The Advisors' Blog

– Broc Romanek

If you’re planning to submit an equity plan for shareholder approval in 2018, now’s the time to start the process. Liz blogged a while back about whether shareholders are more likely to approve a new omnibus plan over an amended one. This Morgan Lewis blog dives further into what you can do now and during proxy season to get approval.

Here’s a teaser – and check out Part 2 for the remaining steps about board approval, proxy drafting, etc.:

1. Review your shareholder base to determine the voting guidelines that key holders follow when reviewing equity plans.

2. Whether or not you subscribe to ISS’s proxy review services, sign up for the ISS Equity Plan Data Verification portal (no charge). If you sign up for this portal, ISS will send a confirmation of the data on which their recommendation will be based.

3. When considering share authorization, review share overhang (outstanding equity grants as compared to outstanding shares), burn rate (share usage) over the past several years (usually three years), the company’s projected need for shares over the next several years (usually three to four years), and, if applicable, ISS’s assessment of the allowable share authorization. In determining whether to include ISS’s favored plan terms, it is important to balance the need to maximize the share authorization against the importance to the company of retaining flexibility, especially with respect to vesting. ‎

4. Compare your draft plan to ISS’s current methodology for reviewing equity plans, the Equity Plan Scorecard, which gives “points” based on plan cost (share authorization), plan features, and grant practices. For more detail, see our “White Paper.”

5. Update the plan to reflect current best practices and legal requirements, and, if applicable, ISS requirements.