July 7, 2022
8-K Trigger? Severance Agreement for Previously Demoted NEO
A member recently posted this new follow-up to a 2018 question in our “Q&A Forum” (#1259):
After a demotion that triggers a Form 8-K, would any changes in the individual’s compensation or duties be reportable? For example, if a CFO is demoted to a Director of Finance on 12/1/2021, that demotion would trigger a Form 8-K and her comp would be included in the 2022 Proxy. However, if she subsequently enters into a severance agreement on 12/1/2022, would that trigger an 8-K? Even though she isn’t an executive officer, she’s a NEO in the proxy, so would that require disclosure?
Another member responded:
Our position and understanding has been that an 8-K is triggered in this situation, under the bright-line test that it applies to anyone who was an NEO. Of course, it’s only if the change is material. I would view a severance agreement as very likely material to the extent that it’s providing benefits beyond what had previously been disclosed. If the change was just to lower a person’s salary to be in line with what other non-executives are earning, that may not be material.
Remember that our forum is a great place for folks new to executive pay disclosure & governance – as well as senior folks who need a “gut check.” It’s a great place to exchange ideas. Anyone who’s a member can post new threads or respond to other members’ topics – either with attribution or anonymously.
– Liz Dunshee