– Broc Romanek

Here’s the intro from this blog by Cooley’s Cydney Posner:

In 2016, the AFL-CIO submitted several shareholder proposals designed to curb the impact of stock buybacks on executive compensation. (See this PubCo post.) The question at the time was whether we would see many more of these proposals. However, amid significant media and academic criticism, as well as relatively high stock valuations, the levels of stock buybacks declined, and the anticipated wave of proposals on buybacks did not materialize.

However, the new tax act is expected to trigger a new spike in the levels of stock buybacks. (See this MarketWatch article.) Perhaps with that in mind, one of the most prolific proponents of shareholder proposals has submitted a proposal to eliminate the impact of stock buybacks in determining executive compensation. Will these proposals now become a thing?

– Broc Romanek

Hats off to Cooley’s Amy Wood – who turned “Master Blogger” Mark Borges onto the first pay ratio disclosure of 2018. Here’s Mark’s blog about it…

– Broc Romanek

Here’s the news from this blog by Ning Chiu:

In a recent speech, Chairman Clayton discussed completing the rulemaking mandates under Dodd-Frank, in light of his mission to allocate the SEC’s resources to both fulfilling statutory requirements and meeting day-to-day needs. The complexity of the mandates coupled with “mission-critical demands” are key variables that influence the objective of finishing the rules.

In terms of how the SEC should proceed on the remaining Dodd-Frank rules, Clayton declared that the executive compensation rules were particularly challenging, in part because “we are writing on an already very colorful canvas and different constituencies see the rules as serving different, and sometimes inconsistent, goals.” He favors a “serial approach” and pointed out that the recent interpretative guidance on the pay ratio rules managed to comply with the statute, reduce compliance costs and remain practical. With those “themes” in mind, Clayton is actively trying to determine how to address the remaining executive compensation rules.

He indicated that market developments may, or should, play a role. For example, developments from shareholder engagement “have, at least in part, mitigated some of the concerns” that led to the statutory mandate in the first place. He cited to the clawback rule as an example, noting that several companies are already making their clawback policies public and some of them “go beyond what would be required” under Dodd-Frank. Some companies have actively clawed back compensation from their executives. Clayton believes that the SEC’s rulemaking priorities, as well as the rules, “should reflect these observable developments.” He also stated that the SEC intends to be flexible “in timing, in sequence, and in content” as they finalize the rules.

While that may suggest that the clawback rule, which is arguably the most complicated of the remaining three (the others being pay-for-performance and pledging disclosure), may not be an key agenda item at the SEC, Clayton pointedly concluded that “it is the SEC’s obligation to complete the rules mandated by Congress in Dodd-Frank, and I intend to do so.”

– 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 2017 filings – examining overall prevalence of RTSR, differences in usage between industry sectors, and key design elements of these plans.

– Broc Romanek

Here’s the intro from this blog by Cooley’s Cydney Posner:

In this recent academic study, “Social Responsibility Criteria in Executive Compensation: Effectiveness and Implications for Firm Outcomes,” the authors examined the impact of the integration of elements of corporate social responsibility, such as environmental and social performance, into executive compensation performance criteria. In the decision-making process, executives tend to gravitate toward the achievement of short-term goals and to respond more readily to more prominent direct stakeholders, such as customers and shareholders.

But CSR metrics typically have a long-term pay-off and involve less direct stakeholders, such as the environment and the local community. The question is: is the inclusion of CSR performance metrics in executive comp programs effective to motivate executives to achieve those longer-term CSR goals, engage with CSR stakeholders and enhance long-term value creation?

– Broc Romanek

Here’s a teaser for this memo by FW Cook:

While the performance-based compensation exception to the $1 million compensation limit under Section 162(m) for “covered employees” is a thing of the past (absent grandfathered contracts) for federal income tax purposes, practitioners are realizing that Section 162(m) may continue to be a consideration for state taxes. For administrative ease, the great majority of states conform many elements of their state tax codes to the federal tax code. However, it is rare for any state to conform to the federal code in all respects.

– Broc Romanek

We’re excited to announce that we have just posted the registration information for our popular conferences – “Pay Ratio & Proxy Disclosure Conference” & “Say-on-Pay Workshop: 15th Annual Executive Compensation Conference” – to be held September 25-26 in San Diego and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days.

Early Bird Rates – Act by April 13th: Huge changes are afoot for executive compensation practices with pay ratio disclosures on the horizon. We are doing our part to help you address all these changes – and avoid costly pitfalls – by offering a special early bird discount rate to help you attend these critical conferences (both of the Conferences are bundled together with a single price). So register by April 13th to take advantage of the 20% discount.

– Broc Romanek

As noted by the memos in our “Stock Options” Practice Area, Section 6039 of the Internal Revenue Code requires companies to furnish a written statement to any employee (or former employee) who either exercised an incentive stock option during 2017 – or first transferred legal title to shares acquired under a Section 423 ESPP during 2017.

These statements on Forms 3921 and 3922 must be furnished to employees no later than January 31st – and companies must file returns with the IRS on Forms 3921 and 3922 no later than February 28th (if filed on paper) or April 2nd (if filed electronically)…

In our “Regulatory Reform” Practice Area, we continue to post oodles of memos about the impact of tax reform on executive pay arrangements…

– Broc Romanek

We have posted the transcript for our recent webcast: “The Latest: Your Upcoming Pay Ratio, Tax Reform & Proxy Disclosures.”

– Broc Romanek

We have already posted the audio for the webcast – “Tax Reform: What’s the Final Word?” – if you wanted to hear Winston & Strawn’s Mike Melbinger, Choate Hall’s Art Meyers and PricewaterhouseCoopers’ Ken Stoler talk about how the new tax legislation will impact executive pay arrangements. For this program, we simply took the audio archive from a NASPP webcast that took place yesterday – and made it available to you now.

Please print out this “Course Materials” deck (45 pages!) in advance of listening to the audio. We’ll be posting the transcript in a week or so.