Executive compensation packages can become sources of tension between directors and shareholders in companies. In the U.S., state corporation laws authorize directors to fix their own compensation and to determine suitable compensation for the officers of the corporation, while federal income tax rules require shareholder validation before the company can deduct individual compensation exceeding $1 million ($500,000 for participants in the Troubled Asset Relief Program (TARP)). U.S. federal laws have expanded requirements for shareholder “say-on-pay” votes, but only require that the votes themselves be advisory, not binding. The 2009 federal stimulus bill requires participants to offer non-binding shareholder votes, and the 2010 Dodd-Frank Act requires all public companies to do the same. (See my recent blog on Securities and Exchange Commission (SEC) rulemaking).
Audit, Compliance and Risk Blog
By Jamie Scudder, Maplecroft
On February 20, 2013, the U.S. Financial Accounting Standards Board (FASB) and its international counterpart, the International Accounting Standards Board (IASB), completed their “substantive deliberations” on the joint project to issue a comprehensive new standard on accounting for revenue. The changes in this standard will affect almost all companies in one way or another. While minor “tweaks” might occur over the next few weeks, the major decisions have been reached.
by James Lockhart-Smith, Maplecroft
Response to Criminal Violations in the Deepwater Horizon Disaster
On November 28, the Environmental Protection Agency (EPA) announced that it was temporarily suspending BP from all new contracts with the U.S. government. EPA acted two weeks after BP agreed to plead guilty to 14 criminal counts, including manslaughter, obstruction of Congress and other criminal charges stemming from the 2012 Deepwater Horizon blowout and oil spill. BP also agreed to pay $4.5 billion in penalties. Federal agencies have authority to issue temporary suspensions and longer-term “debarments” to parties that violate criminal laws (over three thousand were issued in the last fiscal year). EPA is the lead agency doing so for violations of national water and air laws. The effects on BP could be significant: BP is currently the largest lease-holder in deep water portions of the Gulf of Mexico, and in 2011 was the largest supplier of fuels to the U.S. military. Its existing contracts are not affected, but it is ineligible for new ones (for example, the company has already had to skip a round of deep water leasing by the Department of the Interior).
The Foreign Corrupt Practices Act (FCPA) of 1977 prohibits U.S. companies from making bribes or other “corrupt payments” to foreign officials for the purpose of obtaining or retaining business. Concerns that this U.S. attempt to mediate its companies’ overseas activities might prove quixotic—and potentially disadvantaging—to American competitiveness have abated (although not disappeared) since the Organization for Economic Cooperation and Development (OECD) promulgated its “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.” As of November 2012 the OECD Convention has been ratified by all 34 OECD member countries, and five others as well.
I am not a historian. My recollection of the massacre in Tiananmen Square is colored by teenage self-centeredness and the ramblings of a slightly ridiculous history teacher who I managed to ignore for nine months whilst acing the class. I am not proud of this.
Late last month the Securities and Exchange Commission (SEC) adopted new rules (Rule 13p-1 and associated Form SD), requiring annual disclosures by public companies that manufacture any products in which “conflict minerals” are “necessary to the functionality or production.” These conflict minerals comprise a short list of important metals, when they originate in the Democratic Republic of the Congo (Congo or DRC) or an adjoining country. SEC’s rules implement a Congressional mandate contained in 2010’s massive Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).
The internet is such a special place. It makes life so easy. I know that there are a slew of attorneys who existed before the time of the internet, and on-line legal research, but I am so glad that I did not have to be one of them. I am grateful that I did not have to know that kind of grueling legal practice. This is so much more fun!