Given regulatory delays, at this time there are relatively few new items to consider on our proxy statement checklist.  If that holds constant, the season’s debate will likely focus on three items.  First, shareholder proposals for “private ordering” of proxy access under Rule 14a-8 are likely to be submitted given the SEC’s decision not to challenge the invalidation of the proxy access rules.  Second, issuers who held say-on-pay votes are required by Regulation S-K Item 402(b)(1)(vii) to discuss whether, and if so how, the registrant considered the advisory vote on executive compensation in determining compensation policies and decisions and how that affected the registrant’s executive compensation decisions and policies.  Third, and perhaps most importantly, issuers should review last years say-on-pay results, changes to executive compensation packages and determine an approach to this year’s say-on-pay vote.

Here is our preliminary checklist with some commentary which follows on some of the key items.

Click here to view the table.

Proxy Access and Rule 14a-8

The Court of Appeals invalidated the SECs proxy access rules.  The proxy access rules permitted shareholders to include shareholder nominees in company proxy statements under certain circumstances.  As of this date, the SEC has not taken steps to re-propose the rules.

When the SEC adopted the proxy access rules, it also adopted amendments to Rule 14a-8.  The amendments to Rule 14a-8 provide that public companies will no longer be able to rely on Rule 14a-8(i)(8) to exclude a proposal seeking to establish a procedure in a company’s governing documents for the inclusion of one or more shareholder nominees for director in a company’s proxy statement.  While the amendments to Rule 14a-8 were stayed by the SEC in connection with the proxy access litigation, the stay is no longer effective.  The revisions to Rule 14a-8 are a potent weapon for activist investors that we have long advised clients could create far more issues than the now vacated proxy access rules.

We recommend public companies monitor any developments related to Rue 14a-8 that could potentially affect the upcoming proxy season.


It is hard to explain in a concise way, exactly what XBRL, as applied to public companies, is.  To try to make a long story short, financial statements included in certain public filings must be recast and attached as exhibits to SEC filings in the XBRL format, or to use the SEC’s words, interactive data format.  According to the SEC, in this format, financial statement information could be downloaded directly into spreadsheets, analyzed in a variety of ways using commercial off-the-shelf software, and used within investment models in other software formats.

During 2011, large accelerated filers with a non-affiliated public float of less than $5 billion became subject to the XBRL rules for detailed tagging of financial statements footnotes.  In addition, all remaining smaller issuers became subject to the XBRL rules which required XBRL exhibits with certain filings and block tagging of footnotes.

During 2012, all remaining issuers will become subject to the XBRL rules which require detailed tagging of financial statement footnotes for filings which include financial statements for a period that ends on or after June 15, 2012.  For calendar year issuers this will generally the second quarter Form 10-Q.  See Regulation S-T Rule 405(f).  Issuers first subject to the detailed footnote tagging requirements can take advantage of a 30-day grace period for the first filing.

The XBRL rules also apply to registration statements.  Application of the rules depends in part on the type of registration statement filed.  Note that for registration statements filed on Form S-1, it appears both the audited financial statements and the interim financial statements will have to include detailed footnote tagging if the Form S-1 includes financial statements for a period ending after June 15, 2012 (at least where incorporation by reference is not used).  That appears to be the case even if the financial statements for Form 10-K were not required to include detailed footnote tagging.  As a result, issuers considering PIPEs should plan accordingly.  If that is a real possibility those issuers might consider detail tagging footnotes in Form 10-K to prevent doing the XBRL preparation twice.

Rule 406T of Regulation S-T includes certain relaxed liability provisions for XBRL filings which phase out.  For large accelerated filers with a non-affiliated public float of less than $5 billion, those provisions will end during 2012, specifically two years after such issuers were first required to submit XBRL filings.  For other smaller issuers the relaxed liability provisions will be available into 2013.

Check frequently for updates on the Dodd-Frank Act and other important securities law matters.