– Broc Romanek, CompensationStandards.com

I have posted the transcript for the recent webcast: “Executive Compensation Litigation: Proxy Disclosures.”

– Broc Romanek, CompensationStandards.com

I have posted the transcript for the recent webcast: “The Latest Developments: Your Upcoming Proxy Disclosures.”

– Broc Romanek, CompensationStandards.com

With income inequality in the news due to last night’s State of the Union address, I thought I would note some of the reactions to this WSJ op-ed by Tom Perkins, co-founder of top Silicon Valley VC firm Kleiner Perkins (his former firm has disavowed the remarks). One reaction is captured beautifully in this blog by Mark Suster – and here’s a another one from NY Times’ Paul Krugman. Comparing the woes of the top 1% earners to the killing of Jews by the Nazis? I can’t believe the WSJ ran that tone deaf piece.

In fact, Perkins himself can’t believe it as he apologized afterwards (for his Nazi comparison, not his”don’t vilify the 1%” remarks). As this article notes, Perkins is no stranger to drama – he supported Murdoch as a director on News Corp’s board during the UK phone-hacking scandal.

In comparison, this NY Times op-ed by a former Wall Street banker is great. Here’s the opening paragraph:

In my last year on Wall Street my bonus was $3.6 million — and I was angry because it wasn’t big enough. I was 30 years old, had no children to raise, no debts to pay, no philanthropic goal in mind. I wanted more money for exactly the same reason an alcoholic needs another drink: I was addicted.

But then the NY Times ran this column about a bankrupt NYC law firm partner who ‘only’ makes $375k per year. I can’t imagine a whole lot of people shed tears over that one…

– Broc Romanek, CompensationStandards.com

Last week, there were numerous front page articles about how JPMorgan CEO Jamie Dimon’s pay went up after a tough year for the company. Perhaps most interesting is the description of how the compensation committee meetings have gone down – pretty wild that this type of information is being leaked to the press! How does that happen?

This NY Times article notes “hashing out the pay package after a series of meetings that turned heated at times, according to several executives briefed on the matter.” The article also noted: “The debate pitted a vocal minority of directors who wanted to keep his compensation largely flat, citing the approximately $20 billion in penalties JPMorgan has paid in the last year to federal authorities, against directors who argued that Mr. Dimon should be rewarded for his stewardship of the bank during such a difficult period. During the meetings, some board members left the conference room to pace up and down the 50th-floor corridor.”

Also check out the video on Sallie Krawcheck on JPMorgan’s billions in fines: “A Real Cost of Doing Business.”

– Broc Romanek, CompensationStandards.com

Since last year’s Apple court decision on unbundling, litigation spilled over into the employee plan context including the Groupon class action described in this Cooley news brief. In addition, Corp Fin has focused more on this tricky topic through the comment process. On Friday, Corp Fin issued these three CDIs to clarify its unbundling positions under Rule 14a-4(a)(3) including this one in the plan context:

– Question 101.03: omnibus plan amendment increasing shares reserved for issuance, increasing max amount payable to a single employee, adding restricted stock to types of award eligible to be granted and extending plan’s term

Seeing this CDI was great – and coincidental – timing as a question along these lines had just been posted in the Q&A Forum!

– Broc Romanek, CompensationStandards.com

Last month, I blogged about an academic study on international say-on-pay. Now the CFA Institute’s Matt Orsagh has written this summary about another study on international say-on-pay (this one written by two guys from the Fed)…

– Broc Romanek, CompensationStandards.com

Here’s news from this blog by Davis Polk’s Ning Chiu:

Last week, ISS posted a number of updated documents on their policies, including a revised set of summary guidelines and concise guidelines (hint: the summary guidelines are more useful and contain the list of factors that impact their own analysis of what makes a director not independent). It includes ISS’ new policy regarding evaluation of board responsiveness to majority-supported shareholder proposals that we previously discussed.

In mid-December, ISS updated its compensation FAQs. Although it has not yet posted its full set of non-compensation FAQs in full, it released a brief set of questions and answers to address companies’ adoption of a bylaw that disqualifies any director nominee who receives third-party compensation, without putting such a bylaw to a shareholder vote. In these cases, ISS indicates that it may recommend a vote against or withhold from director nominees as a material failure of governance, stewardship, risk oversight, or fiduciary responsibilities. There is no discussion as to the factors that ISS would weigh in its decision, and we note that ISS has already taken a negative view against at least one company before it adopted this policy.

It is also expected that ISS will be updating its Governance QuickScore ranking system at the end of the month, and making additional policy changes to account for new shareholder proposals such as the “confidential voting” one, which aims to prohibit management and boards from access to voting reports for solicitation purposes prior to the annual meetings.

Those who do not subscribe to Glass Lewis services can access an overview of its guidelines, which includes its own set of what constitutes an affiliate, non-independent director. In addition to independence, Glass Lewis has numerous policies regarding director elections that might be surprising, for example, the firm recommends against the audit committee chair if an audit committee does not meet at least four times a year, and members of the compensation committee if at least two other compensation committees on which they served received “F” grades for pay for performance.

– Broc Romanek, CompensationStandards.com

First mentioned at our executive pay conference last September, ISS has now opened a new consultation period on approaches to longer term policy changes beyond 2014. This is the first year ISS is enacting this type of method for seeking market feedback – with the goal of shifting its process from a seasonal to a continual focus on policy development. The consultation period closes on February 14th. Direct comments to policy@issgovernance.com.

Here are the proposals to consider:

– Director Tenure (U.S. and Canada)
– Director Independence (U.S.)
– Role of Company Performance in Director Evaluation (Japan)
– Independent Chair Shareholder Proposals (U.S.)
– Auditor Ratification (U.S.)
– Equity-Based Compensation Plans (U.S. and Canada)
– Share Issuances without Preemptive Rights (Continental Europe and Asia)

– Broc Romanek, CompensationStandards.com

As noted in this Gibson Dunn blog, ISS has revised its corporate governance ratings service – now “QuickScore 2.0.” Some basic information about the retooling was announced, with further details promised on January 27th.

More importantly for companies, from January 27th to February 7th, you can check the data that ISS will use in QuickScore 2.0 through the ISS Governance Analytics webpage before the launch. Learn more in this Compensia memo.

By the way, no information about this development is online. ISS only sent an email to companies in their QuickScore coverage universe…

– Broc Romanek, CompensationStandards.com

One of the big stories last year was Jana Partners’ attempt to pay directors that they were able to get voted onto a board of one of their portfolio companies. The corporate backlash was the adoption of bylaws that disqualified any directors that receive payments from outsiders. As noted in this Financial Times article, 33 companies have adopted such bylaws – and activists are fighting back. Prof. Bainbridge weighs in again on this topic.

To top this off, a few days ago, ISS issued FAQs explaining its views on director qualification/compensation bylaws. Here’s an excerpt from this Weil Gotshal memo:

ISS’ new FAQs discuss how it views a board’s adoption of a bylaw that disqualifies any director nominee who receives compensation from a third party (a “director qualification/compensation bylaw”), where such adoption was not approved or ratified by shareholders. According to the FAQs, ISS considers board adoption of director qualification/compensation bylaws without shareholder approval as a “material failure of governance because the ability to elect directors is a fundamental shareholder right…[and] [b]ylaws that preclude shareholders from voting on otherwise qualified candidates unnecessarily infringe on this core franchise right.”

Pursuant to its US proxy voting policy relating to “Governance Failures,” ISS may therefore issue a negative vote recommendation against directors individually, committee members or the entire board. In contrast, ISS stated in the FAQs that it will not recommend against directors at companies whose board has adopted bylaws precluding from board service those director nominees who fail to disclose third-party compensatory payments (for example, advance notice bylaws). According to ISS, such bylaws “may provide greater transparency for shareholders, and allow for better-informed voting decisions.”

In the event that a board seeks shareholder approval of a director qualification/compensation bylaw, ISS has stated that it will review the proposal “case-by-case…taking into consideration among other factors the board’s rationale for proposing the bylaw, whether the proposed bylaw materially impairs, and/or delivers any off-setting improvements in shareholder rights, and any market-specific practices or views on the underlying issue.” In the context of a proxy contest, ISS has stated that it considers compensation arrangements with director nominees as a factor in its case-by-case analysis.