The Advisors' Blog

We blogged last month about Shearman & Sterling’s annual “Corporate Governance & Executive Compensation Survey” – which always provides a wealth of information. The firm is now out with a 9-page condensed version that is a good reference as we head into proxy season. It includes a handy “housekeeping” checklist at the end. Here are a few key reminders relating to executive compensation:

– New Disclosures. As highlighted above, there is new SEC guidance on pay versus performance disclosure that companies should be mindful of heading into the second year of required pay versus performance disclosure in proxy statements. Companies must also file their clawback policy as an exhibit to their annual report and indicate (via checkboxes on the annual report cover page) whether the filing includes errors or corrections to previously issued financial statements and whether these errors or corrections led to analysis of the clawback of executive officer compensation.

– Equity Grant Timing. The SEC has provided guidance on how to account for and disclose equity compensation awards granted shortly before certain material non-public information is released. Amendmentsto Rule 10b5-1 and Item 402(x) of Regulation S-K requiring tabular disclosure of option awards granted to NEOs within four business days before and after certain filings alongside changes in share price around the time of disclosure will take effect with respect to grants made in 2024 (with disclosure in the 2025 proxy statement). Companies should be mindful of this new disclosure requirement when making grants in 2024.

– Say-on-Pay and Say-on-Frequency. Determine whether the 2024 proxy statement should include either a “say-on-pay” and/or “say-on-frequency” shareholder vote.

– Equity Plan Adoptions or Amendments. If adopting or amending an equity compensation plan, make sure that any disclosure complies with Item 10of Schedule 14A, the plan provides adequate limits on director compensation (including any cash compensation) and be mindful of changes to burn rate calculations within the ISS Equity Plan Scorecard that took effect for meetings held on or after February 1, 2023, and the updates to ISS’s Proxy Voting Guidelines disfavoring equity plans giving boards full discretion over awards in the event of a change in control.

– Alternative Pay Disclosures. Consider whether to include (or continue to include) alternative pay disclosures—such as realized or realizable pay— in light of the addition of the new pay versus performance table while being mindful that shareholders may ask questions to the extent these disclosures are omitted or modified in future years.

– Liz Dunshee