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2021 Annual Shareholder Meetings – Avoiding a Super Spreader Event

As COVID-19 rages on, companies are again flocking to virtual annual meetings for the 2021 proxy season, but with one important difference:  the luxury of time.  Many companies are already exploring retention of virtual annual meeting providers and alternatives for video and real-time Q&A, as well as drafting fulsome disclosure about meeting logistics in their proxy materials to address concerns raised by investors, the SEC and others with respect to some pitfalls during the 2020 proxy season.

Service Providers and Technology.  For 2021, an issuer will have additional time to select an appropriate provider of a virtual meeting platform.  The most widely used vendor for hosting virtual meetings is Broadridge Financial Solutions, Inc., which reported that it hosted 1,494 virtual shareholder meetings during the first six months of 2020.  Other service providers, such as stock transfer agents, also provide such services.  A few companies have even arranged to facilitate the virtual component of an annual meeting via Zoom.

In 2020, some companies were caught off-guard by technology glitches.  For 2021, issuers should be in a position to anticipate technology issues and to put contingency plans in place to address them.  Issuers can follow best practices for virtual meetings by, for example, putting in place technical support lines for the duration of their meetings.

Format and Rules of Conduct (including Q&A).  Companies need to decide whether a meeting will be virtual-only, physical-only or a hybrid.  For any virtual component, they need to decide whether the access will be audio-only or

When What Goes Down Comes Up – Reporting NEO Compensation Restoration

As the COVID-19 pandemic unfolded, public companies took action in response to the impact and potential impact of the pandemic on their businesses and the economy.  The actions often included temporary compensation reductions (voluntary and otherwise) for a company’s principal executive officer, principal financial officer and/or named executive officers (collectively, “NEOs”).

As would be expected, many companies reported these changes under Item 5.02(e) of Form 8-K, which is triggered when a company enters into, adopts or materially amends a material compensatory plan or arrangement with NEOs or in which they participate.  Some companies, however, reported the reductions under Item 7.01 or 8.01 of Form 8-K or, sometimes, in a stand-alone press release or not at all.  As we previously noted in March, companies that did not report the reductions under Item 5.02(e) likely were comfortable that, based on their specific facts and circumstances, the decreases were not material to the executives’ compensation arrangements or, in the case of voluntary compensation reductions where employment agreements were in place, perhaps by analogy to SEC C&DI 117.13, that Item 5.02(e) was not triggered.

As we move into the final quarter of 2020, and in view of developments following the initial compensation reductions relative to the continuing effects of the pandemic, a number of industries and companies have had relatively positive financial performance in the face of the pandemic, and may have a more favorable business outlook or simply better visibility into the effects of the pandemic.  As a result, some companies have

SEC Issues New COVID-19 Guidance: Health-Related or Personal Transportation Benefits May Be Perqs

The SEC Division of Corporate Finance yesterday issued new Regulation S-K guidance, CD&I 219.05, to help public companies determine whether benefits provided to executive officers because of COVID-19 should be disclosed as perquisites or personal benefits for purposes of executive compensation proxy disclosures.  Consistent with Release 33-8732A, the guidance confirms that an item provided because of the COVID-19 pandemic is not a perquisite or personal benefit if it is “integrally and directly related to the performance of the executive’s duties,” which depends on the particular facts.

The CD&I states:  “In some cases, an item considered a perquisite or personal benefit when provided in the past may not be considered as such when provided as a result of COVID-19. For example, enhanced technology needed to make the NEO’s home his or her primary workplace upon imposition of local stay-at-home orders would generally not be a perquisite or personal benefit because of the integral and direct relationship to the performance of the executive’s duties. On the other hand, items such as new health-related or personal transportation benefits provided to address new risks arising because of COVID-19, if they are not integrally and directly related to the performance of the executive’s duties, may be perquisites or personal benefits even if the company would not have provided the benefit but for the COVID-19 pandemic, unless they are generally available to all employees.”

Perqs have been, and will continue to be, an area of SEC focus.  We urge companies to carefully give thought

Kodak Releases Special Committee Report – Details Failures in Corporate Governance Practices

We previously blogged about the myriad issues arising in connection with the botched announcement by Kodak of a potential $765 million loan from the federal government as part of its coronavirus response measures, as well as insider stock transactions preceding and immediately following the announcement.  Kodak’s board formed a special committee to conduct an internal investigation.  Akin Gump, retained by the special committee to conduct the investigation, last week delivered its report of over 70 pages of factual findings and legal analysis, concluding that there were no violations of law or company policy, but identifying corporate governance issues requiring attention and remediation.  The company has posted the report on its website.

As we previously blogged, on July 27 the internal public relations team at Kodak released an alert to local media that Kodak would be making a big announcement the following day concerning a major initiative between Kodak and the federal government.  Stories immediately started circulating on social media and the websites of local network affiliates. Kodak then contacted the recipients of the advisory to tell them it was meant only as background and was not intended for publication.  The formal announcement followed before the market open on July 28 when Kodak and the U.S. International Development Finance Corp (DFC) jointly announced a ”letter of interest” contemplating a $765 million loan to Kodak to launch a new pharmaceutical business. Although the press release made clear that this was only a letter of interest and the loan was subject

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