June 26, 2019
Emerging Growth Companies: Executive Pay Priorities
– Liz Dunshee
Emerging growth companies aren’t required to provide a CD&A or conduct a say-on-pay vote – but that doesn’t mean they can ignore executive compensation issues. This Semler Brossy memo points out that the EGC period is a time to lay the groundwork that will allow their governance practices & pay programs to evolve gradually after the IPO. And according to the memo, there are a few things that should be “high-priority” right out of the gate:
1. Avoid egregious pay practices (such as repricing options, overly generous or non-standard employment agreements and/or tax gross-ups)
2. Establish a peer group to understand comparative practices
3. Set reasonable and defensible pay levels (for example, informed by peer group); avoid outsized pay packages without sufficiently disclosing the rationale