November 22, 2022
2023 Proxies: Don’t Forget “Say-on-Frequency”!
Incredibly, we are heading into the 12th year of say-on-pay. With Rule 14a-21(b) requiring a “say-on-frequency” vote no less than once every six years, that means that companies that are not smaller reporting companies will be facing their third go-round on this ballot item during the 2023 proxy season (smaller reporting companies got an extra two years at the front end, so their next say-on-frequency vote won’t be until 2025).
Most companies have gravitated towards an annual say-on-pay vote. Here’s an excerpt from the “Say-on-Pay Disclosure Issues” chapter of the Lynn & Borges’ Executive Compensation Disclosure Treatise:
During the second round of say-on-frequency votes in 2017, shareholders at more than 90% of Russell 3000 companies approved “annual” voting. So not surprisingly, that frequency has been the predominant practice since say-on-pay was adopted. In 2017, Compensia found that as of July 2017, 78 out of 79 companies disclosed that shareholders voted for annual say-on-pay votes.
The chapter goes on to list key considerations that affect the say-on-frequency recommendation and provides guidance on ballot wording for this resolution. And, as highlighted in a Faegre webinar last week, don’t forget to have the board actually make the say-on-frequency determination and report the decision on the Item 5.07 Form 8-K (in the initial filing or an amendment).
– Liz Dunshee