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IR Weekly - April 26, 2011


President’s Note

Delayed But Don’t You Delay

You may have seen the news last week that FASB and IASB agreed to extend the deadline for completing convergence of U.S. and international accounting standards for revenue recognition, financial instruments and leasing from June 30 until the second half of 2011. That effectively pushes a decision on full IFRS convergence until possibly 2012 when the SEC will weigh in on the matter. This becomes very interesting because the composition of the SEC’s Commissioners will be different when the decision is made. Commissioner Casey is leaving soon and many are speculating about her replacement. Commissioner Aguilar has also yet to be re-appointed, and there are also rumors that Chairman Mary Schapiro may leave before the end of 2011! The ramifications extend well beyond IFRS and could affect Dodd-Frank implementation, proxy access, the proxy mechanics review and financial market safeguards. Don’t ever assume anything is a given in Washington.

Now for some things that crossed my desk last week:

Do you have a passion for FASB’s impact on IR? A handful of NIRI Senior Roundtable members make an annual trek to Norwalk, Connecticut to discuss IR’s role and view on accounting matters. Our next meeting is August 1 and we are opening a limited number of spots for this unique opportunity to all members. If you are interested in participating (along with your CFO or other accounting expert) please let me know.
Are you concerned about NYSE and NASDAQ M&A? The word is that the Justice Department is too and may seek your opinion about how a potential takeover of NYSE by NASDAQ would affect competition. I am interested as well, so if you have not already shared your views, please contact me.
Will the SEC meet Dodd-Frank deadlines? No, and if you missed it, the SEC just pushed back dates on a few new disclosures by several months.
Finally, there are fewer than 50 days until the NIRI Annual Conference in Orlando and it is all about leadership in a changing world. Be equipped and ensure your IR program is leading the way for your organization! Don’t delay and register today.

Until next week,

Jeff Morgan, CAE
President & CEO

Sponsored By:
AST April 2011


Annual Conference Update
Hotel Reservation Deadline, Session Times, and Speaker Updates

Professional Development
Thinking Series Part II: Think Like a Lawyer! – Webinar Wednesday April 27 at 3:00 PM ET
NIRI Energy, Oil and Gas Symposium - Free to practioners May 16-17 in Houston, TX
Crisis Communications and Media Management – Seminar June 28 in New York, NY

Member Services
NIRI Career Center
Member-Get-A-Member Program

Chapter News
Upcoming Chapter Events

The Buzz
"Proxy Firms Move to Centre Stage"
"Shareholder Proposals Companies Don't Want You to See"
"The Myth of Director Independence Under Delaware Law"
"FASB May Publish Major Rule Changes for Fresh Look"
"Another Look at Vote Results on Pay Vote Frequency"
"Gov't: Evidence Overwhelming in NY Hedge Fund Case"
"Dodd-Frank and SEC Blaze New Trail for Credit Ratings"
"Justice Department Seeks Data in Nasdaq-NYSE Antitrust Study"
"'Corporate CEOs Hoarding Cash; But Not When It Comes to Their Own Paychecks'"
"Proxy Firm's Options Advice Hurt Investors: Study"
"AFL-CIO Urges Investors to Use 'Say on Pay' Votes"

Annual Conference Update

Hotel Reservation Deadline, Session Times, and Speaker Updates

Take advantage of every opportunity to learn and connect with your peers.
View the most current information on Conference sessions at and plan to make the most of the world's largest, most comprehensive IR event.
View Agenda
View Sessions

Hotel Reservation Cut-Off
Make your hotel reservation by May 7 to receive the low conference rate. Learn more about discounted room nights and make your hotel reservations now.

Professional Development

Thinking Series Part II: Think Like a Lawyer! – Webinar Wednesday April 27 at 3:00 PM ET

Part-two of this three-part thinking series provides insight into the mindset of the general counsel of a company for communicating messages to investors.

NIRI Energy, Oil and Gas Symposium - Free to practioners May 16-17 in Houston, TX

Don't miss this opportunity to connect with your industry peers for dynamic discussion on current and future prospects for energy, oil and gas. Reception kick-off on May 16.
Crisis Communications and Media Management – Seminar June 28 in New York, NY

Gain insight into how to manage the media, especially in a crisis situation. Create a process to handle and prepare management for the media.

Member Services

NIRI Career Center

NIRI's Career Center is a highly valued member resource that is one of the most frequently visited web pages on the NIRI Web site. Members can search job listings and post resumes confidentially. Employers and recruiters can post a job for a 30-day period for a $350 fee, and search resumes.

Member-Get-A-Member Program

Refer a colleague to NIRI and receive $200 off a NIRI seminar!

The Buzz

Proxy Firms Move to Centre Stage
Financial Times (04/25/11) Smith, Alison

As annual meeting season goes into full swing, a new player is being pushed onstage to perform alongside traditional players: the proxy adviser. Proxy firms' reluctant move from their role behind the scenes has two causes. In the United States, it stems from response to the first annual meetings to be subject to advisory "say-on-pay" votes. As shareholders have compelled some companies to revise pay policies and voted against the compensation reports of a handful who were not taking threats seriously enough, attention has shifted to firms such as ISS and Glass Lewis & Co., which advise institutional investors on say-on-pay votes. The Securities and Exchange Commission is in the nascent stages of weighing new rules. Meanwhile, in Europe, regulators have begun looking at proxy firms because institutional shareholders are depending on them more heavily. This reliance comes as investors must respond to criticism that they were too lax during the financial crisis, while overseeing widely diversified portfolios: Norges Bank Investment Management, the Norwegian state fund manager, has holdings in more than 8,000 companies, for instance. The two primary concerns are that proxy advisers lack transparency and that they are susceptible to conflicts of interest. Analysts also proffer a bigger worry -- that firms may occasionally get in the way of constructive discussion between companies and investors since they necessarily have their own agendas to look after.
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Shareholder Proposals Companies Don't Want You to See
CNN Money (04/25/11) Pepitone, Julianne

Activist shareholders tried to put more than 150 proposals on corporate ballots this year, though those proposals will not be voted on by investors. Every year, companies petition the Securities and Exchange Commission (SEC) for "no action letters," which state that the agency will not take enforcement actions if activist shareholder proposals do not make it on to corporate ballots. These requests are granted for a number of reasons, such as when a shareholder proposal has to do with the company's "ordinary business," or its day-to-day operations. The SEC also grants requests for no action letters if shareholders make proposals that do not have to do with significant policy issues. This rationale was used in granting AT&T's request for a no action letter to prevent activist shareholders from placing a proposal on the corporate ballot that would call on the company to publicly promise to use the principles of network neutrality in the operation of its broadband network. In addition, the SEC can grant a company a no action letter if the investor who makes a proposal does not provide proof of eligible shareholder status within a 14-day period.
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The Myth of Director Independence Under Delaware Law
The Race to the Bottom (04/25/2011) Brown Jr., J. Robert

Delaware's definition of what constitutes an independent director does not guarantee that directors are actually independent. Under the state's definition, a director is no longer considered to be independent if he receives a material stream of income from the company, since this income can be cut off by the CEO. However, the same does not hold true for fees--even if those fees are subjectively material to the director. The decision in the case of Security Police and Fire Professionals of America Retirement Fund vs. Mack, which was heard in New York but was subject to Delaware law, shows that applying the same standard to both fees and material streams of income could prevent ordinary people from serving on boards. In that case, the court had to consider whether the $325,000 to $376,733 in fees that were paid to directors made them not independent. In order to show that these fees made the directors not independent, the plaintiffs had to prove that they were not "usual and customary" instead of having to meet the test of subjective materiality, which is applied to other types of payments made by companies to their directors. The writer of this article notes that this approach is flawed because it does not consider the amount of influence management possesses. In addition, it results in some directors being treated as protectors of shareholders' interests, something that the author said was misguided at best and misleading at worst.
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FASB May Publish Major Rule Changes for Fresh Look
Compliance Week (04/22/11) Whitehouse, Tammy

The Financial Accounting Standards Board (FASB) is unsure whether it will give financial statement prepares and users an additional opportunity to review and comment on revised drafts for several major changes in accounting standards before those new rules are implemented. The FASB is currently planning to make key board decisions on revenue recognition and leasing for U.S. companies that follow GAAP, as well as when and how those decisions will take effect, by the end of June. Once those decisions have been made, the FASB will decide whether it wants to formally release revised drafts for public comment or whether it wants to post them to the Web to allow preparers and users to get an advance look at the new standards. Regardless of which decision it makes, the FASB plans to perform some type of additional outreach, as well as a review on the fatal flaws of the revised standards, before the standards are adopted. As far as the financial instruments project goes, the FASB plans to wrap up its talks with the International Accounting Standards Board about how companies should classify and measure financial instruments in the third quarter. Once it has done that, the FASB plans to decide whether or not it needs to re-expose its conclusions, said FASB Chairman Leslie Seidman.
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Another Look at Vote Results on Pay Vote Frequency
RiskMetrics Group Blog (04/20/11) Allen, Ted

To date, investors have been overwhelmingly accommodating of management recommendations for annual "say-on-pay" votes. At the 65 U.S. firms that endorsed the votes annually, investors have paid attention to management's advice every time, according to ISS data released April 19. Among those companies are Walt Disney, Apple, Starbucks, and Goodyear Tire & Rubber. It is also notable that a board recommendation for future annual votes did not deter investors from voting against management during the 2011 advisory vote on compensation. Hewlett-Packard, Ameron International, Beazer Homes USA, and Shuffle Master all supported annual votes but failed to get majority approval for their compensation practices. At the nine companies with no management recommendation, investors backed annual votes each time, with the exception of Greif Inc. Finally, there have been 10 companies so far where no frequency obtained majority approval.
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Gov't: Evidence Overwhelming in NY Hedge Fund Case
Associated Press (04/20/11)

U.S. prosecutors told a jury on April 20 that exhaustive wiretap evidence proves a major Wall Street player routinely relied on a cadre of "corporate spies" to make money off inside trades, while the defense argued he was simply one of the market's smartest investors. When the jury in Manhattan heard FBI recordings of Raj Rajaratnam, they "heard the defendant commit his crimes time and time again in his own words," Assistant U.S. Attorney Reed Brodsky said in closing statements at the largest insider trading trial in history. "The tapes show he didn't believe the rules applied to him. Cheating became part of his business model." The jury listened to more than 45 audio recordings during seven weeks of testimony in what officials have referred to as the most comprehensive use of wiretaps ever in a white-collar case. The government also used the testimony of a bevy of cooperators it asserts were corrupted by Rajaratnam, including a disgraced technology industry executive and analysts. Prosecutors also ensnared a former Goldman Sachs board member as one of the informants, in part by calling Goldman Chairman Lloyd Blankfein to testify the tapes revealed that the board member breached confidentiality policies. Authorities have said Rajaratnam made profits and skirted losses totaling $68 million from illegal tips.
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Dodd-Frank and SEC Blaze New Trail for Credit Ratings
Reuters (04/20/11)

According to a Reuters blog entry, recently proposed rules from the Securities and Exchange Commission (SEC) will no longer require money market funds to operate using NRSRO ratings. None of the existing rules affected by the proposal prevents a fund's board of directors from using NRSRO ratings as part of its analysis, but such use would now be one of several tools employed in a discrete examination. One aspect of the proposed rule still requires -- to the extent a mutual fund employs an NRSRO rating -- funds to limit themselves to a single ratings agency for all securities, with no "ratings shopping" allowed. The SEC says the new rules signal a departure from the "objective, one-size-fits-all ratings reliance," and could provide a "new class of credit experts" with an opportunity in securities analysis.
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Justice Department Seeks Data in Nasdaq-NYSE Antitrust Study
Bloomberg (04/20/11) Mehta, Nina

The Justice Department is asking market participants for their views on how a takeover of the New York Stock Exchange would impact competition in equity listings. Officials are asking market participants for input on how a variety of outcomes for NYSE Euronext would affect competition, including a takeover. The exchange has already agreed to a $9.5 billion merger with Deutsche Boerse AG and is rebuffing an unsolicited bid from Nasdaq and IntercontinentalExchange, and the government is concerned with antitrust issues. If Nasdaq were to succeed with its bid it would have a monopoly on listings, which may prompt the government to block the deal. Nasdaq has said it would be willing to sell off NYSE Amex as part of the deal to alleviate antitrust concerns, but NYSE Euronext co-head of listings Scott Cutler says that would not improve competition or give issuers more choice because most companies have their initial public offerings on Nasdaq or NYSE. Regulators are concerned that combining with Nasdaq would give it more power to raise annual listing fees and trading fees or reduce services for issuers. Companies are also concerned about whether annual fees would rise and how the cost of services they get from the markets would change should Nasdaq prevail, says National Investor Relations Institute CEO Jeff Morgan. “If Deutsche Boerse and NYSE merge, that company’s going to have a full complement of equities, derivatives, and listings, and issuers will be a smaller part of that,” says Morgan. “A Nasdaq-NYSE merger would focus mainly on cash equities, which would put issuers in a more prominent role, but would lose the competition and what has been built up over the years by two very strong, very different offerings.” Meanwhile, European regulators are looking at the deal as well, as it creates a monopoly in fixed-income derivatives trading through the combination of NYSE Euronext’s Liffe arm and Deutsche Boerse’s Eurex futures business. As it is difficult to demonstrate competition in listed derivatives, the European issue may be the more pressing problem, some experts say.
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'Corporate CEOs Hoarding Cash; But Not When It Comes to Their Own Paychecks'
International Business Times (04/20/11)

Last year, Standard & Poor's 500 Index company CEOs received $11.4 million on average in annual compensation, according to a report from the AFL-CIO. Corporate CEOs are literally aggregating their organizations' cash -- except when it comes to their own paychecks, the report from AFL-CIO Executive Paywatch said. "According to the Federal Reserve, U.S. corporations held a record $1.93 trillion in cash on their balance sheets in 2010. But they are not investing to expand their companies, grow the real economy, or create good middle-class jobs," the report notes. Based on 299 companies' most recent compensation data for 2010, the aggregated total of the chief executives amounted to $3.4 billion -- enough to support 102,325 middle-class jobs, according to the report. AFL-CIO President Richard Trumka said the United States is facing "runaway CEO pay." "The disparity between CEO and workers’ pay has continued to grow to levels that are completely stunning," Trumka says. The report also says new legislation to protect consumers will help shareholders keep tabs on executives' paychecks.
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Proxy Firm's Options Advice Hurt Investors: Study
MarketWatch (04/19/11) Goldstein, Steve

The leading proxy advisor's service recommendations on corporate stock options ended up bringing down shareholder value, finds a study released April 19. A Stanford Business School study determined that the advice dispensed by Institutional Shareholder Services (ISS) between 2004 and 2009 resulted in companies following said advice demonstrating significantly lower market reaction, lower operating performance, and higher executive turnover. The Stanford study comes amid criticism of the major role that such firms play, especially since the Securities and Exchange Commission in 2003 required mutual funds to reveal their votes on shareholders proposals--and said that funds can trust proxy advisory firms to meet those regulations. The Stanford study, which examined 264 stock-option exchanges between 2004 and 2009, found that companies, especially in the technology sector, established such programs for underwater options so that employees can receive some form of remuneration. The study also found that companies that make exchange offers receive an optimistic stock price response, but the gains are "significantly less positive" when the offer is modified to meet ISS guidance.
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AFL-CIO Urges Investors to Use 'Say on Pay' Votes
RiskMetrics Group Blog (04/19/11) Allen, Ted

The AFL-CIO has rolled out a new version of its Executive Pay Watch Web site, which includes a searchable database of the pay information of CEOs from nearly 300 S&P 500 companies that have filed proxy materials. According to the AFL-CIO, the average compensation at those firms increased 23 percent between 2009 and 2010 to $11.4 million. Those pay packages included several different types of compensation, including an average of $3.8 million in stock awards, an average of $2.4 million in stock options, and an average of $2.4 million in non-equity incentive plan compensation. The average total compensation for CEOs at S&P 500 companies is now roughly 343 times larger than the compensation given to the average worker in the United States, up from 42 times larger more than 30 years ago, said AFL-CIO President Richard Trumka. The launch of this year's version of the Executive Pay Watch Web site comes as the AFL-CIO is calling on investors to take part in say-on-pay votes at mid-cap and large companies this year to help reign in executive pay. The AFL-CIO has already said that it plans to vote down the compensation practices at several unidentified companies. Meanwhile, the AFL-CIO is expressing concern about a House GOP plan to repeal a provision of the Dodd-Frank Act that would require companies to reveal the ratio between their CEO's total compensation and the median pay received by employees.
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April 26, 2011

LACP April 2011