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Compliance Hotline
SEC Proposes Changes to Executive Compensation Disclosure Requirements
The SEC has voted to publish for comment proposed rules that would amend disclosure requirements for executive and director compensation, related party transactions, director independence and other corporate governance matters, and security ownership of officers and directors. The proposed rules would affect disclosure in proxy statements, annual reports and registration statements. They would require most of this disclosure to be provided in plain English. The proposals also would modify the current reporting requirements of Form 8-K regarding compensation arrangements.
With respect to executive and director compensation, the currently required tabular disclosure would be refined and combined with improved narrative disclosure to elicit clearer and more complete disclosure of compensation of the principal executive officer, principal financial officer, the three other highest paid executive officers and the directors. The new disclosure would be a Compensation Discussion and Analysis and would address the objectives and implementation of executive compensation programs, focusing on the most important factors underlying each company's compensation policies and decisions. Executive compensation disclosure would be organized into three broad categories:
- Compensation over the last 3 years, which would be reorganized as a 'Summary Compensation Table,' include: A new column reporting total compensation; a dollar value showing all stock-based awards; an 'All Other Compensation” column showing the aggregate increase in actuarial value of pension plans accrued during the year and all earnings on deferred compensation that is not tax-qualified; perquisites (the threshold for disclosing perquisites would be reduced to $10,000 and interpretive guidance provided); and two supplemental tables reporting Grants of Performance-Based Awards and Grants of All Other Equity Awards.
- Disclosure of holdings of outstanding equity-related interests received as compensation, including: the Outstanding Equity Awards at Fiscal Year-End Table, showing outstanding awards representing potential amounts that may be received in the future; and the Option Exercises and Stock Vested Table, showing amounts realized on equity compensation during the last year.
- A retirement plan and post-employment disclosure, including: The Retirement Plan Potential Annual Payments and Benefits Table disclosing annual benefits payable to each named executive officer; the Nonqualified Defined Contribution and Other Deferred Compensation Plans Table disclosing year-end balance, and executive contributions, company contributions, earnings and withdrawals for the year; and disclosure of payments and benefits (including perquisites) payable on termination or change in control, including quantification of these potential payments and benefits.
Regarding related person transactions, director independence and other corporate governance matters, the proposals would update, clarify, and slightly expand the disclosure provisions regarding related person transactions. Principal changes would include a disclosure requirement regarding policies and procedures for approving related party transactions, a slight expansion of the categories of related persons and a change in the threshold for disclosure from $60,000 to $120,000. The requirement to disclose these transactions would also be made more principles-based, and would require disclosure if the company is a participant in a transaction in which a related person has a direct or indirect material interest.
Whistleblowers Not Protected By SOX Outside U.S.
In an issue of first impression for an appellate court, the First Circuit has ruled that ' 806 of Sarbanes-Oxley, which gives whistleblower protection to employees of publicly traded companies, does not extend to the employees of foreign subsidiaries of US companies working outside the country. Carnero v. Boston Scientific Corp., No. 04-1801 (Jan. 5, 2006).
Stating that '[i]f the whistleblower protection provision is given extraterritorial reach in a case like the present one, it would empower U.S. courts and a U.S. agency, the [Department of Labor], to delve into the employment relationship between foreign employers and their foreign employees.' The court further added that it believed that 'if Congress had intended that the whistleblower provision would apply abroad to foreign entities, it would have said so.' The court did note, however, that the plaintiff (an Argentinean who worked for two Brazilian subsidiaries of a US corporation) might have had a claim if the whistleblowing had occurred at a domestic subsidiary over alleged misconduct in the United States. Unfortunately for the plaintiff, the court found that Congress has not made a provision for possible problems arising when the DOL 'seeks to regulate employment relationships in foreign nations, nor has Congress provided the DOL with special powers and resources to conduct investigations abroad.'
SEC Proposes Changes to Executive Compensation Disclosure Requirements
The SEC has voted to publish for comment proposed rules that would amend disclosure requirements for executive and director compensation, related party transactions, director independence and other corporate governance matters, and security ownership of officers and directors. The proposed rules would affect disclosure in proxy statements, annual reports and registration statements. They would require most of this disclosure to be provided in plain English. The proposals also would modify the current reporting requirements of Form 8-K regarding compensation arrangements.
With respect to executive and director compensation, the currently required tabular disclosure would be refined and combined with improved narrative disclosure to elicit clearer and more complete disclosure of compensation of the principal executive officer, principal financial officer, the three other highest paid executive officers and the directors. The new disclosure would be a Compensation Discussion and Analysis and would address the objectives and implementation of executive compensation programs, focusing on the most important factors underlying each company's compensation policies and decisions. Executive compensation disclosure would be organized into three broad categories:
- Compensation over the last 3 years, which would be reorganized as a 'Summary Compensation Table,' include: A new column reporting total compensation; a dollar value showing all stock-based awards; an 'All Other Compensation” column showing the aggregate increase in actuarial value of pension plans accrued during the year and all earnings on deferred compensation that is not tax-qualified; perquisites (the threshold for disclosing perquisites would be reduced to $10,000 and interpretive guidance provided); and two supplemental tables reporting Grants of Performance-Based Awards and Grants of All Other Equity Awards.
- Disclosure of holdings of outstanding equity-related interests received as compensation, including: the Outstanding Equity Awards at Fiscal Year-End Table, showing outstanding awards representing potential amounts that may be received in the future; and the Option Exercises and Stock Vested Table, showing amounts realized on equity compensation during the last year.
- A retirement plan and post-employment disclosure, including: The Retirement Plan Potential Annual Payments and Benefits Table disclosing annual benefits payable to each named executive officer; the Nonqualified Defined Contribution and Other Deferred Compensation Plans Table disclosing year-end balance, and executive contributions, company contributions, earnings and withdrawals for the year; and disclosure of payments and benefits (including perquisites) payable on termination or change in control, including quantification of these potential payments and benefits.
Regarding related person transactions, director independence and other corporate governance matters, the proposals would update, clarify, and slightly expand the disclosure provisions regarding related person transactions. Principal changes would include a disclosure requirement regarding policies and procedures for approving related party transactions, a slight expansion of the categories of related persons and a change in the threshold for disclosure from $60,000 to $120,000. The requirement to disclose these transactions would also be made more principles-based, and would require disclosure if the company is a participant in a transaction in which a related person has a direct or indirect material interest.
Whistleblowers Not Protected By SOX Outside U.S.
In an issue of first impression for an appellate court, the First Circuit has ruled that ' 806 of Sarbanes-Oxley, which gives whistleblower protection to employees of publicly traded companies, does not extend to the employees of foreign subsidiaries of US companies working outside the country. Carnero v.
Stating that '[i]f the whistleblower protection provision is given extraterritorial reach in a case like the present one, it would empower U.S. courts and a U.S. agency, the [Department of Labor], to delve into the employment relationship between foreign employers and their foreign employees.' The court further added that it believed that 'if Congress had intended that the whistleblower provision would apply abroad to foreign entities, it would have said so.' The court did note, however, that the plaintiff (an Argentinean who worked for two Brazilian subsidiaries of a US corporation) might have had a claim if the whistleblowing had occurred at a domestic subsidiary over alleged misconduct in the United States. Unfortunately for the plaintiff, the court found that Congress has not made a provision for possible problems arising when the DOL 'seeks to regulate employment relationships in foreign nations, nor has Congress provided the DOL with special powers and resources to conduct investigations abroad.'
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
The Stranger to the Deed Rule
In 1987, a unanimous Court of Appeals reaffirmed the vitality of the "stranger to the deed" rule, which holds that if a grantor executes a deed to a grantee purporting to create an easement in a third party, the easement is invalid. Daniello v. Wagner, decided by the Second Department on November 29th, makes it clear that not all grantors (or their lawyers) have received the Court of Appeals' message, suggesting that the rule needs re-examination.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.