ISS has announced that for companies with annual meetings between February 1st and September 15th of next year, its peer group review & submission window will open next Thursday, November 17th – and will close at 8pm ET on Monday, December 5th. ISS opens this window twice per year for companies to provide input (but note that the company-submitted peers are just one factor in the ISS determination process). Here’s more detail:
Companies that have made no changes to their previous proxy-disclosed executive compensation benchmarking peers, or companies that do not wish to provide this information in advance, are under no obligation to participate. For companies that do not submit any information, the proxy-disclosed peers from the company’s last proxy filing will automatically be factored into ISS’ peer group construction process.
Additional information on the ISS peer submission process, including links to ISS’ current recent peer selection methodology for the U.S., Canada, and Europe, is available on the ISS website here.
With the SEC’s new pay versus performance rules requiring new disclosures that compare company performance to the performance of a peer group, companies may be taking an even closer look at their peer group this year, and it may be worth informing ISS of any changes.
As you face down the new Item 402(v) disclosure requirements for your 2023 proxy statement, join us tomorrow for a 3-hour special session, “Tackling Your Pay Vs. Performance Disclosures.” This is a 3-part, 3-hour special session that will cover:
1. Navigating Interpretive Issues – we are already getting lots of questions in our Q&A forum about how to apply the new rules, and we know that new issues are arising daily. Hear practitioner guidance and any SEC updates that you need to know – from Sidley’s Sonia Barros, Compensia’s Mark Borges, WilmerHale’s Meredith Cross, EY’s Mark Kronforst, and Morrison Foerster’s Dave Lynn – including what you’ll need to tell your board and executives.
2. Big Picture Impact – how will the disclosure mandate affect say-on-pay models and shareholder engagements? This session will provide context and pointers for bolstering executive compensation & compensation committee support during proxy season – featuring ISS Corporate Solutions’ Jun Frank, Morrison Foerster’s Dave Lynn, and SGP’s Rob Main.
3. Key Learnings From Our Sample – attendees of this event will get first access to our sample disclosures, prepared by Mark Borges and Dave Lynn. Hear “lessons learned” from their drafting effort that will guide you through your own process and jump start your disclosures. Mark & Dave will be joined by Gibson Dunn’s Ron Mueller and Fenwick’s Liz Gartland for this discussion.
If you’ve signed up to access this event, you’ll access the video stream tomorrow by clicking through where indicated on the event page and entering the email address that you used to register. If you have any questions, please email our Event Manager, Victoria Newton, at vnewton@ccrcorp.com.
This event is available at a reduced rate of only $295 for anyone who is already a CompensationStandards.com member or who registered for the live or on-demand version of our “Proxy Disclosure & 19th Annual Executive Compensation Conferences.” You can still register online today for the “special session” and get the CompensationStandards.com member rate. Beginning tonight, you can register by emailing sales@ccrcorp.com, up until 12:30 pm Eastern tomorrow.
For non-members, the cost to attend is $595. You can register online if you sign up before 4pm Eastern today (after that, email sales@ccrcorp.com… you can sign up as late as 12:30 pm Eastern tomorrow).
If you’re not yet a member, try a no-risk trial now. We’ll be continuing to add practical guidance on this topic to CompensationStandards.com as disclosure hurdles & consequences come to light – such as this great podcast that Dave already taped with Gibson Dunn’s Ron Mueller about “first impressions” of the rule, emerging interpretive issues, possible pitfalls, and more.
All that to say, a CompensationStandards.com membership be an essential ongoing resource if you are involved with pay vs. performance. Plus, our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. Register for the “special session” here if you are a non-member and didn’t attend our Conference.
As a bonus, you also can still get the discounted special session rate if you sign up for on-demand access to the Conference archives, which you can do by emailing sales@ccrcorp.com. The practical guidance that was provided at these events will help you navigate shareholder activism, executive compensation, ESG disclosures, compensation committee responsibilities, and more in 2023.
At our “19th Annual Executive Compensation Conference” last month, we covered key action items for the SEC’s new pay versus performance disclosure rules – including how the rules differ for smaller reporting companies. This Pearl Meyer blog summarizes the major accommodations for scaled disclosure under the new rules (and other executive compensation disclosure requirements), for SRCs and EGCs. The Pearl Meyer team notes:
While at the outset, the scaled disclosures may give some companies a welcome reprieve, it may also give rise to an inconsistent or incomplete message for smaller companies. For example, in many smaller companies (that may not qualify as EGC), Net Income and Company TSR may not tell the full or even partial story of how pay aligns with performance.
As such, SRCs may consider voluntarily providing a company-selected measure or listing other measures that align with their pay program in a tabular list and/or providing some narrative around measures that otherwise drive pay and performance. For a further discussion of how certain growth stage companies may address these issues, please see this article.
The blog notes that if you’re an EGC or SRC, it’s important to understand the disclosure breaks you’re getting – and when those reprieves phase out.
We’ll be discussing the new pay vs. performance rules in detail this Thursday, November 10th, in our Special Session: “Tackling Your Pay Vs. Performance Disclosures” – which is a 3-part virtual event that runs from 1-4pm Eastern. If you haven’t already registered, you can still sign up online (you get a discounted price for being a CompensationStandards.com member). At this session, we’ll cover interpretive issues, big picture context (bridging the gap between your pay vs. performance disclosures and your CD&A story), and you’ll get first access to sample disclosures prepared by Dave Lynn & Mark Borges.
In addition, if you attended our fall conferences, you can can now access the on-demand video archives & transcripts, which will be helpful to refer back to for practical guidance on a variety of important proxy disclosure and executive compensation topics. If you weren’t able to attend, you can still email sales@ccrcorp.com to get access to this practical info!
Here are findings from Semler Brossy’s latest “Industry Report” on ESG metrics in S&P 500 incentive plans:
– Energy, Utilities, Materials & Real Estate companies have the highest prevalence of ESG metrics in incentives. They are the top four industries that incorporate environmental metrics and among the top five industries that have adopted HCM metrics
– Diversity & Inclusion metrics rank as a top 3 metric by prevalence in 10 out of 11 industries
– Carbon Footprint is the only environmental metric represented in all 11 industries (increase from 9 industries last year)
– While the Consumer Discretionary industry has had the largest year-over-year increase in ESG metrics – which Semler Brossy expects has been driven by investor & stakeholder pressures – it continues to have the lowest overall prevalence.
The report shows that ESG metrics by industry are often aligned with key strategic drivers of business-specific successes and risks – e.g., safety for heavy manufacturing, talent development for real estate, and emissions/chemical containment for energy.
The report’s findings are largely consistent with last year, and Semler Brossy continues to urge caution in adopting plan metrics purely due to pressure from investors or peer practices.
As John blogged this morning on TheCorporateCounsel.net, the SEC has adopted new rules that will require institutional investment managers to disclose their say-on-pay votes on Form N-PX. I blogged about the proposal last year (which was an updated version of a 2010 proposal).
This final rule fulfills the SEC’s rulemaking mandates under Section 951 of the Dodd-Frank Act. Here’s more info from the SEC’s Fact Sheet:
New rule 14Ad-1 will require managers to report annually on Form N-PX each say-on-pay vote over which the manager exercised voting power. The rule requires a manager to report say-on-pay votes when it uses voting power to influence a voting decision with respect to a security.
The rule permits joint reporting of say-on-pay votes by managers, or by managers and funds, under identified circumstances to avoid duplicative reporting. It also requires additional disclosure to allow identification of a given manager’s full say-on-pay voting record.
Managers will also be required to comply with the other requirements of Form N-PX for their say-on-pay votes.
The rule and form amendments will be effective for votes occurring on or after July 1, 2023, with the first filings subject to the amendments due in 2024.
As I mentioned in a blog a few weeks ago, a number of firms & trade organizations have been urging the SEC to postpone the compliance date for the pay versus performance rules, but there is no indication from the Commission that it will do so. Please participate in this anonymous 10-second poll about the extent to which your company is prepared to implement pay vs. performance disclosures that will be required in 2023 proxy statements:
Effective today, under Local Law 32, New York City joins Colorado, California and other states in requiring companies to disclose a range for base salary or hourly pay in ads for any job opening (including promotions or transfers) that “can or will” be performed in NYC.
The law won’t directly impact executive hiring that is conducted through a search firm, because it applies only to “advertisements” and doesn’t prohibit employers from hiring without using an advertisement. However, many compensation committees are taking on broader “human capital” oversight responsibilities and are overseeing pay equity & compliance issues in connection with that.
In the near-term, companies will need to navigate compliance strategies for this and similar laws. In the longer-term, the growing number of pay transparency laws likely will lead to questions from employees (and potentially shareholders) about perceived pay gaps & inequities, and require a more holistic & rigorous strategy for setting & communicating pay. To prepare, companies that don’t already conduct periodic pay equity audits should consider doing so (see this transcript from our 2020 webcast on the mechanics of doing this).
NYC has posted this “fact sheet” that explains the ins & outs of Local Law 32. This Holland & Knight memo summarizes key points. Here are a few excerpts:
Which Employees Are Covered? The Law covers all employers with four or more employees or one or more domestic workers, provided at least one of those employees works in New York City. The four employees do not need to work in the same location or all work in New York City. Owners and individual employers count toward the four employees, as do independent contractors, part-time employees, paid interns and domestic workers.
Which Job Postings Are Covered? The Law applies to any advertisement for a job, promotion or transfer opportunity that can or will be performed in New York City. The Commission on Human Rights defines “advertisement” broadly to include any written description of an available job, promotion or transfer opportunity that is publicized to a pool of potential applicants, regardless of the medium in which the advertisement is disseminated.
Does the Law Apply to a Posting for a Remote or Hybrid position? The Law applies to a posting for a fully remote or hybrid position, if the position can or will be performed in New York City, in whole or in part, whether from an office, in the field or remotely from the employee’s home.
What Are the Potential Consequences of Noncompliance with the Law? The NYC Commission on Human Rights enforces the Law. Employers who violate the Law are subject to paying monetary damages (if any) to adversely affected individuals and being directed to amend advertisements and postings, create or update policies, conduct training, provide notices of rights to employees or applicants, and engage in other forms of affirmative relief.
An employer will receive a warning for a first complaint of noncompliance, provided the employer shows it cured its noncompliance within 30 days of receiving the warning. An employer may have to pay civil penalties up to $250,000 for an uncured first violation and any subsequent violations.
This NYT article and this WSJ article highlight the approaches that a few big companies are taking to this new requirement – and they note that a similar law is pending in New York state. We’re posting memos that explain how to comply with various state & local laws in our “Gender & Racial Pay Equity” Practice Area.