicated that it stayed the effectiveness of the amendment to Rule 14a-8 because the amendment "was designed to complement Rule 14a-11 and is intertwined."   Specifically, the amendment to Rule 14a-8(i)(8) repeals the current exclusion of a shareholder proposal that relates to a nomination or an election for membership on the company's board of directors or a procedure for such nomination or election, other than a proposal that (a) would disqualify a nominee who is standing for election; (b) would remove a director from office before his or her term expired; (c) questions the competence, business judgment or character of a nominee; (d) seeks to include a specific individual in the company’s proxy materials for election to the board; or (e) otherwise could affect the outcome of the upcoming election of directors.
5 years 7 months ago
Now that the economy is no longer an issue, we have to turn to a new topic- "The Economy", but a different sense of the economy - YOUR economic condition. This may mirror the government's or, perhaps, you may actually understand the state of your finances, as you read this. Are/If you are in a position where "deficit spending" is necessary for you to pay your bills (not unlike the issue of the Federal debt-ceiling - we had to get Congress to let us borrow more so we could pay the interest on the bill we already have incurred) which is like getting a new credit card with an extra few thousand dollars of credit available so you can pay the interest due on the other cards, and buy food, or pay the mortgage, or put gas in the car or... well you get the idea, you need to reconsider your position immediately. Unlike the United States of America, you cannot keep getting more debt without near term (tomorrow or the day after) consequences. Consequences like bill collectors calling; Court appearances being required; car payments missed; a mortgage payment missed or paid more than a month late; a foreclosure; or just ANXIETY and WORRY about what you are going to do when the credit limit is exhausted. Here is a short check-list to review: 1. Is the reason for the excessive debt, spending, reduced income, or both?
5 years 7 months ago
Earlier this week, the SEC announced a settlement with the former CFO of Beazer Homes USA to clawback incentive compensation and profits from the sale of Beazer stock of more than $1.4 million pursuant to the Sarbanes-Oxley Act.  Neither the CFO nor Beazer’s CEO, who reached a similar settlement with the SEC earlier this year for almost $6.5 million, was charged with personal misconduct.  Notably, the SEC blames Beazer’s chief accounting officer as the main perpetrator of the fraudulent actions that led to accounting restatements, but in accordance with the Sarbanes-Oxley Act, the SEC could not seek recoupment from any officers other than the CEO and CFO.  The SEC complaint against the chief accounting officer only included traditional cease-and-desist and disgorgement relief.
5 years 8 months ago
A fairly recent development in governance proposals has been the surge in proposals seeking the ability of shareholders to act by written consent, in lieu of a meeting. The proposal has gained substantial momentum in a short period, averaging 48.4% support at 32 companies where the proposal was voted on during the 2011 proxy season and winning majority support at 12 companies. Almost all of the proposals were submitted by Chevedden or the Steiners. As of April, ISS reported that 30% of S&P 500 companies allow shareholders to act by less than unanimous written consent. Some believe that shareholders are less likely to support a written consent proposal if a company already permits shareholders to call special meetings. Our analysis indicates that while there is correlation, it is not dispositive. 19 of the 22 companies where the proposal failed give shareholders the right to call special meetings at 25% thresholds or below. However, 5 companies that provide for the special meeting right nonetheless received majority support for the written consent proposal, including at Liz Claiborne (67%), Staples (60%) and AT&T (54%). AT&T announced that it intends to implement the proposal at its next annual meeting.
5 years 8 months ago
Steven Pearlstein, a columnist for the Washington Post wrote about the "Global Economy Comes To The End Of Its String" and went on to explain, quite "readably" why it's happening. The column, in the 8/6/11 online edition, discusses the fact that we are cycling back to 2008 levels (maybe), because we never fixed the underlying problems with ours and the global economies. The only issue I would have with the characterization is that we are finding it increasingly difficult to separate our economy from the global economy.As was written in the prior post here, the U.S. has been spending more than it's been making. We have relied on foreign countries, like China, to continue to buy our Treasury Bonds, which is just lending us money. That's what the whole "Debt-Ceiling" debate was all about.
5 years 8 months ago
On August 5, 2011, the UK Financial Services Authority (FSA) proposed two draft “Dear CEO” letters providing guidance on issues relating to the revised Remuneration Code, which came into force on January 1, 2011. The Remuneration Code covers a relatively wide-range of financial institutions in the UK (both UK firms and non-UK firms with branches in the UK) including banks, building societies and broker-dealers (over 2,500 institutions in all). The letters, one of which is for firms in proportionality tier 1 and the other for firms in proportionality tiers 2, 3 and 4, detail how the FSA plans to monitor implementation of the Remuneration Code and provide guidance on FSA policy with regard to the Code. Each letter contains annexes that provide specific guidance on the following topics: the definition of “Code staff”, expectations regarding qualifying long-term incentive plans and how firms may interpret the share-equivalent payment instrument alternatives.
5 years 8 months ago
I work in the private practice of law dealing daily with the economic realities of average people who have average problems and with those who have extraordinary financial problems. Having had the responsibility for the investment of as much as $145M, I continue to pay attention to the financial markets on a daily basis. This posting is to try to explain what has happened in the lowering of the credit rating of the Country's "sovereign" debt (meaning money the Country itself has borrowed - think Treasury Bonds) from AAA to AA+. Just like in baseball, we have been sent down to the minors.By now, the entire world, knows that the United States has lost some of its credit-worthiness. Standard and Poors, known better by "S&P", in its role as a debt rating agency (a company that determines what debt is safe for investment and what is risky and how risky). The fact that the other two major raters have not taken any action "against" the U.S.'s risk seems to be of no importance. In the world of investments PERCEPTION IS REALITY. That's true in many areas of life but especially in this oneThe downgrade was apparently caused not by economic factors but rather the dithering of the Congress in deciding to do anything about the debt-ceiling and deficit reduction.
5 years 8 months ago
ISS has issued its preliminary US post-season report, which is full of useful statistics about the 2011 proxy season for the data hound.  Broc notes some of the key highlights in TheCorporateCounsel.net blog. The report also provides a possible hint on the question of what level of dissent for say-on-pay votes, beyond failed votes, could cause additional ISS scrutiny.  Based on the text in the report as noted below, it appears that companies that received below 70% approval may be targeted, though what "greater attention" means in this context is unclear: "While investors will have different thresholds for which firms they will scrutinize more closely, it appears likely that issuers with greater than 30 percent opposition this year will receive greater attention in 2012.   According to ISS data, 168 companies, or about 6 percent of the total, received more than 30 percent dissent this proxy season." Contact Ning Chiu. Contact Kyoko Takahashi Lin.
5 years 8 months ago
ISS has issued its preliminary US post-season report, which is full of useful statistics about the 2011 proxy season for the data hound.  Broc notes some of the key highlights in TheCorporateCounsel.net blog. The report also provides a possible hint on the question of what level of dissent for say-on-pay votes, beyond failed votes, could cause additional ISS scrutiny.  Based on the text in the report as noted below, it appears that companies that received below 70% approval may be targeted, though what "greater attention" means in this context is unclear: "While investors will have different thresholds for which firms they will scrutinize more closely, it appears likely that issuers with greater than 30 percent opposition this year will receive greater attention in 2012.   According to ISS data, 168 companies, or about 6 percent of the total, received more than 30 percent dissent this proxy season." Contact Ning Chiu. Contact Kyoko Takahashi Lin.
5 years 8 months ago
ISS has issued its preliminary US post-season report, which is full of useful statistics about the 2011 proxy season for the data hound.  Broc notes some of the key highlights in TheCorporateCounsel.net blog. The report also provides a possible hint on the question of what level of dissent for say-on-pay votes, beyond failed votes, could cause additional ISS scrutiny.  Based on the text in the report as noted below, it appears that companies that received below 70% approval may be targeted, though what "greater attention" means in this context is unclear: "While investors will have different thresholds for which firms they will scrutinize more closely, it appears likely that issuers with greater than 30 percent opposition this year will receive greater attention in 2012.   According to ISS data, 168 companies, or about 6 percent of the total, received more than 30 percent dissent this proxy season."
5 years 8 months ago
ISS has issued its preliminary US post-season report, which is full of useful statistics about the 2011 proxy season for the data hound.  Broc notes some of the key highlights in TheCorporateCounsel.net blog. The report also provides a possible hint on the question of what level of dissent for say-on-pay votes, beyond failed votes, could cause additional ISS scrutiny.  Based on the text in the report as noted below, it appears that companies that received below 70% approval may be targeted, though what "greater attention" means in this context is unclear: "While investors will have different thresholds for which firms they will scrutinize more closely, it appears likely that issuers with greater than 30 percent opposition this year will receive greater attention in 2012.   According to ISS data, 168 companies, or about 6 percent of the total, received more than 30 percent dissent this proxy season." Contact Ning Chiu. Contact Kyoko Takahashi Lin.
5 years 8 months ago
The SEC website contains a schedule of Dodd-Frank rulemaking, which has been helpful but at times confusing when the schedule is updated with little notice.  Currently, the schedule for the next five months of August - December includes: Final rules:  (a) disclosure by institutional investor managers on how they voted on executive compensation; (b) listing standards on compensation committee independence and compensation advisers; (c) disclosure on conflict minerals, mine safety and by resource extraction issuers; and (d) end-user exception to mandatory clearing of security-based swaps. Proposed rules:  (a) disclosure of pay-for-performance, pay ratios; and hedging by employees and directors and (b) recovery of executive compensation. 
5 years 9 months ago
The SEC website contains a schedule of Dodd-Frank rulemaking, which has been helpful but at times confusing when the schedule is updated with little notice.  Currently, the schedule for the next five months of August - December includes: Final rules:  (a) disclosure by institutional investor managers on how they voted on executive compensation; (b) listing standards on compensation committee independence and compensation advisers; (c) disclosure on conflict minerals, mine safety and by resource extraction issuers; and (d) end-user exception to mandatory clearing of security-based swaps. Proposed rules:  (a) disclosure of pay-for-performance, pay ratios; and hedging by employees and directors and (b) recovery of executive compensation. 
5 years 9 months ago
The SEC website contains a schedule of Dodd-Frank rulemaking, which has been helpful but at times confusing when the schedule is updated with little notice.  Currently, the schedule for the next five months of August - December includes: Final rules:  (a) disclosure by institutional investor managers on how they voted on executive compensation; (b) listing standards on compensation committee independence and compensation advisers; (c) disclosure on conflict minerals, mine safety and by resource extraction issuers; and (d) end-user exception to mandatory clearing of security-based swaps. Proposed rules:  (a) disclosure of pay-for-performance, pay ratios; and hedging by employees and directors and (b) recovery of executive compensation.  The SEC calendar currently indicates it plans to adopt final rules on these executive compensation disclosures and clawback policy in the January - June 2012 time period.  In addition, during this period the SEC also intends to adopt rules (jointly with others) on the disclosure and prohibition of executive compensation structure and arrangements for financial institutions.
5 years 9 months ago