Tag Archive: Federal budget

Governance By Numbers

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The governance community is waiting for the other shoe to drop. Amid proxy filings and annual meetings, directors are looking to the SEC for final rules on whistleblower provisions, proxy access, and compensation consultant disclosures. The following is a mid-proxy season recap, or “governance by numbers”:

The U.S. Congress finally came to an agreement on the federal budget. This included funding for the SEC, a topic that has been widely discussed.

  • $1.19 billion: SEC Budget for 2011 fiscal year
  • $74 million: Increase in budget over 2010 fiscal year
  • $1.3 billion: 2011 fiscal year allotment for SEC as requested by Dodd-Frank

For the first time, say-on-pay votes are currently being considered at public companies:

  • 90.7%: Average approval from shareholders on say-on-pay votes, according to ISS
  • 5: Number of companies that have failed to win majority support for say-on-pay votes
  • 10%: Percentage of reviewed management proposals that have received a “no” recommendation from ISS and Glass Lewis

Also for the first time, say-on-frequency votes are up for discussion at public companies:

  • 521: Number of companies recommending an annual vote
  • 440: Number of companies recommending a triennial vote
  • 87%: Percentage of shareholder that support an annual vote, according to Pearl Meyer & Partners
  • 32%: Success rate at companies that recommended annual votes, according to ISS

On April 7, the U.S. Federal Court of Appeals heard oral arguments on the lawsuit brought by the Business Roundtable and the U.S. Chamber of Commerce against the SEC’s final rule on proxy access. The presiding judges questioned the potential impact of the rule. According to arguments from SEC assistant general counsel Randall Quinn:

  • 51: Estimated number of proxy contests this year
  • 57: Amount of proxy contests in 2009
  • 2/3: Proportion of companies that do not have shareholders with the necessary 3% stake

Stay current on the most recent developments with NACD Directors Daily and our new BoardVision series.

NACD Insight & Analysis: The Undeterred SEC

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Recent business news is seemingly filled with stories covering the SEC’s push to fulfill the requirements set by Dodd-Frank.

In the last week, NACD Directors Daily has featured reports of the SEC pursuing an insider trading case, proposing rules restricting bonuses at large brokers and investment advisers, and examining practices at banks that have restructured troubled loans. In addition, it was reported this week that the SEC has seen an uptick in whistleblower claims, receiving “one or two high value” tips every day. The agency is not expected to receive a raise in funding in the current debate over the federal budget, leading many to question how the SEC will be able to function at the elevated level required by Dodd-Frank.

In speeches this week, SEC commissioners have discussed the difficulties the agency faces in the future. At the Practising Law Institute’s annual symposium, Chairman Schapiro noted how the current budget freeze on the SEC restricts the organization from functioning as necessary, but, despite her call last year for 800 new employees to carry out the Dodd-Frank mandates, the agency’s budget has been frozen at $1.1 billion since the end of the last fiscal year. The current proposed federal budget is under debate, causing uncertainty over whether portions concerning financial services oversight will be restricted.

SEC Commissioner Elisse Walter echoed the Chairman’s views at the U.S. Chamber of Commerce this week. Her comments focused on the difficulty the SEC has in depending on the budget, particularly as it pertains to making long-term investments in technology.

Directors should be aware that, regardless of the apparent difficulties the SEC says it will have in the upcoming year, the agency is ultimately responsible for carrying out the mandates established by Dodd-Frank. For example, the SEC is expected to issue final rules on the whistleblower bounty program, despite their perceived lack of necessary resources. Boards would be prudent to prepare their companies for the challenges posed by compliance issues. With respect to the new whistleblower program, boards should examine their current internal reporting structure, as well as review their corporate culture.