Disclosure of Executive Pay a Global Trend Reply

Compliance, Legislation • Tags: , , , , , , , , ,
Building Puzzle

(Courtesy of Creative Commons)

Recent corporate scandals and the global financial crisis have launched a renewed push for more visibility into executive pay.  This month, amid public outrage in France against the country’s former budget minister, the government revealed its proposals for financial transparency among ministers and other top officials.  And last month, in response to a scandal involving a Swiss pharma company, Switzerland passed what some are calling “the world’s strictest controls on executive pay.”  Those rules give shareholders binding say on the overall pay packages for executives and directors and require disclosure of all loans to executives.  Germany aims to follow suit, and Chancellor Merkel’s ruling coalition there has already proposed new rules giving shareholders more say as to executive pay.

The idea that companies should disclose how much they pay their top executives has a long tradition in the United States.  Since its creation in 1934, the Securities & Exchange Commission (SEC) has overseen disclosure of how top executives at publicly traded companies are compensated.  More specifically, pursuant to the Securities Act of 1934, companies must reveal in each 10-K or proxy statement how much their top executives earn.

Over the course of the past 80 years, the SEC has also periodically updated its disclosure rules to encompass new forms of executive pay, including stock options, compensation packages, perks (corporate jets, club memberships, etc.) and pension benefits.  Today, “[i]t is generally accepted that shareholders – and the public, for that matter – have a right to know how much the CEO and other top officers are paid, and that more disclosure is always preferred to less,” writes Kevin J. Murphy, a professor of Finance and Business Economics at USC Marshall School of Business.    More…

‘Fair Play’: young people finding a voice against corruption Reply

TRACE • Tags: , , ,

Anti-Corruption Rocks!The music video opens in black and white with images from the 1940s of young politicians, military officers and journalists from Indonesia’s past as they fight to gain independence from the Netherlands.  Suddenly, those images are juxtaposed to the Indonesia of today:  a chaotic voting scene, disgraced government officials pushing away photographers, police officers on a bus asking passengers for money.  In the background, we hear the voice of a young male singer:

“A rich country with children in hunger/greedy officials and politicians/a rich country with uneducated child/greedy business eroded the forest/ a country with constant disaster/ judges are always bribable/ corruptors with full protections…”

The video is by the young Indonesian band Simponi and is entitled Vonis, meaning “verdict”.  Vonis was one of the more than 75 entries last year in the Fair Play Anti-Corruption Music Competition, a global battle-of-the-bands style contest for original songs on the theme of anti-corruption.  The event is organized by the Global Youth Anti-Corruption network (GYAC).   Because Simponi’s video won second place, the band received a free trip to perform a concert in Brasilia last November in front of Brazil’s President Dilma Rousseff, along with more than 2,000 anti-corruption leaders at the 15th International Anti-Corruption Conference. More…

KPMG ‘Insider Trading’ Case Highlights Dangers of Commercial Bribery 1

enforcement, Investigations • Tags: , , , , , , ,

Bribes truly can happen in the most unsuspecting of places.  A few weeks ago, Scott London, partner at the accounting firm KPMG, met up with his longtime friend Bryan Shaw at an unassuming Starbucks in the San Fernando Valley, outside of Los Angeles.  Over a cup of coffee and some pleasantries, Shaw handed London an unmarked envelope containing $5,000 in cash.  Unbeknown to either of them, FBI agents were snapping pictures of the whole thing.

KPMGUntil last week, London, worked at one of the biggest accounting firms in the world.  A 29-year veteran at KPMG, he was reportedly in charge of the firm’s entire southern California audit practice and managed more than 900 workers.  Shaw, a local jewelry store owner, was London’s golfing buddy and the two often played together at the North Ranch Country Club in Westlake Village, California.  But over the course of their relationship, London and Shaw shared more than just golfing tips.  In exchange for  “about $25,000 in cash, a new Rolex watch and fancy dinners” as well as free concert tickets, London gave Shaw insider information regarding public companies, including nutritional supplement maker Herbalife and footwear company Skechers – two of KPMG’s clients.

What London has since described as a “lapse in judgment”, has landed him in a lot of trouble with authorities and has caused huge embarrassment for KPMG.  The firm fired London last week and has since resigned as the outside auditor for Herbalife and Sketchers.  Trading in stocks of the two companies also had to be temporarily suspended as KPMG withdrew its certification for the companies’ financial statements for the last few years.   More…

US Government Intervenes in Wynn Resorts Lawsuit To Prevent Disruptions to Ongoing Criminal Probe Reply

TRACE • Tags: , , ,

According to an article published earlier this morning by Reuters news agency, it is confirmed that U.S. federal prosecutors have sought permission to intervene in a Nevada state court proceeding brought by Wynn Resorts Ltd against Japanese billionaire Kazuo Okada.  Although the Nevada lawsuit began as a contractual dispute, it has since escalated to involve allegations of improper payments made to various foreign officials by Mr. Okada.

In the recently-filed court papers, the federal government for the first time publicly acknowledged that it had initiated a criminal investigation of Okada and his companies – Japan’s Universal Entertainment Corp and Nevada-based Aruze USA Inc – for possible violations of the Foreign Corrupt Practices Act regarding a $2 billion casino project in the Philippines.  Last November, reports indicated that the Philippines government had requested assistance from the DOJ regarding various allegations of bribes made to the Phillipine Amusement and Gaming Corp (PAGCOR).   The Reuters article states that the Federal Bureau of Investigations is also involved in investigating the matter.

Wynn Resorts Ltd, headed by CEO Steven Wynn, is a developer and operator of high end hotels and casinos around the globe.  The company disclosed last February in an SEC filing that it had concluded a year-long internal investigation into Mr. Okada regarding possible violations of U.S. anti-bribery law.  To read more about this case, please visit the TRACE Compendium.