– Broc Romanek

Following up on my blog from a few days ago about UK Prime Minister’s efforts against excessive pay, the United Kingdom has now proposed specific reforms as reflected in this 68-page response to its “Green Paper.” The reforms proposed relate to three specific areas: Executive pay, strengthening the employee, customer and supplier voice and corporate governance in large privately held businesses.

The proposal waters down some of the more controversial aspects of the Green Paper (eg. binding say-on-pay votes) – but the remaining proposals are quite astounding. Here’s the ones relating to executive pay:

1. Require listed companies to report pay-ratio information annually (the ratio of CEO pay to the average pay of the company’s UK workforce), including a narrative explaining changes to the ratio from year to year and “setting the ratio in the context of pay and conditions across the wider workforce.”

2. Provide a “clearer explanation in remuneration policies of a range of potential outcomes from complex, share-based incentive schemes.”

3. Provide specific steps listed companies should take when there is significant shareholder opposition to executive pay policies and awards (which might include, for example, provisions for companies to respond publicly to dissent within a certain time period, or to verify that dissent has been sufficiently addressed by putting the company’s existing or revised remuneration policy to a shareholder vote at the next annual meeting).

4. Increase the responsibility of comp committees for oversight of pay and incentives across the company and require these committees “to engage with the wider workforce to explain how executive remuneration aligns with wider company pay policy (using pay ratios to help explain the approach where appropriate).”

5. Extend the recommended vesting & post-vesting holding periods for executive equity awards from three to five years to encourage a longer term focus.

6. Invite the Investment Association to maintain a public register of listed companies that receive shareholder opposition of 20% or more on say on pay, along with “a record of what these companies say they are doing to address shareholder concerns.”

This Cooley blog goes into detail to explain the proposed reform – and here’s a NY Times article.

– Broc Romanek

Here’s the intro from this article by Semler Brossy’s Seymour Burchman & Jason Brooks:

Performance-based long-term incentives (LTIs) have become the most dominant form of LTI. In most of these plans, performance goals are set to be attained in a fixed period of time, typically three years. But does it have to be this way, especially in the case of major, one-time initiatives?

There are certain situations where companies should consider replacing traditional, time-based vesting with vesting based on the attainment of key milestones, such as the successful completion of a business startup, entry into a new category, completion of a major re-organization or a specific transaction.

– Broc Romanek

Here’s the intro from this Manifest blog:

The UK government has signalled that it will taking a shareholder and stakeholder market-based approach to governance reform rather than introducing more rules on executive pay. According to early briefings reported in the Financial Times and Daily Telegraph, the government’s response to the consultation on its corporate governance paper green paper, will published next week.

While proposals for more stringent binding votes would not be put in place George Parker, the FT’s political editor, reported that the government said there would be measures to improve pay transparency. Parker also quoted a government official stating that the corporate governance reforms would make large companies more transparent and accountable to both staff and shareholders.

– Broc Romanek

For those registered for the upcoming “Pay Ratio & Proxy Disclosure Conference,” we have just posted this invaluable set of course materials: “How to” Pay Ratio Manual (w/ 138 Practice Nuggets).” This is 55-pages of practice pointers that you need now to prepare for pay ratio.

We decided to release these course materials early since so many are grappling now with the type of issues addressed in this “How to” manual. Just like the upcoming “Pay Ratio & Proxy Disclosure Conference” in October will comprehensively address these – and many more – issues. This comprehensive pay ratio event is one that you can’t afford to miss. Also remember that our third pre-conference webcast is September 27th.

Register Now: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register today.

– Broc Romanek

Our first two pay ratio surveys were so popular – “Pay Ratio Readiness” and “Pay Ratio Disclosures” – that we have posted a new one. Please take a moment to participate in this anonymous “Quick Survey on Pay Ratio Medians.”

– Broc Romanek

Here’s the results from our recent survey on pay ratio disclosure:

– Only providing the bare minimum disclosure – 22%
– Providing expanded disclosures with some explanations & clarifications – 22%
– Providing expanded disclosures with alternate ratios – 7%
– Providing expanded disclosures with carve-outs – 4%
– We don’t know our approach yet – 39%
– Wasn’t pay ratio repealed? – 6%

Please take a moment to participate in this anonymous “Quick Survey on Pay Ratio Medians.”

Pay Ratio Conference: Register Now!

Register now for our comprehensive “Pay Ratio & Proxy Disclosure Conference.” New Corp Fin Deputy Director Rob Evans will open the event.

It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. And in addition to the October Conference, you gain access to three pre-conference webcasts – and this set of “Model Pay Ratio Disclosures” in both PDF & Word format.

Register Now: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days.

– Broc Romanek

This “Financial Times” article by Katrine Marçal is an eye-opener:

It is one of the last taboos. You can swear on television and breastfeed in public, but you cannot talk about how much you earn. Not in Britain, at least. Viewed from Scandinavia, the controversy around the UK government forcing the BBC to reveal the salaries of its top presenters was hard to understand.

Each year Sweden, Finland and Norway publish everyone’s income tax returns. In Sweden anyone can find out anyone’s salary with a quick phone call to the tax authorities. The person whose returns you request will know it was you, but that is all. You can know how much your neighbour earns, and how much tax she pays. The practice dates back to the 18th century. Different cultures have different ideas about privacy. The British seem not to mind being watched by millions of surveillance cameras, but they do not want their salaries to be public record. In Sweden it is the other way around.

For many Britons, how much someone earns is not information that belongs in the public space. Money is private. Except, of course, it is not. Having more information tends to help people make better decisions and the economy to work better. Why should pay be any exception? “The personal is political” used to be the slogan of second-wave feminists. And most political progress for women has required some kind of renegotiation of the border between the private and the public sphere.

The debate about pay transparency is no different. The salaries of BBC presenters such as Gary Lineker or John Humphrys are not strictly private matters — they are part of a larger pattern in which the average pay gap between men and women in the UK is 18 per cent. It might not be “very nice” to talk about, as the actor Kate Winslet put it, but that does not make the conversation any less necessary.

In Sweden, businesses with 25 or more employees have to establish an equality action plan. And companies with big pay gaps face fines if they fail to take steps to close them. The Swedish gender pay gap has become smaller since this system was introduced, but it is still 15 per cent. Finland, where tax returns are also public, has a gender pay gap similar to that of the UK.

One reason for Sweden’s gender pay gap being relatively high is the segregated nature of the labour market. A large proportion of women work in the public sector, where pay is low. But if you only measure men and women doing the same jobs, Sweden does much better. The pay gap here is 6 per cent.

Pay transparency probably has a lot to do with this. It also has other benefits. In 2015, the American company PayScale surveyed more than 70,000 US employees. The resulting study showed that the more people knew about why they earn what they earn, especially in relation to their peers, the less likely they were to quit. Dave Smith of PayScale said that “open and honest discussion around pay was found to be more important than typical measures of employee engagement” — career advancement, say, or earning the approbation of one’s boss.

Having more information tends to help people make better decisions and the economy to work better. Why should pay be any exception? One of the reasons people in Scandinavian countries tend to be more relaxed about talking about money is that what you earn carries less weight there. But in a more unequal society, like Britain, where quality of life is closely tied to income, conversations about pay are much more freighted.

John Maynard Keynes once dreamt of a world in which economics is less important. Once our economic problems are solved, he thought, we would be free to focus on other things. Economists would be “thought of as humble, competent people on a level with dentists”. Maybe one day talking about how much you earn might be no more fraught than talking about the weather. Even in Britain.

– Broc Romanek

For those registered for our comprehensive “Pay Ratio & Proxy Disclosure Conference“, we have posted the transcript for our popular webcast: “Pay Ratio Workshop – What You (Really) Need to Do Now.”

The first webcast was on July 20th – and the second webcast was on August 15th; transcripts & audio archives are available for both. The third webcast is on September 27th.

Pay Ratio Conference: Register Now!

Register now for our comprehensive “Pay Ratio & Proxy Disclosure Conference.” New Corp Fin Deputy Director Rob Evans will open the event.

It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. And in addition to the October Conference, you gain access to three pre-conference webcasts – and this set of “Model Pay Ratio Disclosures” in both PDF & Word format.

Register Now: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days.

– Broc Romanek

According to this article, 146 companies in the Russell 3000 switch from triennial to annual votes for say-on-pay during this cycle of say-on-frequency voting. Companies are required to allow shareholders to vote on the frequency of their say-on-pay every six years – with this year being the second time around for this cycle.

A “say-on-pay” investor working group sent letters to 319 Russell 3000 boards that had a triennial vote in 2011 urging them to recommend an annual vote – and of the 273 companies contacted (that have already held their ’17 annual meetings), 53% adopted an annual frequency & 47% retained the triennial.

– Broc Romanek

In this 26-minute podcast, James Kim of Frederic W. Cook discusses his exciting career, including:

1. How did you wind up getting into the compensation consultant industry?
2. What do you tell people that you do when you first meet them?
3. What are your remembrances of Bud Crystal?
4. What are the hot topics that you’re grabbling with now?
5. Are your clients preparing for the coming pay ratio rule?
6. What are the hardest parts of your job?
7. What are the best parts of your job?
8. What advice would you give to someone new in your field?

This podcast is also posted as part of my “Big Legal Minds” podcast series. Remember that these podcasts are also available on iTunes or Google Play – use the “My Podcasts” app on your iPhone and search for “Big Legal Minds”; you can subscribe to the feed so that any new podcast automatically downloads…