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A Living Wage: The Latest ESG Challenge for Corporate Governance

Long considered controversial from economic and shareholder perspectives, living wage concepts are receiving more attention in the context of economic policy, social responsibility and ESG investing. As progressive perspectives concerning income equality, and executive and employee compensation, are becoming more mainstream, corporate leaders should prepare for greater engagement in this important conversation.

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DOL Creates Path for 401(k) Plans to Offer Private Equity Investment Options

In June, the US Department of Labor issued an information letter indicating that it will allow defined contribution retirement plans (such as 401(k) plans) to indirectly invest in private equity funds. While information letters are not binding, this new guidance creates a significant opportunity for plan sponsors to consider investment options that include private equity funds. However, it will be important for both plan sponsors and funds to carefully evaluate potential investments for compliance with fiduciary requirements.

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Exec Comp Regs Crack Down on Partnership Arrangements

Corporations looking to use partnerships to avoid the executive compensation deduction limitation may be out of luck. The new proposed regs (REG-122180-18) on the section 162(m) executive compensation deduction limitation include a rule on compensation paid by a partnership to an executive of a publicly held corporation that’s subject to the limitation.

McDermott’s Andrew C. Liazos contributes to a Tax Notes article that takes a look at these new regulations and what they mean for partnership arrangements.

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Originally published on Tax Notes, December 2019




Capital Markets & Public Companies Quarterly: Expanding Relief under Smaller Reporting Company, Reg A+ and Rule 701, SEC Enforcement of Cybersecurity Disclosures and Other News

During the previous quarter, the SEC acted to expand the number of companies that may rely on the “smaller reporting company” scaled disclosure regime and Congress directed revisions to the Regulation A+ and Rule 701 exemptions. The SEC also took enforcement action on a major cybersecurity breach, reinforcing its recent interpretive guidance on the subject. The director of the SEC Division of Corporation Finance also spoke on how blockchain assets may or may not constitute securities, and the 9th Circuit created a circuit split related to securities litigation after a tender offer.

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SEC Director Makes Groundbreaking Speech about Blockchain Token Sales

The Director of the SEC’s Division of Corporation Finance William Hinman gave a speech in which he discussed whether a digital asset originally offered as a security can become something other than a security over time. The speech provided some of the most important considerations to date for analysis of blockchain token transactions under US securities law.

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What the Demise of the DOL’s Fiduciary Rule Means for Plan Sponsors

The Department of Labor’s fiduciary rule has recently been rendered unenforceable following a recent 5th Circuit Court of Appeals decision. In an article published by the Society for Human Resource Management, McDermott partner Brian Tiemann weighs in on what this means for plan sponsors. “As a result of the Fifth Circuit’s ruling, the suitability standard is effectively restored” for advising plan participants on investments, distributions and rollovers, Tiemann observed. He also points out that advisors may want to revise service agreements with plan fiduciaries to clarify the scope of advice that fiduciaries will provide participants.

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Originally published by the Society for Human Resource Management, May 2018.




The Quandary of Publicly-Traded Employer Stock in a 401(k) Plan

Offering employer stock in a 401(k) plan investment lineup can seem like a win-win situation. It can enable employees to become company owners—real, skin-in-the-game, participants in their employer’s economic future—through a simple deferral election. The U.S. Supreme Court has even recognized the value of employer stock funds, confirming that Congress sought to encourage their creation through provisions and standards contained in the Employee Retirement Income Security Act of 1974 (“ERISA”).

However, in the wake of a series of high-profile employee lawsuits seeking recovery against Enron, Lehman Brothers, and other employers for losses from 401(k) investments in employer stock, such funds can—almost as easily—seem a recipe for disaster. This article examines the quandary that employer stock funds pose for plan sponsors, who must navigate ERISA’s careful balance of (1) ensuring fair and prompt enforcement of employee rights under employer-provided retirement plans while (2) encouraging employer creation of these plans.

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Originally published in Bloomberg Law, May 25, 2017




Protecting Against SEC Whistleblower Enforcement Actions: Employment and Severance Agreements

Large fines have recently been imposed against public companies due to using confidentiality provisions that violate whistleblower provisions under federal securities law. Many standard confidentiality clauses in employment agreements, severance agreements, release agreements, non-compete agreements and other employment related agreements will violate these whistleblower provisions. Recently, the Office of Compliance Inspections and Examinations at the US Securities and Exchange Commission announced that it is actively reviewing these agreements to determine if there are possible securities law violations.

This webinar will address the whistleblower provisions relevant to employment related agreements, the recent SEC enforcement actions, the compliance issues raised by typical confidentiality clauses and actions for employers to consider for existing and future employment related agreements.

On-demand presentation link available here.

MP4 downloadable link available here.




2016 Proxy Season Checklist – What You Need to Know

Executive compensation, corporate governance, shareholder engagement and other rule changes and rulemakings for public companies are highlighted in the 2016 Proxy Season Checklist. The list discusses important developments that will affect the upcoming and future proxy seasons, and offers suggestions on how to prepare for them.

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SEC Finalizes Rules Regarding Disclosure of CEO Pay Ratio—What They Require, What to Do and What’s Next

In yet another divisive 3-2 vote along party lines, on August 6, 2015, the U.S. Securities and Exchange Commission (SEC) adopted final rules requiring public companies (other than emerging-growth companies, smaller reporting companies and foreign private issuers) to disclose the ratio of the compensation of its chief executive officer to the median compensation of its employees (CEO Pay Ratio). The new rules were mandated under Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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