Broc blogged a couple weeks ago that Glass Lewis is piloting a new “Report Feedback Statement” that will allow companies & shareholder proponents to express how their opinion differs from what’s in Glass Lewis’ research. Glass Lewis has now published FAQs – and this Morrow Sodali memo highlights how much you’ll have to shell out for the service:
Companies and/or shareholder proponents do not have to be Glass Lewis clients in order to use the RFS service. However, both issuers and shareholder proponents must purchase the relevant annual meeting report (at a cost ranging from $750 to $5,000, depending on size of the issuer) and pay a $2,000 fee for the distribution of the RFS comments.
And if you’re going to participate, don’t forget to also check out the Glass Lewis “Etiquette Guide,” which clarifies that only publicly available & legally vetted info should be shared in the RFS. In addition, it instructs everyone to use the “appropriate level of decorum & civility” – ah, the times we live in.
As this NYT article shows, the results of “equal pay audits” aren’t always predictable. Maybe that’s another reason to do them – and to take a look at the “big picture” when evaluating the results. Pearl Meyer surveyed 256 companies about their approaches to gender pay equity, the gender pay gap and D&I practices, and here’s what the teaser results show (the full report is available for purchase):
– 90% of companies are doing equal pay assessments – the most prevalent methodology used to evaluate gender pay equity is conducting an assessment that groups comparable/like jobs and analyzing pay variations by gender. As explained in this short memo, that helps evaluate “gender pay equity” but not necessarily the more complicated “gender pay gap”
– 57% of companies are reporting to the board on gender-related issues – e.g. management, leadership and overall representation
DLA Piper has been running a series of memos on “proxy season hot topics.” Among other topics (diversity disclosure, perks, etc.), this installment recaps last year’s IRS guidance on grandfathered arrangements under Section 162(m) – and confirms these things to do & watch going forward:
– Keep a database to track all “covered employees” for tax years beginning in 2017 – particularly in connection with corporate transactions
– Make sure this year’s proxy disclosure reflects any changes to arrangements or philosophy and tax treatment
– Prior to changing any employment agreements with “covered employees,” carefully review and consider the Section 162(m) consequences
– Foreign private issuers, recent IPO companies who are relying on the “IPO transition” rule under the old 162(m) rules, and entities involved in M&A corporate transactions affecting compensation paid to “covered employees” should be on the watch in 2019 hopefully for additional guidance from the IRS
We can grumble all we want about pay ratio – but the requirement probably isn’t going anywhere. And this blog from Margaret O’Hanlon suggests that companies may even be able to benefit from the data they’ve gathered. Here’s an excerpt:
Who are your median employees, and how have your pay policies affected them? Step back and consider whether the picture you’ve painted is optimal, given current business operations and results. Consider other ways the “median employee” can be used as an analytic for your company in the coming years.
What about the future? In three years, based on your projected talent strategy, what title should qualify as median employee? Is it the same job title as today? How will your pay strategies affect this evolution?
I’m guessing that this type of analysis would offer insights that would be valuable for both strategy and communications. Strategy, in that there are bound to be insights that lead to practical adjustments. Communications, in that there are bound to be details that can be helpful in explaining pay and business priorities, and how they have evolved/are evolving.
Last week, economists & investors were buzzing about whether an inverted yield curve and Fed actions were cause for concern. And while the consensus among that set seems to be that nobody knows exactly when a slowdown will happen or how severe it will be, that doesn’t mean comp committees should ignore the possibility that it’ll happen. As I’ve recently blogged – and reiterated – preparing for a downturn would be time well-spent. When it comes to protecting the value of equity compensation programs, this “Compensation Cafe” blog suggests a couple of ways to get started:
It is not too soon to plan for a recession. Performing an equity compensation risk assessment is a good place to start. Review both your strategy and tactical processes for granting stock options and RSUs. Evaluate whether your award features, vesting schedules and exercisability are optimally situated to weather the transformation. Most importantly, prepare now for the possibility of making an extreme course change in 2020 or 2021. Building a new approach, educating your board and getting approval from your shareholders takes more time than you may expect.
There are also ways to “recession-proof” your equity compensation programs. Most of these techniques are outside of common market data and boiler-plate plan documents. They also require a new understanding of the potentials and realities of stock-based compensation. Terms may need to change. Vesting may need a new look. Your entire program may need to be refitted and replaced. Regardless of the new approach, it will require some deep expertise.
– The SEC All-Stars: A Frank Conversation
– Hedging Disclosures & More
– Section 162(m) Deductibility (Is There Really Any Grandfathering)
– Comp Issues: How to Handle PR & Employee Fallout
– The Top Compensation Consultants Speak
– Navigating ISS & Glass Lewis
– Clawbacks: #MeToo & More
– Director Pay Disclosures
– Proxy Disclosures: 20 Things You’ve Overlooked
– How to Handle Negative Proxy Advisor Recommendations
– Dealing with the Complexities of Perks
– The SEC All-Stars: The Bleeding Edge
– The Big Kahuna: Your Burning Questions Answered
– Hot Topics: 50 Practical Nuggets in 60 Minutes
Here’s the intro from this memo by Willis Towers Watson:
Investors’ growing interest in the median gender pay gap (i.e., the wage difference between the median male employee and the median female employee) is the latest expression of a more granular approach to environmental, social and governance (ESG) investing. They are not only more focused on granularity, building on an initial call for public companies to disclose their gender pay gap, but are also casting a wider net to include more industries and companies.
This trend continues in 2019. Arjuna Capital has once again issued shareholder proposals. What’s different from prior years is that the firm has asked 12 large, publicly-traded financial services and technology companies to disclose the median gender pay gap.
This is an interesting new development in gender pay-related shareholder proposals, as it specifically focuses on demographic representation. Previous shareholder proposals asked for information on the wage gap between male and female workers with directly comparable jobs, factoring in function, job level, geography and more (generally referred to as equal pay for work of equal value). Arjuna’s latest filings ask for the median wage gap, which is a statistically unadjusted figure. Simply put, a gap indicates that male employees as a group are occupying higher-paying positions than female employees, which does not allow female employees’ pay levels to trend upward. The gap is especially troublesome if there is a fair representation of female workers across the company, but not at the higher levels.
Check out these notes for CII’s “Spring Meeting,” which includes a mention of how CII is changing its compensation policy soon. Here’s an excerpt:
Two different panels covered executive compensation, always a popular topic. And when we say “different,” we mean different. One was labeled as “Pay Pioneers,” with two companies describing their innovations in pay. The policies they adopted, including stock options for all employees and paying executives in cash so they can buy stock, with required holding periods, were good ones, relatively speaking, but not especially innovative. At least John Trentacoste, of Farient Advisors, the compensation consultant who moderated the panel, had the candor to admit that the question he gets asked most often is “How do you sleep at night?”
A shareholder-perspective panel on pay was very critical of both the amount and the structure of executive pay plans. CII is currently circulating its draft revised policy on CEO pay to the members for comment. “Pay for performance has not worked,” said Simiso Nzima of CalPERS, a pointed rebuttal to the “innovations” of the previous day’s panel.
Glass Lewis announced that it will pilot a new Report Feedback Statement (RFS) service to a limited number of U.S. public companies and shareholder proponents during the 2019 proxy season. According to Glass Lewis, the purpose of the RFS service is to allow companies and shareholder proponents to “more fully and directly express their views on any differences of opinion they may have with Glass Lewis’ research.”
The RFS service is to be used to report on differences of opinion — not factual errors, which companies should continue to communicate to Glass Lewis. Companies and shareholder proponents may submit statements noting their differences of opinion with Glass Lewis’ analysis of their proposals to Glass Lewis’ research and engagement team. That team will then distribute the statements, without editing or modifying the content, directly to Glass Lewis’ 3,000+ investor clients along with Glass Lewis’ response to the RFS.
Participants may submit a request to subscribe to the RFS service; Glass Lewis will accept requests on a first-come-first-served basis. The maximum number of pilot participants will be 12 companies and/or shareholder proponents per week between March and May 2019 (subject to decrease if the statements received in any week are particularly long or complex).