– Broc Romanek, CompensationStandards.com

If case you didn’t catch the recent episode of “The Daily Show” where Trevor Noah interviews Dan Price – the CEO of Gravity Payments – who discusses why he raised all salaries to $70k or more. It’s fascinating – and certainly should give one pause when thinking about whether a CEO who already makes $5 million per year needs another raise…

– Broc Romanek, CompensationStandards.com

Yesterday, ISS released QuickScore 3.0, which doesn’t have too many tweaks. US subscribers will now be able to determine whether companies across the Russell 3000 allow for proxy access or the ability of shareholders to nominate directors. And this Mike Melbinger blog explains the updated “Equity Plan Scorecard FAQs”:

ISS made a few changes to the its new EPSC tool (expect more), including: (a) renamed as “CIC Vesting,” the Plan Features factor formerly known as “Automatic Single-Trigger Vesting” and changed the scoring levels plan provisions on the accelerated vesting of outstanding awards on a change in control; (b) increased the period required for full points with respect to the Post-Vesting/Exercise Holding Period Plan Feature to 36 months (versus 12 months previously); (c) re-named the “IPO” model as “Special Cases,” to analyze companies with less than three years of disclosed equity grant data (generally, IPOs and bankruptcy emergent companies); (d) added a new Special Cases model that includes Grant Practice factors other than Burn Rate and Duration will apply to Russell 3000/S&P 500 companies; and (e) adjusted certain factor scores in ISS’ proprietary scoring model. More to come on EPSC issues in future blogs.

– Broc Romanek, CompensationStandards.com

On Friday, ISS issued its 2016 policy updates. As noted in this press release, key US policy updates include changes to the director overboarding policy (we’re posting memos in our “ISS Policies” Practice Area):

– For most directors except for standing CEOs, maximum number of public company boards that a director can sit on before being considered “overboarded” reduced from six to five.
– There will be a one-year grace period until 2017, giving directors and companies sufficient time to make any changes in advance of the 2017 proxy season.
– During 2016, ISS research reports will highlight if a director is on more than five public company boards, but adverse voting recommendations will not be issued under this new overboarding policy unless the current maximum of six boards is exceeded.
– For CEOs, the current overboarding limit will remain at two outside directorships.

For board actions that significantly reduce shareholder rights without approval by shareholders (so-called unilateral board actions), the policy is being updated to distinguish between (1) unilateral board adoptions of bylaw or charter provisions made prior to or in connection with a company’s IPO and (2) unilateral board amendments to those documents made after the IPO.

On executive pay and transparency, the “Problematic Pay Practice” policy will be updated to add “Insufficient Executive Compensation Disclosure by Externally Managed Issuers (EMIs)” to the list of practices that may result in an adverse voting recommendation on executive compensation. This will apply when an EMI fails to provide sufficient disclosure to enable shareholders to make a reasonable assessment of compensation arrangements for the EMI’s named executive officers.

– Broc Romanek, CompensationStandards.com

As noted in this Weil memo, ISS has announced that companies with annual meetings between February 1, 2016 and September 15, 2016 may notify ISS of any updates to their self-selected benchmarking peers between 9:00am EST on November 24th and 8:00pm EST on December 11th…

Note that the window is now also open to update your peer groups with Equilar, used by Glass Lewis. The deadline is December 31st. This applies to companies that file their proxy between January 15, 2016 and July 15, 2016.

– Broc Romanek, CompensationStandards.com

Here’s an excerpt from this Accounting Today article (also see this Cooley blog):

A new study predicts the Securities and Exchange Commission’s final regulations on clawbacks of incentive based compensation for corporate executives could backfire and only encourage companies to avoid the kinds of financial restatements that might trigger a clawback.

The study, which appears in the current issue of The Accounting Review, a journal of the American Accounting Association, suggests that companies may find themselves pressed to move away from incentive compensation not only to accommodate their top executives but for the sake of the integrity of their accounting.

The paper, by Jonathan S. Pyzoha of Miami University in Ohio, found that incentive pay strongly boosts the tendency of top company financial officers to oppose restatement of prior company reports that overstated earnings. In the words of the study, which involved 112 CFOs and other top financial managers, “executive decision-making is negatively influenced during the restatement process when executive compensation structure is more heavily incentive-based….Firms may want to structure compensation with higher base salaries as a percentage of total compensation to deter negative behaviors in response to clawbacks.”

The researchers found that executive resistance occurs when the auditor proposing a restatement has limited knowledge of the client company’s industry. In such cases executives with high incentive pay (in this study, compensation contingent on the company beating analysts’ consensus earnings forecast) prove about 40 percent less likely than those with lower incentive pay to agree with the auditor’s restatement proposal. This is critical, the study explains, because a top financial officer’s view strongly influences the shape of restatements or, indeed, whether there is a restatement at all.

– Broc Romanek, CompensationStandards.com

Yesterday, Corp Fin Director Keith Higgins delivered this speech entitled “Executive Compensation: Looking Beyond the Dodd-Frank Horizon.” It’s definitely worth reading – and an easy read. It looks ahead to the SEC’s Disclosure Effectiveness project and it covers the executive pay disclosure waterfront, including:

– Item 10 of Schedule 14A
– Form S-8
– Regulation S-K
– CD&A
– Compensation Tables
– Compensation Committee Report

– Broc Romanek, CompensationStandards.com

Without much fanfare, Glass Lewis posted its “Guidelines for the 2016 Proxy Season” on Friday, which includes a summary of the changes to its policies for the upcoming proxy season on pages 1-2 (see this blog for a summary). I say it was done “quietly” because I see no mention of it on the Glass Lewis blog or GL’s home page…

By the way, page 5 of the Glass Lewis policy updates includes a link to this 26-page “Shareholder Initiatives Guidelines” from earlier in the year. There is no change in their look at proxy access on a case-by-case basis….

– Broc Romanek, CompensationStandards.com

Due to popular demand, we have posted the full 5-minute pay ratio puppet show that Dave & Marty performed at our recent “Proxy Disclosure Conference” on CorporateAffairs.tv. Check it out and then participate in the anonymous poll below:

Poll: Dave & Marty’s “Pay Ratio Puppet Show”

I find Dave & Marty’s pay ratio puppet show to be…

– Broc Romanek, CompensationStandards.com

We recently had a query in our “Q&A Forum” (#1108) about: “Does anyone have an example of a company that paid directors extra due to extra work they had to perform?” We did some homework and posted this list of examples in our “Director Compensation” Practice Area…

– Broc Romanek, CompensationStandards.com

We just wrapped up Lynn, Borges & Romanek’s “2016 Executive Compensation Disclosure Treatise & Reporting Guide” — and it’s done being printed. This edition has two new key chapters — one on the new SEC’s pay ratio rules, with over 60 pages of practical analysis & model disclosures — and one with over 120 pages of sample proxy disclosures and detailed analysis from the 2015 proxy season.

How to Order a Hard-Copy: Remember that a hard copy of the 2016 Treatise is not part of a CompensationStandards.com membership so it must be purchased separately. Act now as this will ensure delivery of this 1600-page comprehensive Treatise right away. Here’s the Detailed Table of Contents listing the topics so you can get a sense of the Treatise’s practical nature. Order now.