In a win for employers, the Second Circuit Court of Appeals recently held that whistleblower claims under the Dodd-Frank Act are arbitrable. Daly v. Citigroup Inc. , 939 F.3d 415 (2d Cir. 2019). The Second Circuit also held that a plaintiff’s failure to exhaust administrative remedies related to a Sarbanes-Oxley Act claim serves as a jurisdictional bar, warranting dismissal of the claim...

On November 1, Glass Lewis released its 2020 US Proxy Paper Guidelines. The updates to the voting guidelines primarily add additional factors that Glass Lewis will review when evaluating proposals and issuing its voting recommendation for shareholders...

In High River Limited Partnership v. Occidental Petroleum Corp., C.A. No. 2019-0403-JRS, 2019 WL 6040285 (Del. Ch. Nov. 14, 2019) (Slights, V.C.), the Delaware Court of Chancery held that a stockholder’s mere disagreement with a business decision of a board of directors and intent to pursue a bone fide proxy contest is not a “proper purpose” to support a demand to inspect the corporation’s books and records ...

In late September, Senators Chuck Grassley (R-Iowa), Tammy Baldwin (D-Wis.), Joni Ernst (R-Iowa), and Dick Durbin (D-Ill.) introduced the Whistleblower Programs Improvement Act , which would protect financial whistleblowers who report internally from retaliation. This bill, which mirrors the Whistleblower Protection Reform Act of 2019 and passed in the House of Representatives in May, appears similarly aimed at clarifying that the Dodd-Frank Act’s anti-retaliation provision applies equally to employees who ...

Over the past two years, there has been an uptick in the number of lawsuits challenging director and executive compensation. Cases such as In Re: Investors Bancorp , Stein v. Blankfein , Hertz v. Frissora and, most recently, Tornetta v. Musk are setting new precedent and introducing novel legal theories. This alert highlights certain recent lawsuits in this area and sets out considerations for boards setting executive and director compensation in light of these cases...

 In re BGC Partners, Inc. puts controlling stockholders on notice that their professional and personal ties to board members may undermine the purported independence of those board members...

One of the most important decisions that a startup entrepreneur can make is creating a board of directors that will assist the entrepreneur in growing and governing the business.  A company’s board of directors is tasked with  overseeing and advising management, making key decisions about the company’s business strategies, and representing the interests of the company and its stockholders...

The Third Circuit recently issued an important decision for private fund advisors who serve on corporate boards.  In a precedential decision on a matter of first impression, the Third Circuit distinguished the role of nonvoting board observers from the function of formal corporate directors.  And while the decision was issued in the context of liability for alleged violations of the securities laws, the Third Circuit suggested the analysis may apply more broadly to other situations involving board observers...

Last week, the United States Court of Appeals, Third Circuit issued a ruling in Obasi Investment Ltd v. Tibet Pharm., Inc which pronounced that under Section 11 of the Securities Act of 1933, a board observer is not a person “performing similar functions” as a director on a corporate board...

Under the SEC Whistleblower Program, the SEC is required to pay awards to eligible whistleblowers who voluntarily provide the SEC with original information that leads to successful enforcement actions resulting in monetary sanctions totaling more than $1,000,000. A whistleblower may receive an award of between 10% to 30% of the total monetary sanctions collected...

In Stobart v Tinkler [2019] EWHC 258 (Comm), the high court has taken an extremely restricted view of the freedom of a dissident director to take his case outside the boardroom. At the same time, the court largely endorsed the freedom of the board to silence that director with respect to public statements...

How to Report Accounting Fraud and Earn an SEC Whistleblower Award Wednesday, February 6, 2019 SEC Targets Accounting Fraud in Financial Reporting In the early 2000s, the U.S. Securities and Exchange Commission (SEC) was abruptly reminded of the dangers of accounting fraud after Enron and WorldCom collapsed within months of each other.

Institutional Shareholder Services (ISS) has issued new FAQs addressing U.S. Executive Compensation Policies and U.S Equity Compensation Plans for the 2019 proxy season, for annual meetings held on or after February 1, 2019. Significant executive compensation and equity plan updates for U.S. listed companies are summarized below...

ISS and Glass Lewis Update Proxy Voting Guidelines for 2019 Summary Institutional Shareholder Services Inc. and Glass, Lewis & Co., LLC both recently issued their annual proxy voting guideline updates. As revised, these guidelines have important implications for companies preparing for the 2019 proxy season...

The SEC Whistleblower Program continued its remarkable run of success in fiscal year 2018. As detailed in its 2018 Annual Report to Congress , the SEC Whistleblower Program has been extraordinarily successful in enabling the SEC root out securities fraud and protect investors...

Threatening; Harassing; or Directly or indirectly, or in any other manner discriminating against, a whistleblower in the terms and conditions of employment. Does the Dodd-Frank whistleblower protection law require a whistleblower to demonstrate that the employer knew about the whistleblower’s disclosure to the SEC? No. ...

In recent years, equity compensation programs have increasingly been using restricted stock units (RSUs). A manufacturing company recently made news when it granted RSUs worth millions of dollars to thousands of its employees in connection with its IPO. Statistics show the trend toward RSUs is widespread...

When a shareholder claims that a director or officer has harmed a corporation through his or her improper conduct, these claims typically must be brought through a derivative action, in which the shareholder sues on behalf of the corporation...

As proxy season gets started, we have already seen quite a few proxy statements and other filings, like Forms 10-K, that include the CEO pay ratio disclosures required by Dodd-Frank. In these filings, some consistent themes have arisen as well as some items and language that companies may want to consider including in their upcoming proxy statements...

“Say on Pay” Hasn’t Gone A-Way Under Tax Reform, Reminds ISS* Internal Revenue Code Section 162(m) imposes a $1 million limit on the amount most public companies can deduct for compensation paid to any “covered employee.” The Tax Cuts and Jobs Act (the Act) significantly changes Section 162(m) by eliminating the exception for “qualified performance-based compensation,” expanding the “covered employee” group and expanding the definition of “publicly held corporation.” Compliance with the now-defunct qualified performance-based compensation exception to Section 162(m) required covered companies to, among other things, periodically seek and obtain shareholder approval of executive compensation ...

The removal of four Wells Fargo directors, in connection with other sanctions imposed on the bank by the Federal Reserve, has far reaching implications for the corporate governance of large, sophisticated health care systems and other health industry companies. Announced on February 2, the Fed’s enforcement action has been widely interpreted as a powerful regulatory message of governance accountability for failures of board oversight...

In addition, the consulting firm Spencer Stuart recently cited the following key governance practices of “S&P 500” boards: many companies are supplementing boards with first-time directors; board diversity is slowly progressing; director age (and retirement age) is going up; term limits are not common; ...

The Tax Cuts and Jobs Act has been passed by both the House and the Senate and signed into law by President Trump. Although the final bill did not include a repeal of Code Section 409A, the complex regulatory scheme governing the taxation of deferred compensation, it may still have a significant impact on the current compensation practices of public and tax-exempt employers...

That language is broad enough to encompass virtually any act or omission, including fraudulent or dishonest conduct or actions which are not related to corporate governance , mergers and acquisitions or the marketing of securities. While D&O policies separately contain exclusions for fraudulent or ...