– Broc Romanek, CompensationStandards.com

Whoa! ISS just posted 104 new FAQs – over 43 pages – on its US compensation policies, covering all sorts of topics…

– Broc Romanek, CompensationStandards.com

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

– Broc Romanek, CompensationStandards.com

Within the last hour, the SEC posted this proposing release on hedging disclosure, a rulemaking dictated by Section 955 of Dodd-Frank. It came out of the blue, based on seriatim action taken by the Commissioners – not at an open Commission meeting. Commissioners Gallagher & Piwowar supported getting the proposal out of the gate, but they issued this joint statement noting there are aspects of the proposal that they have concerns about (meanwhile, Commissioner Aguilar issued this statement supporting the proposal). That might be one of the reasons why the proposing release is loaded with specific requests for comments, running on longer than the explanation of the proposed rule! Anyways, this Cooley blog summarizes the rule proposal, as well as the novelty of Commissioners issuing written statements on a proposal. And here’s a blog from Mark Borges.

There is a 60-day comment period. And we’re posting memos in our “Hedging” Practice Area once they start rolling in. It’s hard to predict whether this means that we’ll soon see action on the other “Four Horsemen” rulemakings left from Dodd-Frank, including adoption of the pay ratio rules…

As to the issue of whether the SEC is required to propose (or adopt) rules at an open Commission meeting, see my blog entitled “When is the SEC Required to Hold an Open Commission Meeting?“…

– Broc Romanek, CompensationStandards.com

Here is PwC’s 2nd annual study with analysis of the clawback policies from 100 large public companies as disclosed between 2009 and 2013…

– Broc Romanek, CompensationStandards.com

I don’t like to blog about the misfortunes of others – or maybe the seedy nature of this news is what disturbs me. But I know folks want to know. Here’s an excerpt from this article:

A New York federal jury on Thursday found Faruqi & Faruqi LLP and partner Juan Monteverde partially liable for creating a hostile work environment in a closely watched sexual assault case that has cast a harsh spotlight on the securities boutique.

An eight-member jury found Faruqi and Monteverde liable on former associate Alexandra Marchuk’s New York City law hostile work environment claims and partially granted her request for damages. She sought $2 million in damages. She was awarded $90,000 plus punitive damages to be determined later.

– Broc Romanek, CompensationStandards.com

Love the title of this piece by Towers Watson’s Steve Kline. Here’s an excerpt:

As we reported last month, the third quarter began to show real signs of recovery and growth. (See “Pay-for-Performance Update: Third-Quarter Checkpoint,” Executive Pay Matters, December 22, 2014.) Mild optimism was beginning to form for 2015. But, some cracks in the ice appeared as the year drew to a close and 2015 got under way. Oil and other commodity prices continue to slide, putting a damper on a number of industrial sectors. Concerns in Europe have led to a strengthening of the dollar, which constrains U.S. exports and cuts into foreign profits as sales abroad are converted into fewer U.S. dollars. Other sectors face a range of issues. For example, some retailers’ sales were soft in December, while insurance companies are fretting over capital markets challenges. The bottom line: some earnings disappointments are being announced and/or forewarned.

In the coming weeks, many companies will finalize their incentive plan goals for 2015. As always, this will be no slam dunk. Will the 2015 numbers be an extension of 2014 results? Given the softer start for the new year, perhaps not. Will 2015 reflect the optimism that emerged with third-quarter results? For most sectors and companies, that would seem a bit optimistic today. However, given some of the sharp swings we’ve seen in the global economy and markets in recent years, who knows about tomorrow? Will the range of performance goals that surround target be stretched to accommodate the emerging uncertainties? In many cases, perhaps yes. Will potential rewards be modified in concert with shifting performance goals? Perhaps in extreme cases, although proxy advisors and shareholders may hope for larger modifications to pay opportunities.

In this environment, companies clearly have a tough call in deciding how far to venture out on the ice in their 2015 performance targets. To set rigorous targets, Towers Watson’s Principles and Elements of Effective Executive Compensation Design suggests that companies should consider a number of inputs, including:

– The organization’s long-term strategic plan
– Enduring standards reflecting historical norms of financial performance for the organization, industry and relevant peer organizations
– Analyst/economic forecasts
– The organization’s budget.

– Broc Romanek, CompensationStandards.com

A month ago, I blogged about how I would be shocked if this Politico article was correct when it predicted that the SEC would finalize its pay ratio rules by mid-January. I’m still laughing about that one! Anyways, check out this online petition from Credo Action, which has hit 36,000 so far…

Speaking of petitions, over a million folks have written in to the SEC in support of the agency conducting rulemaking in the “disclosure of corporate political spending” area. It’s remarkable because no one ever writes in about a mere petition of rulemaking. The SEC is not obligated to consider – or act – on a rulemaking petition…

– Broc Romanek, CompensationStandards.com

Since a number of members have recently asked about currency fluctuations and FX strategies in the incentive compensation context, I just posted this “Quick Survey on Currency Fluctuations for Incentive Compensation.” Please participate in this short – and anonymous – poll…

– Broc Romanek, CompensationStandards.com

As noted in this Glass Lewis blog, Glass Lewis is making these changes effective today (here’s a related Tower Watson memo):

Glass Lewis is pleased to announce enhancements to the performance metrics used in its US and Canadian pay-for-performance (P4P) models, as well as its US equity plan model. These changes will go live on February 2, 2015. Glass Lewis’ P4P models evaluate the linkage between pay and performance at companies versus their peers. Weighted-average executive compensation percentiles and weighted-average performance percentiles are reviewed to determine how well a company aligns its executive pay with its corporate performance. When calculating the performance percentiles, the current models evaluate the following five metrics: Change in Operating Cash Flow, Change in Earnings Per Share, Total Shareholder Return, Return on Equity, and Return on Assets.

Glass Lewis has determined that changing some of the performance metrics for certain industries will better reflect how the operating performance of companies in these industries is measured and evaluated by management, boards, and industry analysts. Along those lines, Glass Lewis will:

– Replace Change in Operating Cash Flow with Tangible Book Value Per Share Growth for companies in the Bank, Diversified Financials, and Insurance sectors
– Replace Change in Operating Cash Flow with Growth in Funds From Operations for REITs, with the exception of Mortgage and Specialized REITs.

In order to be consistent with these updates, Glass Lewis will also make the same changes to the performance metrics used in its US equity plan model. Glass Lewis has back-tested these changes in the P4P and equity plan models. The results indicate that there will be minimal impact on the grades generated by the P4P models, as well as minimal impact on the pass/fail assessments generated by the equity plan model.