The Advisors' Blog

– Broc Romanek, CompensationStandards.com

On a topic that will be covered more fully in the January-February issue of The Corporate Counsel that will be out within a few days, the Corp Fin Staff recently addressed the fact that hundreds of companies forgot to amend their Form 8-Ks last year to disclose their say-on-pay frequency decision – and how that impacts their Form S-3 eligibility. Here is a WSJ article from yesterday on this topic:

Hundreds of companies “forgot” to comply with an aspect of the say-on-pay advisory vote law that went into effect last year, according to the U.S. Securities and Exchange Commission. As part of the Dodd-Frank law that requires companies to give shareholders an advisory vote on compensation, companies had to let shareholders decide whether say-on-pay votes should occur every one, two or three years and file an amended 8-K within 150 days of the vote explaining their decision on the vote’s frequency. While most companies filed an 8-K with the preliminary results a few business days after the vote, hundreds didn’t follow-up with the other filing, according to the SEC.

Companies that failed to file the reports are technically not in compliance with timely-filing requirements and could be impinging on their shareholders’ rights. However, the SEC said it would likely grant waivers to many companies that missed the filing. “We haven’t seen too many of those amendments, and that’s a problem for companies because the failure to file the amended 8-K means they are not timely for S-3 purposes,” Jonathan Ingram, deputy chief counsel in the SEC’s Division of Corporation Finance, said at the Practising Law Institute’s “SEC Speaks” conference in Washington D.C. last week, referring to the timely filing requirements in S-3 rules companies comply with to register securities.

“We said in the release [companies] need to do this, but we think they just forgot,” Meredith Cross, Director of the SEC’s Division of Corporation Finance, said at the conference. She said the SEC wants companies to file the amended 8-Ks so there would be a record of what shareholders decided for the subsequent proxy season. If the company didn’t implement what the shareholders wanted, then a shareholder proposal would be allowed, which requires the amended 8-K, Cross said.

However, if the company’s board followed the shareholder recommendation and forgot to file the 8-K, the agency will likely grant a waiver, so the company can maintain its S-3 eligibility status, Cross and Ingram said. “If the company did what the shareholders asked for, then it’s not likely the shareholders would have wanted to put in a proposal, so the access to the 8-K wouldn’t have made a difference to them,” Cross said. “But, anyway, please file your 8-Ks.” The frequency vote is only required every six years, so Cross said it “shouldn’t be a recurring problem.”