Talking Points: Some Observations from the Playing Field …
By Brian Foley, Managing Director, Brian Foley & Company, Inc. (10/11/07)
As we head into the tail-end of the 2007 proxy season …
12 ongoing problems with the “new” proxy rules
- Failure to require 3-year look in SCT
- Reporting of annual bonuses in SCT
- Switch to FAS 123R ## in SCT reporting
- Elimination of required year-end spread ## on options
- Absence of stock retention data on options and SARs exercised during year, and full-value awards vesting during year
- Failure to require current proxy disclosure of material Q1 developments occurring before proxy mailing date
- Failure to require footnote quantification of cash dividends on restricted stock
- Failure to require disclosure of cash-based LTIPs in progress for cycles starting prior to last full year
- Failure to require disclosure of employer-funded tax-qualified DC account balances
- Failure to require proxy disclosure of the impacts of recent earnings restatements on prior NEO compensation for years in question – if so, how so; if not, why not
- Decision not to require better disclosure of “other work” performed for Management by Compensation Committee’s consultant
(existence, nature, extent and value)
- Failure to require inclusion of, or clear cross-references to, already-vested items (e.g., vested options, SARs, RSUs, SERP benefits/balances) in “termination scenario” disclosures – what’s the full “all-in” walk-away?
- Related problem with how to value option vesting acceleration (spread at termination vs. Black Scholes value of remaining play)
SELECTED CURRENT PRACTICE ISSUES
- How important is it for the Compensation Committee to have an independent compensation consultant and seek independent legal advice?
- How much to disclose about who is advising who about what?
The trouble with some peer groups …
- What to do … and what to say in CD&A …
- Who is in the peer group and why?
- How many data slices?
- How does company compare with peers?
How much is a “miss” really worth?
- Problems re the sizing of annual and long-term incentive payouts for performance that is short or well short of target / estimated
competitive median performance
To Q1 or not to Q1?
- Whether and to what extent to cover in current proxy filing any material changes/improvements in NEO compensation/employment arrangements occurring after last year-end but before proxy mailing date
- The consequences of restatements
Who is advising who about what?