SEC Disclosure and Corporate Governance: Challenges of the 2010 10-K and Proxy Season

by Weil Gotshal, December 30, 2009.

In approaching the upcoming 10-K and proxy season, public companies face new challengesstemming from the political, regulatory and investor response to the economic and financialupheavals of 2009. These challenges center around three themes: risk (and how it is managed), compensation (including its tie to risk) and whether the board has the qualifications, leadershipand resources necessary, in light of current circumstances, to oversee risk management and compensation and to set the company’s long-term strategic course. In 2010, the “routine” annual meeting will largely be a thing of the past. The elimination of broker discretionary voting in uncontested director elections will magnify the impact of themajority voting standards adopted by many companies, giving institutional shareholders (andtheir proxy advisory firms) greater power than ever before in determining who serves on theboard. This shift in power will be even more pronounced in 2011 and beyond if the Securitiesand Exchange Commission (the “SEC”) moves forward as expected with some form of proxy access rules and Congress enacts legislation mandating majority voting and “say on pay.” Inaddition, companies can expect more shareholder proposals, due in part to the SEC staff’s recently expanded view of what constitutes a “policy issue” appropriate for a shareholder vote. In this volatile environment, effective communication with shareholders, whether directly orthrough the company’s SEC documents, website and other media, presents another challenge…(continue reading)

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