Category Archives: SEC Hot Topic

SEC Publishes Spring Rulemaking Agenda

On June 22, 2022, the Office of Information and Regulatory Affairs released the U.S Government’s “Spring 2022 Unified Agenda of Regulatory and Deregulatory Actions,” which includes the SEC’s spring agenda.  The SEC’s agenda includes climate change and cybersecurity in the Final Rule stage and human capital resources disclosures in the Proposed Rule stage.

As always, your thoughts and comments are welcome!

SEC Publishes Spring Rulemaking Agenda

On June 22, 2022, the Office of Information and Regulatory Affairs released the U.S Government’s “Spring 2022 Unified Agenda of Regulatory and Deregulatory Actions,” which includes the SEC’s spring agenda.  The SEC’s agenda includes climate change and cybersecurity in the Final Rule stage and human capital resources disclosures in the Proposed Rule stage.

As always, your thoughts and comments are welcome!

Acting Chief Accountant Addresses Auditor Independence and Ethical Cultures in Audit Firms

On June 8, 2022, Acting Chief Accountant Paul Munter issued a Statement titled “The Critical Importance of the General Standard of Auditor Independence and an Ethical Culture for the Accounting Profession.”

The Statement:

  • Reviews the principles in the SEC’s auditor independence framework,
  • Summarizes OCA’s approach to independence questions,
  • Lists recurring issues in independence consultations, and
  • Discusses the importance of an ethical culture to accounting firms.

The auditor independence framework section begins with a review of the foundational principles in S-X Rule 2.01:

The Commission will not recognize an accountant as independent, with respect to an audit client, if the accountant is not, or a reasonable investor with knowledge of all relevant facts and circumstances would conclude that the accountant is not, capable of exercising objective and impartial judgment on all issues encompassed within the accountant’s engagement. In determining whether an accountant is independent, the Commission will consider all relevant circumstances, including all relationships between the accountant and the audit client, and not just those relating to reports filed with the Commission.

The discussion emphasizes that a simple “checklist compliance exercise” with the detailed requirements in Regulation S-X will not assure that an auditor is independent.  All “relevant circumstances” must be considered when assessing independence.

The discussion of OCA’s approach to independence questions briefly reviews the staff’s process and emphasizes several considerations, including:

  • Consultations should include all information relevant to an independence determination, and
  • Companies and their auditors should not place undue reliance on previous independence consultations as circumstances, legal or regulatory requirements may be different.

The discussion of recurring issues in independence consultations begins with a discussion of concerns by the OCA staff that they are observing “loosening attitudes” about the general independence standards.  It also focuses on the “checklist mentality,” non-audit services, including providing non-audit services to affiliates, and risks in alternative practice structures.

The concluding section about ethical culture issues begins with this statement:

“It is of paramount importance that public accounting firms foster a culture of ethical behavior with respect to all aspects of their professional responsibilities, including auditor independence.”

Included are discussions of how firms should be willing to forgo engagements that are “close-to-the-line” for independence and the importance of quality control systems.

As always, your thoughts and comments are welcome!

A Busy REGFLEX Agenda for the SEC

On June 11, 2021, the SEC’s regulatory agenda was published as part of the Office of Information and Regulatory Affairs “Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions.”

As you can read in this Press Release, proposed and final rule making areas addressed in the agenda include:

  • Disclosure relating to climate risk, human capital, including workforce diversity and corporate board diversity, and cybersecurity risk
  • Market structure modernization within equity markets, treasury markets, and other fixed income markets
  • Transparency around stock buybacks, short sale disclosure, securities-based swaps ownership, and the stock loan market
  • Investment fund rules, including money market funds, private funds, and ESG funds
  • 10b5-1 affirmative defense provisions
  • Unfinished work directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including, among other things, securities-based swaps and related rules, incentive-based compensation arrangements, and conflicts of interest in securitizations
  • Enhancing shareholder democracy
  • Special purpose acquisition companies
  • Mandated electronic filings and transfer agents

You can also get more perspective about the agenda in this speech that Chair Gensler gave at London City Week.

As always, your thoughts and comments are welcome!

About That Selected Financial Data and Quarterly Information Change??

In an earlier post, we suggested eliminating Selected Financial Data and quarterly information disclosures in Form 10-K.  This was based on the early transition option in the SEC’s Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information Final Rule.

The change in administrations in Washington, D.C. has created the possibility of a change in the effective date of the new rule.  In a January 20, 2021, Presidential Action titled “Regulatory Freeze Pending Review,” the new administration provides this guidance:

  1. With respect to rules that have been published in the Federal Register, or rules that have been issued in any manner, but have not taken effect, consider postponing the rules’ effective dates for 60 days from the date of this memorandum, consistent with applicable law and subject to the exceptions described in paragraph 1, for the purpose of reviewing any questions of fact, law, and policy the rules may raise.  For rules postponed in this manner, during the 60-day period, where appropriate and consistent with applicable law, consider opening a 30-day comment period to allow interested parties to provide comments about issues of fact, law, and policy raised by those rules, and consider pending petitions for reconsideration involving such rules.  As appropriate and consistent with applicable law, and where necessary to continue to review these questions of fact, law, and policy, consider further delaying, or publishing for notice and comment proposed rules further delaying, such rules beyond the 60-day period.  Following the 60-day delay in effective date:

a.  for those rules that raise no substantial questions of fact, law, or policy, no further action needs to be taken; and

b.  for those rules that raise substantial questions of fact, law, or policy, agencies should notify the OMB Director and take further appropriate action in consultation with the OMB Director.

A deferral of the effective date is not automatic.  And there are some questions about whether this action applies to independent agencies such as the SEC.  Whatever the case, the SEC would have to take action to defer the effective date.  With these uncertainties it is likely not prudent to make these changes now.

As always, your thoughts and comments are welcome!

Internal Control Versus Internal Accounting Control

On October 15, 2020, the SEC announced a settled enforcement case against Andeavor, LLC.  The case centers on stock buybacks Andeavor made while in discussions to be acquired by another oil and gas company.  This case is relevant for all public companies as it potentially expands the concept of internal accounting control to include administrative controls.

In January 2018, Andeavor and a potential acquirer agreed to resume acquisition discussions which had been suspended in October 2017.  Just before the scheduled resumption of the talks Andeavor’s CEO directed its CFO to initiate a stock buyback program.

According to the SEC’s press release:

The order finds that Andeavor used an abbreviated and informal process to evaluate whether the requirements for the buyback were satisfied, including that the company was not in possession of material non-public information. The order finds more specifically that the process for evaluating the materiality of the acquisition negotiations did not include discussing, with the CEO, the likelihood of a deal between Andeavor and Marathon.

In addition, Associate Director Melissa Hodgman stated:

While buybacks can be an important part of a company’s capital allocation plan, this case makes clear the importance of effective controls when a company is contemplating transactions with its shareholders.

The reason all companies should become familiar with this case is that the 1934 Act provisions it alleges that Andeavor violated focus on internal control.  It is not a Rule 10b-5 case.

Commissioners Peirce and Roisman published a Statement to explain why they voted against this enforcement decision.  A major issue in their dissent is that the Commission is taking the concept of internal accounting control and expanding it in ways that may not be appropriate.

In the dissent they make this important point about internal control:

Thus, accounting control “is within the scope of the study and evaluation of internal control contemplated by generally accepted auditing standards, while administrative control is not.”  Put another way, “accounting controls . . . generally bear directly and importantly on the reliability of financial records and require evaluation by the auditor,” while “[a]dministrative controls . . . ordinarily relate only indirectly to the financial records and thus would not require evaluation.”

They then raise this concern:

We are concerned that the Commission’s resolution of this case—if pursued to its logical conclusion in future cases—risks uprooting the core concept of “internal accounting controls” from the language, statutory context, and history of Section 13(b)(2)(B).  There may be temptation to simply view this provision as a generic “internal controls” requirement.  While this case is unprecedented in its application of the provision to the insider trading compliance context, the Commission has settled other actions in the recent past based on similar theories of inadequate internal controls that go well beyond the realm of “accounting controls.”  It has found a violation, for example, where controls were inadequate to ensure that an airline’s approval of a domestic flight route was consistent with its ethics policy.    No court, however, has adopted the expansive view of Section 13(b)(2)(B) that such actions seem to require.

They conclude with this thought:

While we agree that Andeavor’s decision processes in this case left substantial room for improvement, and inadequate processes may expose a company to potential Rule 10b-5 liability, we doubt it is our role under Section 13(b)(2)(B) to second-guess management’s decision processes on matters that do not directly implicate the accuracy of a company’s accounting and financial statements.

As always, your thoughts and comments are welcome!

Human Capital Resources Disclosure Examples

Thanks to the hard work and research skills of Abril Chavira, Director of Financial Reporting at ASGN Inc., here are a number of examples from recent Form 10-K’s of human capital resources disclosures.

While this post is very long, we thought you would find these examples valuable and wanted to include the full text.  Feel free to skim or use the included links.

Dolby Laboratories (YE 10/3/2020)


As of September 25, 2020, we had 2,289 employees worldwide, of whom 1,037 employees were based outside of the U.S. None of our employees are subject to a collective bargaining agreement. Through our long operating history and experience with technological innovation, we appreciate the importance of retention, growth and development of our employees. We believe we offer competitive compensation (including salary, incentive bonus, and equity) and benefits packages in each of our locations around the globe. Further, from professional development opportunities to leadership training, we have development programs and on-demand opportunities to cultivate talent throughout the Company. We are also focused on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress. We have created Employee Networks that are aligned around dimensions of diversity, such as gender, ethnicity, sexual orientation or other shared attributes, which we believe help build community and enable opportunities for development. We continue to focus on building a pipeline for talent to create more opportunities for workplace diversity and to support greater representation within the Company.



SONOS (YE 10/3/2020)

Human Capital

Sonos is dedicated to creating the ultimate listening experience for our customers, and our employees are critical to achieving this mission. In order to continue to design innovative experiences and products, and compete and succeed in our highly competitive and rapidly evolving market, it is crucial that we continue to attract and retain experienced employees. As part of these efforts, we strive to offer a competitive compensation and benefits program, foster a community where everyone feels included and empowered to do to their best work, and give employees the opportunity to give back to their communities and make a social impact.

As of October 3, 2020, we had 1,427 full-time employees. Of our full-time employees, 999 were in the United States and 428 were in our international locations. Other than our employees in France and the Netherlands, none of our employees are represented by a labor union or covered by a collective bargaining agreement.

Compensation and Benefits Program. Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders. We provide employees with compensation packages that include base salary, annual incentive bonuses, and long-term equity awards (“RSUs”) tied to the value of our stock price. We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and stockholder interests, including by incentivizing business and individual performance (pay for performance), motivating based on long-term company performance and integrating compensation with our business plans. In addition to cash and equity compensation, we also offer employees benefits such as life and health (medical, dental & vision) insurance, paid time off, paid parental leave, and a 401(k) plan.

Diversity and Inclusion. We believe that an equitable and inclusive environment with diverse teams produces more creative solutions, results in better, more innovative products and services and is crucial to our efforts to attract and retain key talent. We have set a goal of 50% of new U.S. hires coming from underrepresented groups. We are focused on this goal and on building an inclusive culture through a variety of diversity and inclusion initiatives, including related to internal promotions and hiring practices. Our employee resource groups (“ERGs”) also help to build an inclusive culture through company events, participation in our recruitment efforts, and input into our hiring strategies.

Community Involvement. We aim to give back to the communities where we live and work, and believe that this commitment helps in our efforts to attract and retain employees. We offer employees the opportunity to give back both through our Sonos Soundwaves program, which partners with leading non-profits, and our Sonos Cares program, which offers employees paid volunteer time each year.

For more information on our diversity and inclusion and community involvement initiatives, please see our Corporate Responsibility report which is available at


Starbucks 10-K (YE 9/27/2020)

Human Capital Management

As a company, Starbucks mission is not only to deliver outstanding financial results by offering exceptional and unique products and services, but to also create a strong connection with the communities where we operate. We believe the strength of our workforce is one of the significant contributors to our success as a global brand that leads with purpose. This is largely attributed to our partners (employees) who strive every day to create a welcoming and inclusive environment for our customers. Therefore, one of our core strategies is to invest in and support our partners to differentiate our brand, products and services in the competitive specialty coffee market, including the following areas of focus:

Oversight and Management

We recognize the diversity of customers, partners and communities, and believe in creating an inclusive and equitable environment that represents a broad spectrum of backgrounds and cultures. Working under these principles, our Partner Resources Organization is tasked with managing employment-related matters, including recruiting and hiring, onboarding and training, compensation planning, performance management and professional development. Our Board of Directors and Board committees provide oversight on certain human capital matters, including our Inclusion and Diversity programs and initiatives. As noted in its charter, our Compensation and Management Development Committee is responsible for periodically reviewing Starbucks partner resource programs and initiatives, including healthcare and other benefits, as well as our management development and succession planning practices and strategies. Our Audit and Compliance Committee works closely with the Risk Management Committee, led by Starbucks cfo and general counsel, to monitor current and emerging labor and human capital management risks and to mitigate exposure to those risks. Furthermore, our Nominating and Corporate Governance Committee annually evaluates the effectiveness of our social responsibility policies, goals and programs, which also include partner-related issues. These reports and recommendations to the Board and its committees are part of the broader framework that guides how Starbucks should attract, retain and develop a workforce that aligns with our values and strategies.

We regularly conduct anonymous surveys to seek feedback from our retail and non-retail partners on a variety of topics, including but not limited to, confidence in company leadership, competitiveness of our compensation and benefits package, career growth opportunities and improvements on how we could make our company an employer of choice. The results are shared with our partners and reviewed by senior leadership, who analyze areas of progress or deterioration and prioritize actions and activities in response to this feedback to drive meaningful improvements in partner engagement. Our management and cross-functional teams also work closely to evaluate human capital management issues such as partner retention, workplace safety, harassment and bullying, as well as to implement measures to mitigate these risks.

Total Rewards

We have demonstrated a history of investing in our workforce by offering competitive salaries and wages. To foster a stronger sense of ownership and align the interests of partners with shareholders, restricted stock units are provided to eligible non-executive partners under our broad-based stock incentive programs. Furthermore, we offer comprehensive, locally relevant and innovative benefits to all eligible partners. In the U.S, our largest and most mature market, these include, among other benefits:

  • Comprehensive health insurance coverage is offered to partners working an average of 20 hours or more each week.
  • 100% tuition coverage is provided to partners who earn a bachelor’s degree online at Arizona State University through the Starbucks College Achievement Program.
  • Parental leaves are provided to all new parents for birth, adoption or foster placement.
  • A Partner and Family Sick Time program is provided and allows partners to accrue paid sick time based on hours worked and use that time for themselves or family members in need of care.
  • Care@Work benefit provides partners with subsidized child, adult or senior care planning services. This benefit includes up to 20 days of subsidized backup care services through the end of fiscal 2021, in light of the COVID-19 pandemic.
  • We view mental health as a fundamental part of our humanity and implemented a comprehensive suite of related programs and benefits in fiscal 2020. These include Headspace, an online application that enables guided mediation, Lyra, which provides mental health coaching, and Starbucks Mental Health Fundamental Training, created in partnership with National Council for Behavioral Health, which offers ongoing training to help partners recognize and respond to signs of mental health and substance use issues.

Outside of the U.S., we have provided other innovative benefits to help address market-specific needs, such as providing interest-free loans to our U.K. partners to help cover rental deposits, mental health services in Canada, and in China, a monthly housing subsidy for full-time Starbucks baristas and shift supervisors, as well as comprehensive health insurance coverage for parents of partners.

Role-based Support

To help our partners succeed in their roles, we emphasize continuous training and development opportunities. These include, but are not limited to, safety and security protocols, updates on new products and service offerings and deployment of technologies. Training provided through our Pour Over sessions include a wide variety of topics such as achievable goal setting, giving and receiving constructive feedback and effective engagement with customers and communities. To help further promote an inclusive culture and to better serve our customers, we encourage U.S.-based partners to enroll in the To Be Welcoming courses we created in partnership with Arizona State University to address different forms of bias and discrimination.

Pay Equity

To be an employer of choice and maintain the strength of our workforce, we consistently assess the current business environment and labor market to refine our compensation and benefits programs and other resources available to our partners.

We previously achieved and currently maintain 100 percent pay equity in the U.S. for women and men and people of all races for partners performing similar work. We have also achieved gender pay equity in China and Canada, two of our largest markets outside of the U.S., and we made a commitment to achieve gender pay equity in all company-operated markets.

As of September 27, 2020, Starbucks employed approximately 349,000 people worldwide. In the U.S., Starbucks employed approximately 228,000 people, with approximately 220,000 in company-operated stores and the remainder in corporate support, store development, roasting, manufacturing, warehousing and distribution operations. Approximately 121,000 employees were employed outside of the U.S., with approximately 118,000 in company-operated stores and the remainder in regional support operations. The number of Starbucks partners represented by unions is not significant. We believe our efforts in managing our workforce have been effective, evidenced by a strong Starbucks culture and a good relationship between the company and our partners.

Tetra-Tech 10-K (YE 9/27/2020)

Human Capital Management

Employees. At fiscal 2020 year-end, we had approximately 20,000 staff worldwide. A large percentage of our employees have technical and professional backgrounds and undergraduate and/or advanced degrees, including the employees of recently acquired companies. Our professional staff includes archaeologists, architects, biologists, chemical engineers, chemists, civil engineers, data scientists, computer scientists, economists, electrical engineers, environmental engineers, environmental scientists, geologists, hydrogeologists, mechanical engineers, oceanographers, project managers and toxicologists. We consider the current relationships with our employees to be favorable. We are not aware of any employment circumstances that are likely to disrupt work at any of our facilities. See Part I, Item 1A, “Risk Factors” for a discussion of the risks related to the loss of key personnel or our inability to attract and retain qualified personnel.

Diversity and Inclusion. Tetra Tech brings together engineers and technical specialists from all backgrounds to solve our clients’ most challenging problems. Our Diversity and Inclusion Policy guides the Board of Directors, management, associates, subcontractors, and partners in developing an inclusive culture. Our Diversity and Inclusion Council monitors Tetra Tech’s diversity and inclusion practices and makes recommendations to the Board of Directors and Chief Executive Officer for any changes or improvements to our program.

Tetra Tech values diversity and inclusion and undertakes various efforts throughout its operations to promote these initiatives. Our current efforts are focused on three primary areas:

  • Safe work environment.We provide training to all associates to improve their understanding of behaviors that can be perceived as discriminatory, exclusionary, and/or harassing, and provide safe avenues for associates to report such behaviors.
  • Equal employment opportunity.Tetra Tech ensures that our practices and processes attract a diverse range of candidate, and that candidates are recruited, hired, assigned, developed, and promoted based on merit and their alignment to our values.
  • Learning and development opportunities.To support our associates in reaching their full potential, Tetra Tech offers a wide range of internal and external learning and development opportunities. Education assistance is offered to financially support associates who seek to expand their knowledge and skill base.

As part of Tetra Tech’s commitment to a culture of inclusion, in fiscal 2020 we launched our Global Resource Group (“ERG”) Program, which broadens and enhances company-wide interaction opportunities for our employees. Our ERG’s are open to all and involve activities for both employees whose background is the focus of the ERG and those who are supportive of the group (also known as allies). These global networks build on and coordinate with the many local networks that are already active throughout our operations and include groups focused on the experiences of Black, Latino, Women, Veterans, and LGBTQ employees.

Professional Development. Tetra Tech invests in the professional development of our associates. They are provided with training in leadership development, project management skills, and interpersonal skills development. Our focused programs are designed, taught, and facilitated by Tetra Tech leadership, consistent with our commitment to talent development. These programs include the following:

  • Tetra Tech Leadership Academy.Tetra Tech Leadership Academy develops our high-potential associates from around the world into outstanding business leaders. Instructors for this intensive, year-long program are executive management and operational leaders. Participants are immersed in all aspects of the operations of Tetra Tech and complete challenging, real-world assignments designed to hone their leadership and management skills.
  • Project Excellence Program. Tetra Tech develops Project Managers who are world class in their abilities and performance. The program is led by our Chief Engineer and involves extensive training on how to effectively manage all components of a project.
  • Fearless Entrepreneur Program. Tetra Tech develops into client-oriented, business-minded professionals who are driven to understand and meet the needs of our clients. Developing professionals are challenged and mentored through a process of building client relationships. Participants take part in group discussions in a classroom setting and then are required to implement learned strategies with actual and potential clients.
  • Tetra Tech Technology Transfer (T4) and ToolTalk Webcast Series. Tetra Tech holds webcasts to help associates around the world share technical resources and enhance their use of available internal tools and to provide better service to clients. Through the T4 and ToolTalk Webcast Series, Tetra Tech experts present and lead discussions about new technologies and programs, best practices, and opportunities for growth across our company.

By offering our associates meaningful work and career development, Tetra Tech is well positioned to continue its growth through recruitment, development, and retention of the best talent in the industry




The Walt Disney Company (YE 10/3/2020)

Human Capital

The Company’s key human capital management objectives are to attract, retain and develop the highest quality talent. To support these objectives, the Company’s human resources programs are designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay, benefit, and perquisite programs; enhance the Company’s culture through efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high-performing, diverse workforce; engage employees as brand ambassadors of the Company’s content, products and experiences; and evolve and invest in technology, tools, and resources to enable employees at work.

The Company employed approximately 203,000 people as of October 3, 2020. Our global workforce is comprised of approximately 80% full time and 20% part time employees, with nearly 1% of the part time population being seasonal employees. Of the total population as of October 3, 2020, approximately 155,000 of our employees worked in the Parks, Experiences and Products segment.

Some examples of key programs and initiatives that are focused to attract, develop and retain our diverse workforce include:

  • Diversity and inclusion (D&I). Our D&I objectives are to build teams that reflect the life experiences of our audiences, while employing and supporting a diverse array of voices in our creative and production content.

◦    Established six pillars that serve as the foundation for our D&I commitments – transparency, accountability, representation, content, community, and culture

◦    Created a pipeline of next-generation creative executives from underrepresented backgrounds through programs such as the Executive Incubator, Creative Talent Development and Inclusion (CTDI), and the Disney Launchpad: Shorts Incubator

◦Championed targeted development programs for underrepresented talent

◦Hosted a series of culture-changing, innovation and learning opportunities to spark dialogue among employees, leaders, Disney talent and external experts

◦Sponsored over 70 employee-led Business Employee Resource Groups (BERGs) that represent and support the diverse communities that make up our workforce. The BERGs facilitate networking and connections with peers, outreach and mentoring, leadership and skill development and cross-cultural business innovation

  • Health, wellness and family resources. Disney’s benefit offerings are designed to meet the varied and evolving needs of a diverse workforce across businesses and geographies. Because we want our employees and their families to thrive, this year, we enhanced the ways we help our employees care for themselves and their families, especially in response to COVID-19

◦Healthcare options for employees in Florida and Southern California, aimed at reducing out-of-pocket costs

◦Coverage of all COVID-19 testing and treatment under all Company medical plans at no cost to the employees and dependents

◦Child care programs for employees, including access to onsite/community centers, enhanced back-up care choices to include personal caregivers, child care referral assistance and center discounts, homework help and a variety of parenting educational resources

◦Free mental and behavioral health resources, including on-demand

  • Disney Aspire. We support the long-term career aspirations of our hourly employees through education and personal development. We pay tuition costs at a network of schools and aim to help our hourly employees put their career goals within reach by equipping them with degree programs, coaching and job skills designed for a rapidly changing workplace and workforce

◦Investment of $150 million in Aspire’s first five years to cover 100% of tuition, books and education fees

◦Access to a wide variety of degree, certificate, high school completion, college start, language learning and trades programs

◦Chosen fields of study do not have to be related to an employee’s current position, and employees do not have to stay at the Company upon completion of their studies

  • Talent Development. We prioritize and invest in creating opportunities to help employees grow and build their careers, through a multitude of training and development programs. These include online, instructor-led and on-the-job learning formats as well as executive talent and succession planning paired with an individualized development approach

Community & Social Impact. We are committed to providing comfort to those in need and inspiration and opportunity to those who want to improve their world. One primary way we do this is through our unique employee volunteer program – Disney VoluntEARS. Throughout the year, employees make a positive impact in their local communities and have found a multitude of special ways to continue volunteering during the pandemic

Due to the current climate, including COVID-19 impacts, and changing environment in which we are operating, the Company has generated efficiencies in its staffing, including limiting hiring to critical business roles, furloughs and reductions-in-force. As part of these actions, the employment of approximately 32,000 employees primarily at Parks, Experiences and Products will terminate in the first half of fiscal 2021. Additionally, as of October 3, 2020, approximately 37,000 employees who are not scheduled for employment termination were on furlough as a result of COVID-19’s impact on our businesses.


Meta Financial Group (YE 9/30/2020)

Human Capital Resources

In order to continue to deliver on our mission of financial inclusion for all, it is crucial that we attract and retain talent who desire to enable financial equality through delivery of capable solutions, thoughtful innovation and equitable consumer options in the markets that we serve. To facilitate talent attraction and retention, we strive to make MetaBank an inclusive, safe and healthy workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits, health and welfare programs.

Employee Profile

As of September 30, 2020, we had approximately 1,015 full time equivalent employees in locations across the United States. This represents a decrease of 171 employees or 14.42% from September 30, 2019 due primarily to the sale of the Community Bank division in February of 2020 in which employees aligned with our community bank operations and support transitioned to the acquirer of the Community Bank division, Central Bank.

As of September 30, 2020, approximately 56.6% of our current workforce is female, 43.4% male, and our average tenure is 6.07 years, an increase of 5.93% from an average tenure of 5.73 years as of September 30, 2019.

Total Rewards

As part of our compensation philosophy, we believe that we must offer and maintain market competitive total rewards programs for our employees in order to attract and retain superior talent. In addition to healthy base wages, additional programs include annual bonus opportunities, a Company augmented Employee Stock Ownership Plan, Company matched 401(k) Plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, adoption assistance, and employee assistance programs.

Health and Safety

The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our employees. We provide our employees and their families with access to a variety of flexible and convenient health and welfare programs, including benefits that support their physical and mental health by providing tools and resources to help them improve or maintain their health status; and that offer choice where possible so they can customize their benefits to meet their needs and the needs of their families. In response to the COVID-19 pandemic, we implemented significant operating environment changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes having the vast majority of our employees work from home, while implementing additional safety measures for employees continuing critical on-site work.


A core tenet of our talent system is to both develop talent from within and supplement with external hires. This approach has yielded loyalty and commitment in our employee base which in turn grows our business, our products, and our customers, while adding new employees and external ideas supports a continuous improvement mindset and our goals of a diverse and inclusive workforce. We believe that our average tenure — 6.07 years as of the end of the fiscal year 2020 — reflects the engagement of our employees in this core talent system tenet.

Our talent acquisition team uses internal and external resources to recruit highly skilled and talented workers across the US, and we encourage employee referrals for open positions.

Our Performance Management framework includes monthly business and functional reviews and one on one, quarterly, forward looking, goal and employee development discussions, followed by annual opportunities for pay differentiation via overall performance distinction.

We strive to promote inclusion through our stated Company values and behaviors. With the support of our Board of Directors, we continue to explore additional diversity, equity, inclusion and belonging efforts via our three pillars of inclusion: candidates, employees, and marketplace. Our ongoing diversity and inclusion initiatives support our goal that everyone throughout the Company is engaged in creating an inclusive workplace, and we are focused on sourcing and hiring with fairness and equitable approaches, creating an environment where all of our employees can develop and thrive, and engaging and influencing suppliers, partners and associations in our marketplace

VISA Inc (YE 9/30/2020).  VISA filed their Proxy on 11/13/2020 and their 10-K on 12/1/2020, their Proxy as additional information on Human Capital.





Central to our long-term strategy is attracting, developing and retaining the best talent globally with the right skills to drive our success. In fiscal year 2020, the COVID-19 pandemic had a significant impact on our human capital management. A large majority of our workforce worked remotely throughout the second half of 2020, and we instituted safety protocols and procedures for the essential employees who continued to work on site. Visa committed that no employee layoffs would occur in calendar year 2020 related directly to COVID-19. Visa’s workforce grew in 2020 at a slower pace than prior years, increasing from approximately 19,500 employees in fiscal year 2019 to approximately 20,500 employees in fiscal year 2020. Voluntary workforce turnover (rolling 12-month attrition) was 6.3% in September 2020. At the end of fiscal year 2020, Visa’s global workforce was 59% male and 41% female, and women represented 34% of Visa’s leadership (defined as vice president level and above). In the U.S., ethnicity of our workforce was 38% White, 42% Asian, 11% Hispanic, 6% Black and 3% other. For our U.S. leadership, the breakdown was 63% White, 19% Asian, 12% Hispanic, 4% Black and 2% other.

Our culture is underpinned by our core values, including an unwavering commitment to inclusion and diversity. In 2020, we established goals to increase the number of employees from underrepresented groups at the vice president level and above in the U.S. by 50 percent in three years and to increase the number of employees from underrepresented groups in the U.S. by 50 percent in five years. Visa’s commitment to diversity recruiting includes partnering with a number of non-profit and community organizations to support and develop a diverse talent pipeline. For example, Visa established the Black Scholars and Job program, a $10 million fund to create a dedicated Visa scholarship assistance program over the next five years, specifically for college-bound Black students. Upon graduation, all recipients who have met their commitments will be guaranteed a full-time job with Visa. Visa is committed to pay equity, regardless of gender or race/ethnicity, and conducts pay equity analyses on an annual basis.

For additional information, please see the section titled “Talent and Human Capital Management” in Visa’s 2020 Proxy Statement.

Thank you again Abril, and as always, your thoughts and comments are welcome!

Disclosure Modernization Continues – MD&A and Other Financial Disclosures

On November 19, 2020, the SEC adopted a Final Rule modernizing MD&A requirements, eliminating the five-year selected financial information disclosure, and updating the S-K Item 302 quarterly information disclosure.

The related press release includes this summary of the changes for MD&A:

  • Add a new Item 303(a), Objective, to state the principal objectives of MD&A;
  • Amend current Item 303(a)(1) and (2) (amended Item 303(b)(1)) to modernize, enhance and clarify disclosure requirements for liquidity and capital resources;
  • Amend current Item 303(a)(3) (amended Item 303(b)(2)) to clarify, modernize and streamline disclosure requirements for results of operations;
  • Add a new Item 303(b)(3), Critical accounting estimates, to clarify and codify Commission guidance on critical accounting estimates;
  • Replace current Item 303(a)(4), Off-balance sheet arrangements, with an instruction to discuss such obligations in the broader context of MD&A;
  • Eliminate current Item 303(a)(5), Tabular disclosure of contractual obligations, in light of the amended disclosure requirements for liquidity and capital resources and certain overlap with information required in the financial statements; and
  • Amend current Item 303(b), Interim periods (amended Item 303(c)) to modernize, clarify and streamline the item and allow for flexibility in the comparison of interim periods to help registrants provide a more tailored and meaningful analysis relevant to their business cycles.

The new rules have a multi-layered transition path.  They will be effective 30 days after publication in the Federal Register.  Companies will not be required to implement the new rules immediately after the effective date.  Instead, each company will have a “mandatory compliance date” of its fiscal year that ends on or after the date that is 210 days after the effective date.  However, companies have the option to comply with the new rules any time after the effective date.

A registration statement must comply with the new rules if it contains financial statements for a period on or after the “mandatory compliance date” for a company.

We will be posting details about all the changes in coming weeks.

As always, your thoughts and comments are welcome!

Two More Disclosure Modernization Steps

Along with the Commission’s Final Rule on August 26, 2020, modernizing disclosure requirements for the description of the business, risk factors and legal proceedings, the SEC recently made two other changes which are a bit narrower in scope but which we should be aware of in the reporting process.

First, in September, the Commission adopted a Final Rule updating the statistical disclosure requirements for banks and savings and loans.  This Final Rule eliminates Industry Guide 3 and replaces it with new, updated and modernized disclosures in Section 1400 of Regulation S-K.  The rule will be effective 30 days after publication in the Federal Register and will apply to fiscal years ending on or after December 15, 2021.  Affected financial institutions can implement the new disclosure requirements before the mandatory implementation date.  You can read more about the new rules in this press release.

Second, on September 9, 2020, CorpFin amended Disclosure Guidance Topic 7 to provide new renewal options for companies with confidential treatment orders about to expire.  If a confidential treatment request was obtained under the pre-Disclosure Modernization guidance (which required SEC approval), and meets certain conditions, it may be renewed using the new confidential treatment request process in S-K Item 601.  This process does not require SEC pre-approval, but is subject to SEC review.

As always, your thoughts and comments are welcome!

An SEC Comment Challenge: Find the Non-GAAP Measure Issue – Post Four

In this series of posts we are focusing on non-GAAP measure problems and related SEC comments.  As the first, second and third posts in this series did, this post gives you an opportunity to see if you can spot the issue, and then provides the background and SEC guidance behind the issue.

As a brief reminder, the SEC’s guidance about the use of non-GAAP measures is primarily in three places:

  1. Regulation G for non-GAAP measures used anywhere,
  2. S-K Item 10(e), for non-GAAP measures in filed documents, and
  3. Compliance and Disclosure Interpretations.

Just like the first, second and third posts in this series, you can read the excerpt of the release behind the comment and try to spot the issue.  If you prefer, you can read straight through to the comment and explanation that follow.

These excerpts are from Papa John’s International, Inc’s Form 10-K for the fiscal year ended December 29, 2019.  You may recognize this Company as we highlighted their 10-K in our third post in this series.  Can you spot the non-GAAP issue?  As you review this information, focus your thoughts on the “special charges,” and within the detailed list of “special charges” look at the “Royalty relief” line item.

To begin, here is one of the non-GAAP measures presented by Papa John’s:

PapaJohn One

Papa John’s also provided this detail about the special charges:

PapaJohn Two

As you review the list of non-GAAP adjustments, letter (a) about royalty relief to franchisees seems like a typical kind of adjustment.  But the issue here is more complex, as royalty income is a significant source of revenue for Papa John’s.

This is the comment the SEC issued about this non-GAAP adjustment:

Form 10-K for the Fiscal Year Ended December 29, 2019

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Items Impacting Comparability; Non-GAAP Measures, page 40

  1. Please tell us the consideration you gave to Question 100.04 of the Non-GAAP Financial Measures Compliance and Disclosure Interpretations in adjusting your non-GAAP measures to add revenues you did not receive due to royalty relief.

The C&DI referenced, Question 100.04 makes a very important point:

Question 100.04

Question: A registrant presents a non-GAAP performance measure that is adjusted to accelerate revenue recognized ratably over time in accordance with GAAP as though it earned revenue when customers are billed. Can this measure be presented in documents filed or furnished with the Commission or provided elsewhere, such as on company websites.

Answer: No. Non-GAAP measures that substitute individually tailored revenue recognition and measurement methods for those of GAAP could violate Rule 100(b) of Regulation G. Other measures that use individually tailored recognition and measurement methods for financial statement line items other than revenue may also violate Rule 100(b) of Regulation G.   [May 17, 2016]

This is Papa John’s first of two responses to this comment:

We did consider the guidance in Question 100.04 in connection with our inclusion in “Special charges” of royalty reductions that are above and beyond the level of franchise support the Company would incur in the ordinary course of its business. We also evaluated Rule 100(b) of Regulation G, which states that a registrant may not make public a non-GAAP financial measure that, taken together with the information accompanying the measure, is misleading.   We believe the adjustment reflects the add-back of contractually due and waived franchise royalties in our financial statements rather than the tailoring of the recognition or measurement principles under GAAP.

 Papa John’s franchisees are contractually required to pay a 5% royalty on sales. As part of its voluntary program to provide temporary financial assistance for traditional North America franchisees in response to declining North America sales discussed above, the Company extended financial assistance to its traditional North America franchisees in the form of a reduction in the contractually due royalties beginning in the third quarter of 2018, for a limited time period. The decline in sales was due to the negative publicity and consumer sentiment surrounding the Company’s brand as noted in Comment 1 (Note:  See the third post in this series for this information) above. Sales remained negative into 2019, which led the Company to formalize a temporary relief package, publicly announced in July 2019, to provide its franchisees with certainty regarding the availability and schedule of the relief which will continue through the third quarter of 2020. The total royalty relief included in “Special charges” was $19.1 million and $15.4 million for the years ended December 29, 2019 and December 30, 2018, respectively. The scheduled royalty reductions presented in “Special charges” represent the difference between the usual 5.0% contractual royalty rate applicable to North America franchise sales and the reduced royalty rate under our franchisee assistance program ranging from 0.5% to 2.0% of franchise restaurant sales varying by quarter. Additionally, North America franchisees that met certain defined service measures also received a 0.25% reduction in the royalty rate in the third and fourth quarters of 2019.

We believe that presenting these royalty reductions as “Special charges” is consistent with the objectives of our non-GAAP presentation, which is to show the financial performance of our ongoing operations excluding the temporary impact of the Company’s initiative of providing short-term support and financial assistance to the North America franchise system in response to the severe decline in North America sales. The Company did not receive the revenue foregone from its royalty relief program, as it is waiving a contractual right to recognize the revenue earned. We excluded the temporary waiver of this contractual right together with the marketing investments discussed in our response to Comment 1 for internal comparison purposes when evaluating the Company’s underlying operating performance and when analyzing trends. When presented next to the most directly comparable GAAP measure, we believe we are presenting a supplemental measure that shows the impact of our discretionary, non-contractual franchise support and relief program to our operating results. Accordingly, the Company respectfully advises the staff that we have considered the prescribed guidance and we believe that the presentation of royalty relief from our non-GAAP financial results, taken together with the information accompanying the measure, does not cause those results to be misleading.

To help further clarify the nature of the royalty reductions, beginning in our Form 10-Q for the quarter ended March 29, 2020, we will revise the footnoted description of the royalty relief in our “Special charges” table as follows: “Represents financial assistance provided to the North America system in the form of temporary royalty reductions that are above and beyond the level of franchise support the Company would incur in the ordinary course of its business. This temporary financial assistance provides our North America franchisees with certainty regarding the availability and schedule of the temporary relief through the third quarter of 2020. Under the formal relief program, the franchisees pay royalties below the 5.0% contractual rate on franchise restaurant sales with varying rates by quarter as specified under the terms of the program.”

After this first response the SEC and Papa John’s had further phone discussions about this issue.  Interestingly, the SEC did not issue a second comment letter.  While we cannot know the content of these discussions, they were clearly substantive.  They resulted in this final answer by Papa John’s:

Response: As discussed during the phone conversation between the Staff and the Company on April 24, 2020, beginning with the Company’s earnings release for the first quarter of fiscal 2020, the Company will no longer present adjusted (non-GAAP) financial results adjusted to add revenues we did not receive due to royalty relief.

As always, your thoughts and comments are welcome!