Corporate Finance Lawyer & Attorney : Davis Wright Tremaine Law Firm

"Senator Arlen Specter (R-Pa.), Ranking Member of the Senate Judiciary Committee, made the following statement in response to the Department of Justice’s revised attorney-client privilege guidelines: 

“The revised guidelines are a step in the right direction but they leave many problems unresolved so that legislation will still be necessary. For example, there is no change in the benefit to corporations to waive the privilege by giving facts obtained by the corporate attorneys from the individuals in order to escape prosecution or to have a deferred prosecution agreement. The new guidelines expressly encourage corporations to comply with the waiver and disclosure programs of other agencies including the SEC and EPA. Legislation, of course, would bind all federal agencies and could not be changed except by an Act of Congress.” "

See here. 

Coverage of this issue can also be found at thecorporatecounsel.net blog.

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In Julian v. Eastern States Construction Service, Inc. (Del. Ch. July 8, 2008), the Delaware Chancery Court ordered the disgorgement of director compensation bonuses after its determination that the bonuses did not pass the entire fairness standard.

"Self-interested directorial compensation decisions made without independent protections, like other interested transactions, are subject to entire fairness review.  Directors of a Delaware corporation who stand on both sides of a transaction have “the burden of establishing its entire fairness, sufficient to pass the test of careful scrutiny by the courts.”  They “are required to demonstrate their utmost good faith and the most scrupulous inherent fairness of the bargain.”  The two components of entire fairness are fair dealing and fair price. Fair dealing “embraces questions of when the transaction was timed, how it was initiated, structured, negotiated, disclosed to the directors, and how the approvals of the directors and the stockholders were obtained.”  Fair price “assures the transaction was substantively fair by examining ‘the economic and financial considerations.’”"

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The SEC has accepted the Nasdaq's proposed rule change increasing the dollar threshold for determining director independence.  "Nasdaq Rule 4200(a)(15)(B) provides that a director of a listed company who accepted, or has a family member who accepted, any compensation from the company in excess of $100,000 during any period of twelve months within the preceding three years cannot be deemed an independent director (with certain exceptions). The proposed rule change would change this threshold amount to $120,000."

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Richard Grasso, the former head of the New York Stock Exchange, has prevailed in his legal battle to keep the salary and bonuses paid to him while he ran the exchange.  The New Times has reported on the opinion.   

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The SEC issued its "Staff Observations in the Review of Executive Compensation Disclosure" today.  This guidance grows out of the SEC's review of the executive compensation disclosures of 350 public companies, and gives a summary of the types of comments the SEC gave on various companies' compensation disclosures, and why it gave those comments.  John W. White, the Director of the SEC's Division of Corporation Finance, also gave a speech today in which he discussed CD&A disclosures.  You can view a text of the speech here.

Highlights of the staff observations on CD&A include, among other things:

• Focus on the how and why of decisions that were made;
• Emphasize material items, and de-emphasize immaterial items;
• Spend less time explaining mechanical procedures and lengthy statements on philosophy and more on how key decisions were made; flip the order--explain how the analysis resulted in the decisions made;
• Presentation matters--consider the order in which items are presented and how they are presented; and
• Consider adding tables that aren't required if they elucidate material issues.

 The SEC guidance is helpful and worth reading.

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