1st Quarter, 2010
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1st Quarter, 2010 |
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Increased Proxy Disclosure Requirements
By Wayne Gray, CPA, Partner-in-Charge, Dallas OfficeThe Securities Exchange Commission (SEC) issued Release No. 33-9089 on December 16, 2009, which amends public companies’ required proxy disclosures. The amendments increase the required disclosures, and the SEC has stated the intention is to increase transparency regarding employee compensation structures and board member qualifications. The Release is effective February 28, 2010. The amendments will require disclosure regarding:
More specifically, the amendments require the following changes: The Compensation Discussion and Analysis (CD&A) section of the proxy statement will have to be expanded to include discussion of the overall compensation policies and practices that can affect the company’s risk and management of that risk. This disclosure encompasses the compensation policies of all employees, including non-executive officers, if they may create risks that are reasonably likely to have a material adverse effect on the company. In addition, the Summary Compensation Table and Director Compensation Table disclosure of stock and option awards has been amended to require disclosure of the aggregate grant date fair value of awards computed in accordance with FASB ASC Topic 718. Furthermore, all earlier years that are required to be included in the Summary Compensation Table will have to be re-computed under the new rules. The new rules require companies to disclose for each director (or an individual nominated for director) the experience, qualifications, attributes or skills that caused the board to believe that the individual was capable of serving as a director for the company. Any directorships at public companies held during the previous five years will also require disclosure. Also, the SEC lengthened the time period of required disclosure of legal proceedings of directors, director nominees, and executive officers from five years to ten years. The SEC says it adopted these changes in order to allow investors and shareholders to make better informed decisions regarding corporate governance. The SEC will now require all results of shareholder votes to be filed in Form 8-K within four business days of the meeting. This replaces the requirement to file the results in Form 10-K and 10-Q which may have been filed months after the vote. The SEC also approved rules requiring disclosure of all fees paid to compensation consultants in excess of $120,000 during the company’s fiscal year when the consultants assist in determining or recommending executive and director compensation. According to the SEC press release this requirement is aimed at shedding light on potential conflicts of interest a compensation consultant may have in recommending executive compensation. Other articles in this newsletter:
New Revenue Recognition Guidance Small Company Financial Reporting Issues Posted Financial Reporting Manual: An Alternative to Wandering in SEC Regulations |
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Wayne has over 30 years of professional experience and serves as the Partner-in-Charge of the Dallas office of HEIN & ASSOCIATES LLP. He provides audit and consulting services to both public and private companies, specializing in Securities and Exchange (SEC) reporting services, IPOs, and mergers and acquisitions. He also has significant experience with complex accounting and reporting issues, and assists companies with the implementation of Section 404 of the Sarbanes-Oxley Act (SOX 404) internal controls and reporting.