1. The SEC proposed pay for performance ruleshere, to implement Section 953(a) of Dodd-Frank, which requires disclosure of “information that shows the relationship between executive compensation actually paid and the financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions.” The proposed rules would amend Item 402 of Regulation S-K to add yet another compensation table, this one showing CEO and average other NEO summary compensation and compensation actually paid (excluding unvested equity awards and adjusting for pension benefits), total shareholder returns and peer group total shareholder returns. The peer group would be either the group included in the performance graph required by Regulation S-K Item 201(e)(1)(ii), which shows cumulative shareholder return, or the group used for benchmarking under Regulation S-K Item 402(b). Summaries of the proposed rule are herehere and here. The comment period ends July 6, 2015. Theoretically, these rules could be finalized in time for next year’s proxy statement. Of course, that reminds us that the proposed pay equity disclosure rules mandated by Dodd-Frank Section 953(b), here, still are not effective, even though they were proposed in 2013. (These rules would apply to the next full fiscal year after adoption, which means that if adopted today, a calendar-year-end company would disclose pay equity information for 2016 in the proxy statement it files in 2017.)   
  2. Apropos pay for performance, we find interesting the argument made by oil billionaire Harold Hamm, founder and CEO of Continental Resources, that his wife shouldn’t get the appreciated value of most of his company in their divorce because the increase wasn’t his doing (and thus its appreciated value was exempt from the divisible estate). See here. Rarely do you see good luck cited by an executive as the reason for his success, although certainly you see bad luck, and those pesky “market forces,” often cited as an excuse for poor performance. Also interesting is the report by ISS, here, which notes that average CEO pay in the U.S. increased nearly 13% in 2015, largely through increases in retirement assets.   
  3. The CFA Institute released an updated model Compensation Discussion and Analysis template, here.   
  4. Recent SEC proposals on pay for performance and the adoption of final Regulation A+ rules (here) remind us of the host of governance and disclosure rules that linger under the JOBS Act and Dodd-Frank. These include:   
    • Crowdfunding rules, here.
    • Regulation D process rules, here.
    • Hedging disclosure rules, here.
    • Compensation clawback rules, not yet proposed under Dodd-Frank Section 954, see here.
    • Possible changes, someday, on the recommendations of the Investor Advisory Committee created by Dodd-Frank Section 911, including to the definition of “accredited investors,” here.   
  5. Disclosure of campaign contributions is not required by SEC rules, but noise about such disclosures continues and has been the subject of SEC rulemaking requests, see here and here, and a favorite of shareholder activists (see here). The Campaign for Accountability (catchy name) filed a lawsuit claiming that the SEC has arbitrarily and capriciously failed to act on the rulemaking petition submitted by Stephen Silberstein, see here. Presumably, the lawsuit is for publicity, because it seems, on its face, stupid. Count on the decibel level increasing with the onset of the presidential campaign and a renewed call that President Obama issue an order requiring government contractors to disclose campaign contributions, here. (Recall that the Administration abandoned a similar effort in the run up to the 2012 election. See here.)   
  6. Early returns on proxy access votes are discussed here. As of April 27, shareholders had rejected proxy access proposals at six of the 10 companies that had voted. (Two of the six had adopted an alternate company proxy access proposal in advance of the meeting.) An update for the week of May 3, here, shows shareholders rejected proposals at three of eight companies that recommended no votes. The tack at most companies is to simply include the shareholder proposal and recommend a “no” vote. Generally, arguments against a proxy access proposal are that it’s a solution in search of a problem, that the company’s board is good and its governance practices strong, that the proposal strips power from the independent nominating committee charged with selecting directors and that proxy access is expensive, a distraction, gives special interest groups control to the detriment of shareholders generally and encourages short-termism. In the meantime, CalPers and the NYC Comptroller have filed a host of notices of exempt solicitation under Rule 14a-2(b)(1) (solicitations that urge shareholders how to vote but do not solicit proxies, which is allowed but for which a notice must be filed that shows up on the company’s EDGAR page) in which they rail against some of these common arguments. See, e.g., here.   
  7. The NYC Comptroller, never one to slack, also signed onto a letter with the NY State Comptroller urging the SEC to consider enforcement action to force oil and gas companies to improve climate change disclosurehere. The letter echoes the themes of the letter recently sent by Ceres, here, although the plea in the Ceres letter is to step up comment letters to offending companies.   
  8. Recall that Form SD, including the second conflict minerals report for most, is due June 1, 2015. Some observations on early 2015 conflict minerals reports are here. A recent report by Global Witness and Amnesty International, here, points to “alarming gaps” in U.S. corporate transparency based on last year’s reports. Criticism of Global Witness’s “misleading findings” and “baffling” assessment criteria is here. With no meaningful SEC guidance on the adequacy of 2014 filings, no news about the SEC’s appeal of the portion of its conflict minerals rule that was struck down on First Amendment grounds (here) and a feeling of general malaise about the topic despite Global Witness’s efforts to make it interesting, expect this year’s reports to be nearly identical to 2014 reports.   
  9. The U.S. Department of Justice released “Best Practices for Victim Response and Reporting of Cyber Incidents,” here, generally suggesting that you (a) take steps to prevent cybersecurity breaches and have an action plan in place, (b) quickly respond to a breach by implementing your response plan, including assessing initial damage and stanching the information flow, document your process and gather data on the breach and communicate with internal personnel, law enforcement and victims of the breach so they can protect themselves and (c) after the breach, remain vigilant and remediate any identified deficiencies. The report also gives tips on what not to do, including continuing to use your breached system, retaliating and curling up into a ball and weeping. Emphasizing the import of all of this, Verizon published its 2015 Data Breach Investigations Report, available here. And just for the heck of it, recent SEC cybersecurity guidance to registered investment funds and investment advisers is here.  
  10. The PCAOB published “Audit Committee Dialogue,” here, in which it shares with audit committees the insights it has garnered through annual inspections of audit firms, including identifying key recurring areas of concern and new risks the PCAOB is monitoring.   
  11. A sneaker, perhaps, for those with foreign subsidiaries is the Bureau of Economic Analysis requirement, here, to file a report on Form BE-10 (available here), by May 29, 2015 for most. Likely, there will be no adverse consequence for failing to file, suggested by the BEA’s response to the general question “I received a ‘Notice of Failure to File’ stating that my company has not complied with the reporting requirement. What should I do?” (Answer: “file.”) But do you really want to be the company the BEA decides to fine just to send the message that it’s serious? (And if you know about the requirement and still don’t file, that’s a willful violation that could have consequences. So, um, sorry for bringing this to your attention.)   
  12. A survey of emerging growth company corporate governance practices adopted in connection with their IPOs is here.   
  13. And finally, two tidbits to add to last month’s exhaustive (exhausting?) coverage of whistleblower issues:   
    • The Occupational Safety and Health Administration clarified the standard it uses for whistleblower investigations, here.
    • The SEC awarded $1 million to another internal audit type, here, and $600,000 in its first whistleblower retaliation case, here.