Compliance Bricks and Mortar for January 26

These are some of the compliance-related stories that recently caught my attention.


Say on Pay: Is It Needed? Does it Work? by Stephen F. O’Byrne

In this article, we’ll show that there is substantial evidence that directors do a poor job overseeing executive pay and that directors have weak incentives to pursue shareholder interests in executive pay. We’ll then look at Say on Pay and present evidence that Say on Pay voting is sensitive to differences in pay for performance, but so forgiving that extraordinary pay premiums are required to elicit a majority “no” vote. We will show that three quarters of institutional investors have lower SOP voting quality—that is, less informed and fair voting ‐ than the average investor and almost all have a short‐term focus, with much greater vote sensitivity to current year grant date pay premiums than to long‐term pay alignment and cost. We’ll conclude with a proposal explaining how institutional investors can improve their SOP voting. [More…]


Cybersecurity and Third-Party Risks by Michael Volkov

A global company conducting business with third parties may increase the risk of cybercriminals circumventing cyber protections through the third party. I know it sounds scary but the fact is that third parties could be the proverbial back door into a company resulting in a major cyber-attack and hack of company data. [More…]


Whistleblowers Beware: Your Work Computer Is Probably Monitored by Christopher Easton

Picture this: while at work you become aware of conduct that you believe is unethical, illegal, or qualifies as government waste, fraud, or abuse. You decide you want to blow the whistle. But before you act, be careful! Most corporate and government networks log traffic. Your work computer and phone are not private. When you use a company or department computer, assume everything you do is monitored. These computers are an easy way for your employer to determine you are the whistleblower.[More…]


Kokesh v. SEC: Half a Year On by Matthew C. Solomon, Alex Janghorbani & Richard R. Cipolla

More than six months have passed since the Supreme Court held, in Kokesh v. SEC, 137 S. Ct. 1635 (2017), that the Securities and Exchange Commission’s (SEC or Commission) disgorgement power constitutes a penalty subject to a five-year statute of limitations. As expected, the Supreme Court’s holding on the penal nature of SEC disgorgement has spurred defendants to seek to broaden its application to other contexts. Most fundamentally, this includes whether the SEC has the statutory authority to seek disgorgement at all. To date, courts have mostly turned aside these challenges. At the same time, however, litigants have grown more creative in their attacks, evidenced by a class action suit seeking reimbursement of nearly $15 billion from the SEC of certain historical disgorgement payments. [More…]


An ethical obscenity by Jeff Kaplan

The absurdity of the notion that giving up control of an asset mitigates conflicts of interest arising from ownership of such asset will be evident to anyone who has filled out a COI questionnaire – meaning not just those in the public sector but private sector as well (including those involved in the above “hypo”). On such forms, employees must disclose asset ownership AND asset control – not one or the other. As long as an owner can know who is spending money in ways that benefit his asset – and if Public Citizen can know such things President Trump surely can too – then the conflict is there. Period. [More…]


About Those Tax Reform Bonuses… by Matt Kelly

Today we step away from corporate compliance for a short detour into financial reporting, tax policy, and corporate governance. All those companies announcing bonuses, raises, and new employee benefits as a result of tax reform may not be as honest about their motives as their breathless press releases say. [More…]