VideoThe Securities and Exchange Commission has approved a requirement ordering public companies to get shareholder approval before doling out stock-option packages to executives, directors, or employees.
The commission today approved listing standards recommended by the New York Stock Exchange and NASD requiring that shareholders okay many lucrative stock-based pay plans, according to Reuters.
Under the rule, brokers holding shares for their clients would also be barred from voting on equity compensation unless the owner of the shares has given voting instructions, it was reported earlier.
The new listing standards will also require that shareholders approve changes in the exercise price option grants that have lost value because of falling stock prices, Bloomberg News reported Friday. One likely exception to the requirement for shareholder approval: option packages aimed at executive recruitment.
Until now, corporations have not been required to seek shareholder approval for broad-based stock-compensation plans. Although shareholder advocates welcomed reports of the new rule late last week, some lamented that it wasn't approved in time for this year's proxy season, according to a story in the Wall Street Journal.
Divulged: Petty Auditor Crimes
PricewaterhouseCoopers and KPMG are asking their auditors to fess up about any misdemeanor convictions they might have had in the past five years, according to Bloomberg News. Shoplifting, trespassing, and drunk driving are among the misdeeds that would need mentioning.
The firms are reportedly inquiring about the misdemeanors because it's part of the information they're being asked submit as part of their registration with the Public Company Accounting Oversight Board (PCAOB). Firms that audit public companies must register by October, and some of the largest firms have begun assembling the required background information.
Executives at some of the firms have reportedly complained that such criminal information has nothing to do with the quality of audits. The executives also worry that the inquiries violate employee privacy—especially if the PCAOB lists names and details on its Website.
The SEC, which must give final approval to PCAOB rules, is accepting public comments on the registration requirements until July 2. The PCAOB OK'd the disclosure rule in April and hasn't decided whether auditors' criminal records will be released to the public, Bloomberg reported, citing board members.
Under the board's registration rules, the accounting firms can ask that the information they hand over to the PCAOB be handled confidentially. Board members can choose on a case-by-case basis whether to grant such a request.
The Sarbanes-Oxley Act of 2002, which created the PCAOB, called for disclosure of criminal, civil, and administrative proceedings "pending" against an audit firm or its accountants "in connection with any audit report."
A number of audit firms and the American Institute of Certified Public Accountants reportedly intend to ask the SEC to change the PCAOB requirement to make it align more closely with Sarbanes-Oxley.
No More Waiting on Those Creditors' Lines
Corporations looking to get paid by bankrupt insurers can bring their claims straight to the carriers' reinsurers, a Pennsylvania judge has ruled. The decision has added significance in light of growing concerns about the solvency of property-casualty insurers.
Under reinsurance contracts that cover specific insurance programs, policyholders that can show they have third-party rights can tap directly into the reinsurance proceeds that crop up in an insurer insolvency, according to a decision handed down by the Pennsylvania Commonwealth Court in Harrisburg.
In her opinion, Judge Mary Hannah Leavitt placed Legion Insurance Co. and Villanova Insurance Co. into liquidation, allowing certain policyholders to recover directly from reinsurance companies.
That's good news for the policyholders. Unlike Legion and Villanova, the reinsurers on most of the insurers' programs are solvent and can pay claims. In the case, American Airlines and three of the insurers' other corporate policyholders sought direct access to reinsurance.
The bankruptcy rehabilitator had argued "that 'sophisticated' [corporate] policyholders are less deserving than others and, thus, prime candidates for having their contractual expectations compromised." The judge reportedly rejected that notion.
One of the insurers, Legion, had sold many "fronted" insurance policies, in which the policyholder's risk was passed through to reinsurance companies. Policyholders had often bought reinsurance directly from solvent reinsurance companies, paying Legion a fee for issuing an insurance policy just to meet regulatory requirements. In fronting arrangements, the policyholder commonly insures itself via a captive insurance subsidiary, which buys the reinsurance.
When Legion became insolvent, it claimed that all reinsurance proceeds should go into the estate, instead of to policyholders.
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