– Broc Romanek

This nifty chart from Exequity’s Ed Hauder looks at failed equity plan proposals at S&P 1500 companies – using the ISS Voting Analytics database – to show how this group of companies fared during the past 3 years & found the failure rate to be less than 1% (and generally less than 0.3% in the two most recent years)…

– Broc Romanek

As noted in this Cooley memo, ISS has announced that companies with annual meetings between February 1st and September 15, 2017 may notify ISS of any updates to their self-selected benchmarking peers between 9:00am EST on November 28th and 8:00pm EST on December 9th…

– Broc Romanek

Here’s the intro from this Glass Lewis blog:

The Investment Association (IA)—the leading trade association for trust and fund managers in the UK—has written to the chairs of remuneration committees in the FTSE 350 to outline changes to its Principles of Remuneration. The latest guidance emphasises the IA’s attempts to ensure the UK’s top companies address concerns surrounding executive pay, and the letter is primarily focused on updating the Principles to reflect the publication of the Executive Remuneration Working Group’s final report in July 2016. The main changes are as follows:

– The Principles have been slimmed down to a set of high level issues and updated to reflect the recommendations of the Executive Remuneration Working Group;
– Amendments to acknowledge the need for increased flexibility of remuneration structures;
– Updates to ensure that the Principles do not promote a single remuneration structure;
– Updates to ensure that the level of remuneration has appropriate focus and that companies should disclose pay ratios between the CEO and median employee, and the CEO and the Executive team, to provide the context of the remuneration provided;
– Inclusion of a new section on the importance of improving shareholder consultation, ensuring that it is based on the strategic elements of remuneration and leads to consultation rather than affirmation of the company’s position; and
– Post retirement shareholding guidelines have also been encouraged.

– Broc Romanek

Yesterday, ISS issued its 2017 policy updates, which applies to meetings starting in February (here’s the policy updates for outside the US). Similar to Glass Lewis, the ISS’ updates aren’t too significant for existing public companies – but there are several new & revised policy changes related to equity plans, including on director compensation. Davis Polk’s Ning Chiu gives a rundown of the most significant changes in this blog…

– Broc Romanek

As noted on their blog, Glass Lewis posted 49 pages of “Guidelines for the 2017 Proxy Season” on Friday, which includes a summary of the policy changes on the first page. Dorsey & Whitney has a new blog – and Kimberley Anderson has blogged some analysis of the policy changes there…

Glass Lewis: Companies Allowed to Review Rudimentary Draft Reports! Get In Early!

On Friday, Glass Lewis also announced “open enrollment” in its “Issuer Data Report” program. This enables companies a chance to access – for free! – a data-only version of their Glass Lewis report. This is an opportunity for companies to weigh in prior to Glass Lewis completing its recommendations for the upcoming proxy season!

As Glass Lewis doesn’t provide drafts of its voting recommendations report for companies to review like ISS does (for the S&P 500), this is your only chance to review what Glass Lewis factors into its recommendations. Open enrollment ends on the earlier of January 6th – or when Glass Lewis decides its annual limit has been reached. So do it now!

See these blogs by Gibson Dunn, Dorsey & Whitney and Mike Melbinger…and don’t forget my “Proxy Advisors Handbook“…

– Broc Romanek

Over on our blog on TheCorporateCounsel.net, I’ve blogged a few times about how the change in the Administration might impact the regulatory frameworks that we all work with. For example, my blog yesterday was entitled “Financial Choice Act: One Provision Could Destroy the SEC’s Rulemaking Abilities.”

This Latham & Watkins memo does a good job of running down the impact of the election on executive compensation matters more specifically…

– Broc Romanek

Nearly a decade after its last study on proxy advisors, the GAO issued this 49-page report on the state of the proxy advisor industry. Taking a quick swing through it, I didn’t see anything all that surprising. Several factors have led to increased demand for proxy advisor guidance (eg. rise of institutional investing & voting requirements) – but views are mixed on the extent of their influence. Proxy advisors have increased the level of shareholder engagement. And more.

It’s a nice summary of the state of the industry as we know it. Nice graphic on page 22 to illustrate how ISS & Glass Lewis communicate their policy-formulating process. All that might change soon enough with Section 1082 of the “Financial Choice Act” or whatever reform legislation gets enacted with a new Administration coming in soon…

The “GAO” is the “Government Accountability Office,” the investigative arm of Congress charged with examining matters relating to the receipt & payment of public funds…and of course, if you really want to know about the proxy advisors, read my “Proxy Advisors Handbook“…

– Broc Romanek

In this memo, Exequity explores the usage of relative total shareholder return (RTSR) within long-term incentive plans across S&P 500 companies using data from 2016 filings – including overall prevalence of RTSR, differences in usage between industry sectors, and key design elements of these plans. And here’s a memo from Compensia about relative TSR…

– Broc Romanek

I’m calling this a “bonus” edition blog because if you came to our executive pay conference two weeks ago, you’ve heard a good deal of analysis about this visionary clawback policy from SunTrust Banks (I’ve all posted a version in Word in our “Clawbacks” Practice Area). Our expert panel on clawbacks – and what you should be doing now – covered that policy, the new Well Fargo one and others in detail. Come to our proxy disclosure conference in Washington DC next year!

Anyway, one of our panelists says that reading the SunTrust policy is just like reading “Gone With the Wind” – when you read it, you will laugh, you will cry. You will experience the whole range of human emotions. It’s a well-designed clawback policy, as it covers all incentives (time & performance-based) for all incentive eligible employees. It also allows a clawback for a wide range of issues – such as misconduct, theft, termination for cause, failure to perform duties and restatements to name a few. The clawback appears partly based on the banking regulators’ 2010 guidance that has a number of good principles-based recommendations that are relevant to users of incentive compensation in all industries. The company also has an internal “Events Tracking Group” that monitors incentive payouts – and the Group reports to the compensation committee regularly. SunTrust is one of the few companies that files their clawback policy as an exhibit to their SEC filings.

If you see a clawback policy that you like, let me know & I’ll add it to our samples posted in our “Clawbacks” Practice Area. Also check out these memos on the recent SEC v. Jensen case in the 9th Circuit about clawbacks under Section 304 of Sarbanes-Oxley…and this Covington blog for a high level thought piece on clawbacks…

– Broc Romanek

Not surprising given recent court decisions in this area, this Equilar blog reports how more companies are disclosing director pay limits. Here’s an excerpt:

According to an Equilar study, 80% of companies in the S&P 100 proposed or amended an incentive plan involving directors in proxies filed between January 1, 2011 and September 30, 2016. Of those companies, 28.8% explicitly mentioned a dollar value cap on director awards, and more than half of these dollar value caps were disclosed in a proxy filed in 2016. The graph below compares dollar value pay caps that specifically mention directors to the median amount a director received in 2015 for that company.

In addition, although 41.3% of these incentive plans mentioned some sort of cap on the number of shares of an award that applied to directors, many were in the hundreds of thousands or millions and designed for executives. Just 16.3% of proposals mentioned a cap on number of shares explicitly referring to non-employee directors, and these limits were anywhere between 6,000 to 100,000 shares.