The Advisors' Blog

– Lynn Jokela

Back in February, I blogged about recent trends in stock ownership requirements.  Obviously, a lot has happened since then and a recent Hunton Andrews Kurth blog serves as a reminder that, depending on how companies structure stock ownership guidelines, some companies might want to consider granting a temporary waiver of stock ownership requirements.  With volatile markets and many companies having experienced a stock drop, ownership guidelines denominated in dollars are most likely to cause executives to fail the ownership requirement.  Here’s the blog’s message:

Compensation Committees could consider a temporary waiver of the stock ownership requirements, with the idea that the issue will be revisited in the Fall of 2020.  But in exchange for such waiver, the executive should be required to hold (i.e., not be able to sell) all shares currently subject to the policy.  Such hold requirement should continue until the issue is revisited in the Fall of 2020.

Some companies may already incorporate a “hold until requirement is met” into their guideline, so a consideration for these companies might include whether the policy requires action to temporarily waive the ownership requirement and if so, the length of the waiver.