The Advisors' Blog

We recently fielded a member inquiry on our “Q&A Forum” (#1475) about changing compensation consultants during the last few months of the fiscal year. John gave these thoughts on whether a company should request that its outgoing consultant provide an assessment of compensation programs:

There’s no requirement that a board or comp committee retain a compensation consultant or, if they do, any rule that would require that consultant to provide such an assessment.

Assuming the Comp Committee has retained another consultant, they could certainly ask that consultant to provide the assessment. If not, and assuming your board doesn’t have a policy requiring such an assessment, I think the biggest issue is likely going to be how you address the absence of a third party assessment in your CD&A disclosure, particularly if you’ve previously disclosed that your comp consultant provided this assessment in prior years.

When it comes to the implications for the Item 407 assessment of independence for the advisor that served for more than half the year, he followed up:

I think obtaining the memo from the former consultant would be prudent. The disclosure requirements of Item 407(e)(3)(iii) and Item 407(e)(3)(iv) require the company to provide the required disclosures, including conflict of interest disclosure, with respect to any compensation consultant who played a role in determining or recommending any form of executive or director comp during the most recent fiscal year. The information in that memo will be important in assessing whether there are any disclosable conflicts of interest.

Meredith also chimed in on whether investors or proxy advisors have any preference for “rotation” of compensation consultants:

I’m not aware of any ISS/GL preference on this. The Center On Executive Compensation recently released a guide on best practices. I discussed this guide in more detail – including policies, the rotation concept, assessments and RFPs – with Ani Huang, CEO of the Center On Executive Compensation, in this 14-minute podcast.

Speaking of podcasts, I’m excited to share that Meredith has more episodes of “The Pay & Proxy Podcast” in the hopper! Reach out to either of us if you have a topic that’s good for a practical “quick take” – it’s a fun & easy experience, and you get to meet Meredith! She’s at mervine@ccrcorp.com and I’m at liz@thecorporatecounsel.net. Remember that our contact info is at the bottom of every blog email if you ever want to drop us a line! We love hearing from members.

– Liz Dunshee