• On the Fast Track! NYSE's Rule 452 Amendment
  to Eliminate Broker Non-Votes
• NYSE Adopts Temporary Suspends $1 Closing Price/Extends
  Reduced Market Cap Listing Standards
• The American Recovery and Reinvestment Act
• Corp Fin Issues "Say-on-Pay" Guidance: 400 Companies
  Now Having a Vote
• Some Pretty Wild Proposals in Delaware
• With Scant Apologies to the Pay Apologists
• The New "Financial Stability Plan"
• How to Fix the Latest Treasury Guidance
• SEC Chair Schapiro Lays Out Big Changes
• SEC Commissioner Walter: A Noteworthy Speech
• No-Action Letters for Shareholder Proposals: The Challenge
  of Reading the Tea Leaves
• What is the Meaning of Regions Financial?
• SEC Posts XBRL Rules: What to Do Now
• Put It on the "Wish List": Communicating IDEA/Edgar Problems
• The PCAOB's International Inspections: Heightened
  Importance Post-Satyam?
• Cold Hard Fact: Investors Don't Read Disclosures Today
• What is the Proper Board Size?
• The Corporate Executive: January-February Issue Mailed
• People: Who's Doing What and Where
• TheCorporateCounsel.net Conference Calendar
• What's New on TheCorporateCounsel.net

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NYSE Adopts Temporary Suspends $1 Closing Price/Extends
Reduced Market Cap Listing Standards

As rumored recently, the NYSE filed an immediately effective rule change with the SEC at the end of February that:

• Suspends the $1 average closing price requirement (requirement is couched in terms of being below a buck for a consecutive 30-trading day period) until June 30th. This may provide relief for companies now in the 180-day compliance period following notification of a $1 closing price deficiency.
• Extends existing temporary reduction of the $25 million average market capitalization requirement to $15 million (which was set to expire on April 22nd) to June 30th

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In mid-February, Congress passed the "American Recovery and Reinvestment Act" - and law firms went to work drafting their memos analyzing this stimulus package. We've posted the final text of the legislation and we've posted numerous law firms memos analyzing the ARRA in our "American Recovery Act" Practice Area.

The most relevant part of the legislation for our members is the tax provisions in Division B, which includes the controversial executive compensation restrictions among others (e.g. see this Hodak Value commentary) - even President Obama is not happy with what Senator Dodd inserted as the final exec comp language. Oddly, the stimulus legislation went from no new executive compensation restrictions on one day to more restrictive than previously contemplated by the end of the next day.

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In late February, Corp Fin issued this set of "American Recovery and Reinvestment Act of 2009" C&DIs, which contain three Q&As regarding how to implement the "say-on-pay" provision of ARRA. Unfortunately, these Compliance and Disclosure Interpretations don't answer many of the questions we have been hearing. Initially, the Staff issued three Q&As that boil down to:

• Say-on-pay only applies to shareholder meetings at which directors are to be elected
• Addresses how the rules apply to smaller reporting companies that are not subject to CD&A disclosure requirements
• Notes that "a company that determines to comply" must file a preliminary proxy statement - and you should contact the Assistant Director of your industry group if that causes timing problems (this begs the question - how can a company determine not to comply?)

Since these original CD&Is were semi-silent as to the effective date of Section 7001 of ARRA (which amends Section 111 of EESA), the Staff updated them a few days later to add two new CD&Is that explain that the SEC follows the effective date from Senator Dodd's letter that Broc blogged about recently.

Now, all TARP companies will be required to conduct a "say-on-pay" advisory vote if they didn't file their preliminary proxy materials before February 18th. This is huge. Over 400 companies will now be doing "say-on-pay" this year! For TARP companies that have filed preliminary (and definitive) proxy materials since February 17th, we imagine they are freaking out. Shoot, we imagine all TARP companies are freaking out even if they haven't filed yet - since their proxy materials must be close to final. Back to the drawing board. Chaos reigns supreme...

To say there still are a number of open issues in how to frame say-on-pay in proxy materials this year is an understatement. But our experts will do their best to help you during this newly scheduled CompensationStandards.com webcast to be held on Wednesday: "Say-on-Pay: A Primer for TARP Companies."

For the academics out there, it could be interpreted that Section 7001(h) allows Treasury to adopt say-on-pay regulations to fill in the gap before the SEC adopts rules under Section 7001(f)(3)(under which the SEC has one year to adopt rules). Unlikely, but anything is possible...

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In our "Delaware Law" Practice Area, we have posted some memos explaining the new proposed amendments to the Delaware General Corporation Law. The proposals include a number of interesting provisions, including proposed new statutes on proxy access and reimbursement bylaws, indemnification matters, judicial removal of directors and authorization to separate record dates for notice and voting at shareholder meetings.

Typically, proposals don't become final in Delaware until early August. It will be interesting to see if these proposals get adopted as proposed...

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From Broc Romanek: One of the more disappointing aspects of this market meltdown has been the lack of leadership from the top of Corporate America. So few CEOs have spoken publicly about what can - and should be - done to fix what ails us. There has been panic in the air for over six months, and this may well accelerate if some of our biggest banks are nationalized. Where is the leadership?

Even more perplexing to me is that a few lawyers are finally speaking up about executive pay - but they are speaking up to defend past practices and urge that they be continued (in comparison, many tell me privately that they agree with our mission to rein in excessive pay). Lawyers have long ago given up the mantle of being perceived as responsible leaders in the community. This surely will not help the profession's cause.

I'm not saying that Congress' (and Treasury's) latest approach to reining in executive pay is without fault. I firmly believe that Congress should not legislate executive pay and have long said that. But I don't blame them for trying to stem the tide because those involved in setting pay have long ignored the fact that the pay-setting processes are broken (here's my explanation for how they are).

Change Won't Happen Until Boards Want Change
Unfortunately, the sad truth is that even if the legislated/regulated pay fixes were perfectly set so that pay would be aligned with performance, etc., the fixes still wouldn't work until boards and their advisors wanted them to work. They always seem to find a "work around" to keep the excessive practices flowing. Part of the problem is a culture of "all CEOs are deities and couldn't possibly be replaceable" as well as a failure to recognize that the client is the company, not the CEO. The current state of executive pay remains a huge corporate governance problem - as pay has unintentionally ratcheted up over the past two decades - and needs to be rolled back.

Unmasking the Myths
These pay apologists continue to argue that CEOs will run to the nearest private equity/hedge fund if they aren't paid along the lines of the past. I say let's see. I think most boards will find that their CEOs aren't going anywhere fast if given the option to depart, particularly given the state of those funds.

Most of the arguments against responsible pay arrangements revolve around the fact that CEOs have amassed so much wealth that they don't need the company anymore. Which is exactly the point. I hear the argument that hold-through-retirement won't work because it incentivizes a CEO to retire and collect their accumulated equity now (Note that our approach encourages long-term holding until "the later of" - and Exxon Mobil has shown that it works. Here's our analysis on how to implement hold-thru-retirement). That may be the case for this generation of CEOs who have amassed ungodly sums of money - but if pay packages are brought back to Earth, this won't be a continuing problem because your CEO won't have amassed $100 million in a few short years and will need to keep the job.

There has to be a modicum of common sense in negotiating these pay packages. How can one be motivated to do a better job getting paid $10 million per year versus $5 million? If you earned 5 mil, wouldn't you give 100% of your effort? Boards need to get off the peer group survey train and do their own homework, starting from scratch and using internal pay equity as an alternative benchmark.

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Meanwhile, in an effort to distance itself from the perceived failures of the recent past, the Obama Administration renamed TARP as the "Financial Stability Plan." Below is a brief summary of the Financial Stability Plan from Cleary Gottlieb:

The four-prong plan incorporates most major elements rumored in the press, but provides few details and leaves key questions unanswered.

More Capital Assistance for Banks: Banks with over $100 billion in assets will undergo a regulatory "stress test" and then will be eligible to receive a preferred security investment from Treasury through the Capital Assistance Program ("CAP"). Smaller institutions will be eligible for CAP after a supervisory review. Securities will be convertible to common by the issuer at a modest discount to the February 9, 2009, market price. Stock purchased under CAP will be held in a newly created Financial Stability Trust.

Public-Private Investment Fund to Buy Troubled Assets: Treasury (together with the FDIC and the Federal Reserve) will initiate a Public-Private Investment Fund to acquire "legacy" assets weighing down banks' balance sheets, although Treasury is still exploring how to structure the fund. The fund is initially pegged at $500 billion, but could be expanded to $1 trillion. In later Senate Banking Committee testimony, Secretary Geithner emphasized that the fund is intended to kick-start a private market, not provide a Resolution Trust Corporation-type solution. Notably, the announcement did not address pricing concerns, the issue that has bogged down previous asset purchase proposals, saying only that the program would allow private sector buyers to set their own prices. In later remarks, the Secretary noted that he is unwilling to let the government subsidize the financial sector by overpaying for assets.

Consumer and Business Lending Initiative: Expanding the Federal Reserve's Term Asset-Backed Securities Lending Facility ("TALF"): The TALF program, announced last November but not yet implemented, will be expanded in both size and scope. Under TALF, the Federal Reserve Bank of New York will make non-recourse loans to eligible participants fully secured by eligible newly packaged AAA asset-backed securities. TALF could grow substantially, using $100 billion of Treasury funding to provide up to $1 trillion in new lending. In addition, eligibility will be expanded beyond securities backed by student loans, credit card debt, small business and auto loans to include commercial mortgage-backed securities and possibly other assets.

Housing and Small Business Initiatives: Details of a comprehensive housing program will be announced in the new few weeks. The program likely will include use of TARP funds for foreclosure prevention efforts, national loan modification guidelines, and continued support for purchases of GSE mortgage-backed securities and debt by the Federal Reserve. CAP recipients will be required to participate in foreclosure mitigation programs consistent with Treasury guidelines. Treasury and the Small Business Administration plan to take steps to encourage small business lending, including financing purchases of AAA-rated SBA loans and supporting legislation that would increase SBA loan guarantees.

There will also be new requirements and conditions, including public reporting of detailed lending data and executive compensation limits, imposed on banks that receive CAP funds or exceptional assistance going forward. The Treasury announcement states that these standards will not be retroactive.

The Treasury Department also decided to launch a new site, FinancialStability.gov. The site seems as rushed as the FSP. We imagine this new site will be redundant with Treasury's site, where all the TARP documents have been posted to date.

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Jesse Brill lays out below how the latest Treasury guidance still needs to be tweaked to accomplish its goals of reining in excessive executive compensation:

The biggest change under the new Treasury guidelines is a $500,000 salary cap. One key aspect of the new $500,000 cap that has not gotten sufficient attention is the unlimited amount of restricted stock and stock options that still can be granted under the latest "restrictions." Equity compensation is the pay component that has gotten most out-of-line over the past 20 years. It (as well as severance/retirement/ golden parachutes) has caused the greatest disparity between CEO compensation and that of the next tier of executives (and employees generally).

The new $500,000 cap provision does prevent executives from realizing the gains in their equity compensation until after the government is paid back. But there are two major problems with how this applies:

1. It does not apply to past equity compensation. Warren Buffet imposed a similar cap on Goldman Sachs' executives, but his restriction applies to all the equity held by the top executives. It is not limited just to future grants, as is the case with the new government restriction. So Buffett's provision wisely requires that the key decision-makers keep all their "skin in the game" until he gets paid off.
2. Although it may help protect the government's investment, it is short-sighted and fails to protect the shareholders' best long term interests. The holding period should be the longer of age 65 or two years following retirement. That will ensure that the key executives make decisions that truly are in the long-term best interests of the company (as opposed to decisions aimed at a shorter period - after which an executive could depart, taking all his marbles with him).Note that holding-through-retirement also addresses the major concern about top executives' unnecessary risk taking.

Holding equity compensation through retirement is perhaps the single most important—and fundamental - fix to getting executive compensation back on track because it also addresses all the past outstanding excessive option and restricted stock grants. And, by requiring CEOs to keep their skin in the game for the long term, it will go a long way to restoring public trust in our companies and our market, which is so important to restoring stability to the markets.

Needless to say, the fundamental hold-through-retirement fix should apply to all companies - not just TARP financial institutions—and can be adopted at the same time that Congress adopts say-on-pay legislation (if such legislation is adopted). (It will have much greater impact and do more good than say-on-pay.) Learn how to implement hold-through-retirement in our "Hold-Through-Retirement" Practice Area on CompensationStandards.com.

Here are three additional points about the $500,000 cap:

1. Just as the $1 million cap was a major cause for the runaway increase in equity compensation over the past decade, the new unlimited opening for restricted stock will further exacerbate the problem. As an example, the typical time vested restricted stock grant does not qualify for the $1 million cap "performance-based" compensation exemption, thus more companies and shareholders will suffer the cost of the lost tax deductions as these very large amounts vest. (So, once again the top executives will benefit at the expense of shareholders.)
2. One reasonable fix to the tax deductibility problem would be to require real performance conditions (in addition to time vesting) upon the vesting of the equity.
3. To address the "unlimited" new grants problem, do not permit additional grants in situations where the CEO's total accumulated equity grants exceed the company's own historic internal pay equity ratios compared to the next tiers of executives within the company.

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As noted in this Washington Post article, new SEC Chair Schapiro intends to make big changes to the Enforcement Division - and quickly. Among other changes, the article notes:

• Rollback of highly-criticized requirement that the Enforcement Staff receive Commission approval before negotiating to impose penalties. This created a huge bottleneck and fines levied have dropped 85% since it was instituted three years ago.
• Beefing up the number of Enforcement Staffers. The number of Staffers has steadily decreased in recent years.
• Reforming an office to focus on identifying and preventing risk in the market. Earlier this decade, then-Chair Donaldson formed such a group - but it was scarcely staffed (umm, with one person) and shut down not too long after it was created.

And the NY Times recently ran this pretty interesting article on the new SEC Chair Mary Schapiro, some of which was based on an interview. If she lands current PCAOB board member Charles Niemeier to serve as the SEC's Chief Accountant (he used to be the SEC Enforcement Division's Chief Accountant) as mentioned in the article, I wonder what that means for IFRS in the US given his well-known unfavorable views of it. This past week, the IASB was in DC urging IFRS adoption by the SEC before Sir Tweedie steps down as IASB Chair.

Here is a counter-view from a group that raises serious questions about the existing plan advocated (and here is another one) and suggests a different approach. A few weeks ago, the SEC extended the comment deadline for its IFRS roadmap proposal to April 20th - but comments have dribbled in already...

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Recently, SEC Commissioner Elisse Walter delivered this speech entitled "Restoring Investor Trust through Corporate Governance." Under the new Chair's reign, it appears that Elisse will have more influence than a typical Commissioner due to her long-standing relationship with Mary Schapiro, as well as the fact that Elisse had spent considerable time working in high-level Staff positions at the SEC earlier in her career (including Corp Fin Deputy Director).

Here are the main points from Elisse's speech:

• Supports shareholder access - not only indicated support for access but she's open to new approaches other than the ones that the SEC proposed in '07 (which she is troubled by), even wants to reconsider original '03 access proposal
• Supports enhanced disclosure about director nominees - this falls in line with what SEC Chair Schapiro mentions in this Washington Post article from Friday
• Wants to fix e-proxy to improve shareholder participation - agrees with Commissioner Aguilar on this one
• Wants to consider NYSE's proposal to eliminate broker non-votes from director elections
• Believes "tone at the top" can be improved through "say-on-pay" when it comes to executive compensation

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One of the toughest jobs that Corp Fin faces ahead of every proxy season is making hundreds of no-action determinations related to Rule 14a-8 exclusion requests. These requests from companies seek to exclude shareholder proposals from their proxy statements.

The number of Staffers processing these requests is surprisingly small (i.e. slightly less than two dozen) and they take their job seriously, creating lots of internal documentation to back up the ultimate decision on a particular request. As a result, these Staffers work very hard over a three-month period. Each decision of the Staff hinges on the specific facts and circumstances related to the proposal and supporting statement - and it is not unusual for the Staff to conduct its own research beyond the arguments provided by the company and the proponent.

Since each response is so fact-specific, the response letter often is quite brief and doesn't get into the specifics of "why" a proposal was allowed to be excluded or vice versa. The Staff simply doesn't have the resources to take their responses this extra step. Due to this process, it's not uncommon for folks to detect a new trend in the Staff's thinking that might not really be there - some of the close calls that the Staff is required to make are akin to splitting hairs. If the Staff reverses course on a particular line of responses, it typically signals such a change in a speech or other communication (or at least, this is something that it should do).

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From Broc Romanek: That's why it's my hunch that the Staff's recent Regions Financial response on a TARP-related proposal was not a reversal of an earlier response provided to SunTrust, as each response was based on the facts unique to each request. We can understand why RiskMetrics could have interpreted it otherwise (as others have done), because the proposals themselves are very similar. Plus, there is the backdrop of institutional investor clamoring for Presidential pressure on the SEC to overturn its exclusion of a variety of meltdown/risk related proposals (e.g. December letter from 60 institutional investors to Obama).

As noted in the SunTrust response, the Staff explained that exclusion was permitted in that case under Rule 14a-8(i)(3) because the proposal was deemed vague and indefinite since it failed to "impose a limit on the duration of the specified reforms." The Regions Financial proposal seemingly could have been permitted to be excluded due to the same rationale.

But it wasn't. I think the reason for that is based on the different arguments set forth by the respective proponents in their correspondence. Note how the Staff took extra efforts in its response to note this quote from the proponent's own argument: the "intent of the proposal is that the...reforms...remain in effect so long as the company participates in the TARP." In comparison, the proponent in Regions Financial provided arguments about why such a duration limit is unnecessary and perhaps won the day based on that. Perhaps this is hair-splitting, but my hunch is that this indeed was going the other way on a close call - and not really a more formal Staff reversal of position. But I could be wrong...

By the way, we keep getting asked which Staffers are heading up the "Shareholder Proposal Task Force" this season. We always list who is heading up the Task Force at the bottom of our "Corp Fin Organization Chart."

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In early February, the SEC posted the adopting release for its new interactive data rules. This project has been an enormous effort on the part of the Corp Fin Staff under an extraordinarily tight timeframe. Under the new rules, filers will be required to provide a new exhibit containing the financial statements and any applicable financial statement schedules in interactive data format with certain Securities Act registration statements, quarterly reports, annual reports, transition reports, and current reports on Form 8-K or Form 6-K that contain revised or updated financial statements. The new requirements will be phased in as follows:

1. Domestic and foreign large accelerated filers that use U.S. GAAP and have a worldwide public common equity float above $5 billion (as of the end of the second fiscal quarter of their most recently completed fiscal year) must provide the interactive data exhibit beginning with their periodic report on Form 10-Q, Form 20-F or Form 40-F containing financial statements for a fiscal period ending on or after June 15, 2009.
2. All other domestic and foreign large accelerated filers using U.S. GAAP will be subject to the interactive data reporting requirements beginning with their periodic report on Form 10-Q, Form 20-F or Form 40-F containing financial statements for a fiscal period ending on or after June 15, 2010.
3. All remaining filers using U.S. GAAP (including smaller reporting companies), and all foreign private issuers preparing their financial statements in accordance with IASB IFRS, will be subject to the interactive data reporting requirements beginning with their periodic report on Form 10-Q, Form 20-F or Form 40-F containing financial statements for a fiscal period ending on or after June 15, 2011.

Once the phase-in is complete, then companies becoming subject to the reporting requirements for the first time will be required to submit an interactive data file with their first periodic report on Form 10-Q or first annual report on Form 20-F or Form 40-F.

The tagging of financial statement footnotes and schedules is also subject to a phase-in schedule. While footnotes and schedules initially will be tagged individually as a block of text, after a company has tagged them in this manner for a year, then the company must begin tagging the quantitative disclosures - and may permissibly tag each narrative disclosure.

The interactive data exhibit is required for Securities Act registration statements containing financial statements, so it typically will not be required for a Form S-3 that incorporates the financial statements by reference. No interactive data exhibit will be required for initial public offerings registered under the Securities Act, nor will it be required as an exhibit to Exchange Act registration statements, such as Form 10 or 20-F.

After all of the build-up to XBRL, the question many are likely asking themselves is "what do I do now?" If you are in the first group to be phased-in, you are probably already well under way in preparations for the first interactive data filing. But for the second and third phase-in groups, the final rules should serve as a wake-up call to start preparing for the inevitable. A few pointers are:

Familiarize yourself with the process and the output - Much of the nervousness around interactive data can be addressed by gaining a better understanding of what goes into producing it and how users may potentially utilize the data. The place to start is our "XBRL" Practice Area on TheCorporateCounsel.net. There are also lots of online tools and training sessions available for you to get up to speed. In addition, a number of issuers have participated in the SEC's voluntary XBRL program, so they can be a great resource to consult.

Consider whether you will use a service provider - The financial printers and others are all geared up to assist you with preparing your interactive data file, so you should visit with them to see what services they offer and how much it will all cost.

Assemble your team - Preparing interactive data will require a team that includes accounting, finance, SEC reporting and legal personnel, among others critical to the process. While this same team is already in place for preparing the SEC reports, it may be helpful to have a smaller subgroup focused on interactive data implementation.

Focus on quality control - As with any reporting issues, the key is having adequate procedures and controls in place to make sure that what gets included in the interactive data file is appropriate and will come out correctly when accessed through an interactive data viewer. A thorough familiarity with the applicable taxonomy and plenty of testing can go a long way on this front.

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A member recently told Broc about a few anxious minutes between the filing of a company's earnings release on a Form 8-K and the start of its conference call. Actually, it was more than a few minutes - it was a half-hour gap between the time that the SEC's IDEA/Edgar indicated that it had accepted the filing and public availability of the filing on the SEC's site.

In theory, under Regulation FD, if you have an Edgar acceptance message that says 10:30 and the call starts at 11, we would argue that the company can go ahead and start - even if investors can't yet see the filing. However, there is some risk with this approach given the rule's purpose of investors having this information before the earnings call starts.

As we understand it, this is not a new problem. In fact, EDGAR/IDEA was down just the other day starting ~12:17 eastern for over an hour. This occurs regularly enough that it should be on the list of issues that the SEC's new brain trust should tackle right away.

The SEC doesn't seem to monitor its outages - and when these outages occur, the Staff members that should be aware of them typically aren't until they get calls en masse from filers. There's an easy fix (besides fixing the database) - the contractor used by the SEC should alert the appropriate SEC Staffers, particularly those who take calls from filers (i.e. Filer Support and Technical Filer Support). And, the SEC should promptly post a message on their web site that an outage is taking place. That's an easy first step towards fixing this problem.

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The PCAOB recently adopted an amendment to Rule 4003 (as well as proposed a separate amendment to that rule) relating to the timing of certain inspections of registered non-US companies. Given the breath-taking revelation by Satyam's CEO of prevalent fraud perpetuated by the CEO, it's unfortunate that the PCAOB has not been inspecting the foreign affiliates of the US audit firms, such as the Indian firm auditing Satyam, because the budget that the PCAOB submits to the SEC has not provided sufficient funds for such inspections.

As we have seen with Madoff's auditor, who was not undergoing inspections, a lack of independent inspection of auditors has led to undesirable results, and is a major shortcoming on the part of the regulator and regulatory system. This is also especially interesting as the major auditing firms are now outsourcing portions of their audit work to India. With the developments below, this should give investors great concern. Especially at a time when some on the PCAOB have espoused a view that the agency should just rely on their foreign counterparties thru a system referred to as mutual recognition.

Lynn Turner teaches us about how audits of non-US companies are conducted:

There are two types of foreign audits. The first one is one in which a foreign company that lists in the US, is audited by a foreign audit firm, who renders the auditors report on the financial statements. That could be one of the large international audit firms or a local firm in that foreign country.

The second type of foreign audit work, often called "referral work" is when a US audit firm, such as one of the Big 4, audits a large international conglomerate such as IBM or Coca Cola. The US audit firm audits the revenues, assets, internal control and accounting systems in the US. The US audit firm then refers the audit work on the foreign operations to one of the audit firms affiliated with them in the respective foreign countries where the foreign operations exist and are accounted for. These are two separate and distinct firms, with separate management but affiliated for marketing and branding purposes.

Referral work is becoming more significant and having additional risks evolve for investors as the US audit firms are now also farming out to foreign affiliates, such as in India where the cost of labor lower, some of the audit work that in the past, would have been performed on the audit of the US operations of these companies. They are in essence, now outsourcing a portion of the US audit work and writing into their audit engagement letters that this can be done.

I have also been told by various sources that some of the Big 4 have been trying to set up structures internationally to avoid inspections of their foreign audits. Also some foreign entities such as the EU have been pushing the PCAOB to just go along with whatever independent oversight or inspections (which in many cases is none) are done internationally. However, it is unlikely they will be bailing out the investors who have suffered losses in Satyam.

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SEC Commissioner Luis Aguilar recently delivered a speech in which he expressed concern over the huge drop in the number of retail investors who voted last year. This drop is mainly attributable to the SEC's new e-proxy rules - and Commissioner Aguilar strongly suggested that "we move quickly to reconsider e-proxy, improving it if possible, repealing it if necessary, but with the goal of restoring investor participation."

The drop in the retail vote should be a concern and it's important that the SEC address it. But another concern is the level of shareholders even bothering to click on the proxy statements and annual reports posted online as part of the voting process. As Dominic wrote in the Winter issue of InvestorRelationships.com (sign up for a free copy):

In a recent survey among 1,000 retail investors commissioned by the SEC, fully 57% of investors said they rarely (28%), very rarely (13%) or never (16%) read annual reports when they receive them. For proxy statements, the results were somewhat better, with 44% saying they rarely (21%), very rarely (10%) or never (13%) read proxy statements.

When it comes to web-based proxy materials, statistics collected by Broadridge during the first year of notice-and-access meetings also present a dismal picture. First, only 1.1% of notice recipients bothered to ask companies to mail them paper documents. Meanwhile, just 0.5% of all recipients viewed the materials when they visited the URL provided in the notices. According to Broadridge, notice-and-access has resulted in a 96% reduction in information access by investors, which arguably has led to greater levels of voting without viewing proxy information.

Read Dominic's article - "Online Annual Reports and Proxy Statements: What's Wrong And How to Fix It" - to better understand why these statistics are so poor and what your company might be able to do to fix that.

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There hasn't been any debate over "what is the appropriate board size" for years - not since companies that had too many directors (e.g. 20) reduced their board size, primarily through attrition. Many boards trimmed down to a range of 9-13 directors (see our "Board Composition" Practice Area).

We found it interesting that Eddie Bauer has announced that it's reducing the size of its board from ten to seven. This change is primarily a cost-cutting measure as the company is also cutting the compensation of its remaining directors. On its face, this makes sense when you're cutting employees and undertaking other cost-savings measures.

On the other hand, boards are under pressure to be more actively involved in overseeing the company and many have enhanced committee duties. In fact, we imagine that many boards will be adding members to better manage risk and perhaps be needed to sit on new risk management committees. So we're not suggesting that cutting board compensation is not a good idea, but we do wonder whether cutting the board's size is appropriate.

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We recently mailed the full January-February issue of The Corporate Executive (along with the Special Supplement with our Model CD&A). The issue includes pieces on:

1. ESPPs-Opportunities in Today's Environment
2. Making Sure Your Stock Options Are Eligible for the 409A Corrections Program
3. More Model Disclosures: Compensation Risk Disclosures

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At the SEC, David Becker was named SEC General Counsel. He also will have the title of "Senior Policy Director," a new position. David previously served as the SEC's General Counsel from 2000–2002. He replaces Andrew Vollmer, Acting General Counsel, who left the SEC to return to private practice.

Kayla Gillan, a founding PCAOB Board Member, who served most recently as Chief Administrative Officer with RiskMetrics, has been named Senior Advisor to Chair Mary Schapiro.

In Enforcement, Director Linda Chatman Thomsen is leaving to return to the private sector, replaced by Robert Khuzami, a former federal prosecutor.

Robert Malhotra, who has been serving as a Professional Accounting Fellow in Office of the Chief Accountant, has been named Senior Advisor of that office.

In Corp Fin, former Staffer Jonathan Gottsegen has been named General Counsel of United Rentals.

At FINRA, Richard Ketchum has been named CEO, succeeding Mary Schapiro. Ketchum, now the chief executive of NYSE Regulation, was formerly head of the SEC's Division of Market Regulation.

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• CompensationStandards.com's webcast – "New Treasury Regulations and the American Recovery Act: Executive Compensation Restrictions" (3/11)
• TheCorporateCounsel.net's webcast –"Raising Equity Capital in a Turbulent Market," (3/18)
• DealLawyers.com's webcast – "The SEC Staff on M&A" (3/19)
• CompensationStandards.com's webcast – "Compensation Arrangements in a Down Market" (3/24)
• TheCorporateCounsel.net's webcast – "XBRL: What Lawyers Need to Know" (4/23)
• ABA's "Business Law Section Spring Meeting," (4/16-18) in Vancouver
• Society of Corporate Secretaries & Governance Professionals' "National Conference" (6/24-28) in San Diego
• SEC Institute's "24th Midyear SEC Reporting Forum" - Dallas (5/28-29); Washington DC (5/28-29); San Francisco (6/15/-16); NYC (6/22-23)

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Among other new additions, during the last month we have:

• Held Part II of the webcast – "The Latest Developments: Your Upcoming Proxy Disclosures – What You Need to Do Now!" (1/28) for CompensationStandards.com members
• Held the webcast – "Alan Dye on the Latest Section 16 Developments" (2/3) for Section16.net and NASPP member
• Held the webcast – "How to Implement E-Proxy in Year Two" (2/5) for TheCorporateCounsel.net members
• Held the webcast – "TARP II: The Executive Compensation Restrictions" (2/12) for CompensationStandards.com members
• Held the webcast – "Lessons Learned from the BCE Buyout: Bondholder Rights, Litigation Issues, Etc." (2/26) for DealLawyers.com members
• Interviewed a number of experts for Inside Track on TheCorporateCounsel.net and CompensationStandards.com, including:
  • Joe Ruck on Board Portal Developments, on TheCorporateCounsel.net
  • Jason Day on Economic Downturn Disclosure, on TheCorporateCounsel.net
  • Suzanne Rothwell on Nasdaq's Response to Market Decline, on TheCorporateCounsel.net
  • Terry Kelly on Corporate Aviation Policies, on CompensationStandards.com
  • Sharie Brown on Heightened Enforcement Activity for Financial Fraud, on TheCorporateCounsel.net
  • Ben Preston on Reducing/Eliminating Dividends, on TheCorporateCounsel.net
  • David Koenig on Aligning Compensation Incentives with Corporate Objectives, on CompensationStandards.com
• Posted the results of our survey on Analyst "Quiet Period" Practices
• Posted the American Recovery and Reinvestment Act
• Continued to post the latest memos and reports on the current state of the financial markets and regulatory reform in our "Recovery Act /TARP /Credit Crunch" Practice Area.
• Posted a summary of recently-proposed significant changes to the Delaware General Corporation Law
• Posted notes from Northwestern's 36th Annual Securities Regulation Institute, January 28-30, 2009

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