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The SEC staff’s issuance last year of a “Wells Notice” to Netflix and its CEO alleging a violation of Regulation FD based on a personal Facebook posting by the CEO caused significant concern.  SEC interpretative guidance in 2008 had focused on the application of Regulation FD to company web site disclosures, but not social media, which were then only starting to gain in popularity.[1]  The Netflix Wells Notice called into question the kinds of judgments practitioners had nonetheless become accustomed to making in the intervening years.
Continue Reading Regulation FD in the Social Media Age

Cleary Gottlieb partners Alan L. Beller and Arthur H. Kohn recently guided a working group comprised of six major pharmaceutical companies and a coalition of 12 institutional investors in developing industry-setting principles regarding recoupment policies concerning major compliance failures under health care laws.  The working group publicly announced yesterday its successful joint development of a best practices policy. For the full text of the announcement, click here.
Continue Reading Cleary Gottlieb Guides Pharmaceutical Industry/Institutional Investor Working Group in Developing Principles for Clawback Policies

On January 10, 2013, the Federal Trade Commission (“FTC”) announced new thresholds for pre-merger notifications under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“the HSR Act”).  Most significantly, the FTC announced that the minimum “size-of-transaction” threshold has increased from $68.2 million to $70.9 million.  The new thresholds will take effect on Monday, February 11, 2013.
Continue Reading FTC Announces Revised Hart-Scott-Rodino Notification Thresholds Effective as of February 11, 2013

In the years since the financial reporting scandals and the Sarbanes-Oxley Act of 2002, and in particular following the financial crisis and the Dodd-Frank Act of 2010, boards of directors have faced greater burdens and more intense scrutiny of their activities and performance. One manifestation of this has been pressure to change the role of directors from one of partnership with and oversight of management to one of an almost quasigovernmental watchdog directly responsible for monitoring management’s performance, including its compliance with increasingly complex and burdensome regulation. In addition, activist investors continue to publicly push some boards to pursue strategies focused on short-term returns, even in instances where those strategies are inconsistent with the directors’ preferred, sustainable long-term strategies for the corporation.
Continue Reading Selected Issues for Boards of Directors in 2013

On November 14, 2012, the European Commission adopted a proposal for a directive (the “Proposed Directive”) that aims to substantially increase the number of women on EU corporate boards. In the Commission’s view, non-binding efforts to enhance female board representation1 have proven ineffective. The proposed measures are intended to be of a transitory nature (i.e., until sustainable progress has been reached in the gender composition of boards). Accordingly, the Proposed Directive would expire on December 21, 2028.
Continue Reading EU Proposes Gender Balance Quotas for Listed Company Boards

On October 16, 2012, proxy advisory firm Institutional Shareholder Services (ISS) issued for comment proposed changes to its U.S. voting policies for 2013.  ISS’s proposed changes focus primarily on compensation-related matters.  Of particular note in that regard is a modest revision to ISS’s approach to peer group selection for purposes of its pay for performance analysis.  ISS also proposed a change that highlights its concern with companies’ responsiveness to majority-supported shareholder proposals.
Continue Reading ISS Focuses on Pay and Majority-Supported Shareholder Proposals in Proposed Changes to U.S. Voting Policies for 2013

At its open meeting on August 15, 2012, the Public Company Accounting Oversight Board adopted Auditing Standard No. 16, Communications with Audit Committees, and related amendments to other PCAOB standards.[1]  AS 16 requires auditors to engage in certain communications with audit committees and is intended to foster a meaningful dialogue on important audit and financial statement matters.  The PCAOB expects more effective two-way communications to enhance audit quality and strengthen audit committee oversight.  The new standard is subject to approval by the Securities and Exchange Commission.
Continue Reading PCAOB Adopts Standard on Auditor Communications with Audit Committees

A recent opinion of the Delaware Chancery Court, Seinfeld v. Slager,[1] addresses the legal standard applicable to directors’ decisions about their own pay under Delaware law, an important topic as to which there is little prior law.  In an opinion by Vice Chancellor Glasscock, the Court held that a derivative claim alleging that directors breached their fiduciary duties by granting themselves excessive compensation survived a motion to dismiss.[2]  In so concluding, the Court also found that the directors’ action did not have the protection of the business judgment rule and was instead subject to “entire fairness” review.
Continue Reading Delaware Case Raises Question About Structuring Director Compensation