The Advisors' Blog

– Liz Dunshee

The JOBS Act turned five in April – which means many EGCs are due to exit their scaled disclosure regime. This Aon/Radford memo suggests that exit planning should begin at least 6-12 months before filing the first post-EGC 10-K. It includes a handy chart comparing EGC and non-EGC disclosure requirements – and lots of tips. Here’s a teaser:

Planning early for post-EGC disclosure and voting requirements is critical in the present environment. Additional disclosures in combination with the requirement to hold Say-on-Pay votes expose former EGC companies to dramatically more scrutiny from investors and proxy advisory firms.

We recommend educating your board on potential governance changes and starting the investor outreach process well in advance of the first full filings in order to anticipate potential investor discontent and reduce the likelihood of unfavorable votes. A critical first step is cataloguing each of the practices that will be disclosed for the first time in your CD&A to compare against the proxy voting policies of the company’s significant shareholders.

Questions to ask include:

– Do the company’s equity practices qualify as sufficiently “performance-based” to withstand scrutiny from shareholders and proxy advisory firms, in the event that the firm’s pay-for-performance policies are triggered?

– Has the company adopted (or should it consider) stock ownership guidelines, clawback policies, and other “risk mitigating” policies that garner more favorable treatment in Say-on-Pay voting?

– Is the company benchmarking pay against a peer group that shareholders and proxy advisory firms would find objectionable?