– Broc Romanek

Tune in tomorrow for the webcast – “The Top Compensation Consultants Speak” – to hear Mike Kesner of Deloitte Consulting, Blair Jones of Semler Brossy and Ira Kay of Pay Governance “tell it like it is. . . and like it should be.” The jam-packed agenda includes:

1. Pay ratio – last minute items
2. The tax reform bill eliminates the 162(m) exemption – what impact will that have on executive pay design, structure and governance (e.g., salaries and positive discretion on incentive payouts)?
3. Calculation of existing performance awards under tax reform
4. Director pay is continuing to get additional attention from the proxy advisors and the plaintiff’s bar. What will this attention mean for how director pay is structured & administered?
5. Clawbacks aren’t just for restatements anymore. What is the latest thinking on applying clawbacks to a broader range of activities and a broader population?
6. Goal-setting and performance adjustments remain major discussion points at the C-suite level: what are some best practices that can be helpful in this regard?
7. Investors, the SEC and proxy advisors are all still looking for the best way to assess pay & performance? What is the best thinking about how companies can kick the tires around their own pay & performance?

– Broc Romanek

Here’s the intro from this blog by Globoforce’s Derek Irvine:

During the last couple of years, I’ve had the opportunity to host executive forums with CHROs, EVPs, and other senior leaders looking to evolve (and sometimes revolutionize) the foundations of HR – compensation structures, performance processes, and more. In many ways, it’s been enlightening to be a facilitator of these sessions to hear how some of the most innovative minds in human resources, talent management, compensation and benefits think about a process that has been in place for decades – the annual performance review, especially the performance rating.

Performance management is evolving. That evolution is taking many forms and directions as organizational leaders are seeking the most effective ways to give employees the feedback they need (both positive and constructive) to grow their careers. As part of this evolution, the performance rating is coming under deeper scrutiny. Most companies have some kind of rating scale for employees. Some have thrown it out entirely. Others tried to eliminate it, only to add it back again. Many hedge the discussion on performance ratings, believing that process to be the best justifier of pay raises or distribution of annual merit increases.

– Broc Romanek

This pay ratio disclosure is on page 10 of Gencor’s proxy statement:

Mr. John Elliott had fiscal 2017 total compensation of $463,138, as reflected in the Summary Compensation Table included in this Proxy. We estimate that the median annual compensation for all Gencor employees, excluding our CEO, was $50,975 for 2017. As a result, Mr. John Elliott’s 2017 annual compensation was approximately 9 times that of the median annual compensation for all employees.

– Broc Romanek

In this article, Steve Kline & Tatjana Ricketts of Willis Towers Watson summarize best practices to help companies take the guesswork out of setting performance targets and ranges and addresses head-on the rising demand for proper pay-for-performance alignment – providing five key steps on this crucial topic…

– Broc Romanek

Here’s the teaser for this Semler Brossy report about say-on-pay during 2017:

2,357 Russell 3000 companies held say-on-pay votes in 2017 and the average say-on-pay support in 2017 (91.7%) was the highest observed rate since voting began.

35 companies (1.5%) failed say-on-pay in 2017, resulting in the lowest failure rate since the first year of say-on-pay in 2011. The four new companies that have failed since our last report are Bofl Holding, Oracle, United Natural Foods, and Western Digital.

– Broc Romanek

We continue to post memos about ISS’ updated policy guidelines in our “ISS Policy Guidelines” Practice Area – including this new one from Compensia that covers a lot of ground, including ISS’ burn rates…

– Broc Romanek

It will be interesting to see if Equilar’s new ‘pay ratio’ survey proves accurate after the proxy season – the survey predicts that companies will disclose a ratio of 140:1 on average. Here’s the intro from the blog by Cooley’s Cydney Posner about the survey results (see this related WSJ article):

Equilar has just released the results of an anonymous survey of public companies, with 356 respondents, which asked these companies to indicate the CEO-employee pay ratios they anticipated reporting in their 2018 proxy statements. As you would expect, there was a lot of variation among companies based on industry, market cap, revenue, workforce size and geography. In addition, because the rule provided significant flexibility in how companies could identify the median employee and in how they calculate his or her total annual compensation, variations in company methodology likely had a significant impact on the results.

These variations in the data underscore the soundness of the SEC’s view, expressed at the time it adopted the pay-ratio rule, that the rule was “designed to allow shareholders to better understand and assess a particular [company’s] compensation practices and pay ratio disclosures rather than to facilitate a comparison of this information from one [company] to another”; “the primary benefit” of the pay-ratio disclosure, according to the SEC, was to provide shareholders with a “company-specific metric” that can be used to evaluate CEO compensation within the context of that company.

– Broc Romanek

The annual “Corporate Governance & Executive Compensation Survey” of the 100 largest companies from Shearman & Sterling is always a “hot ticket” item, perhaps because its one of the oldest. 15th annual…

– 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.