The Advisors' Blog

Last week on TheCorporateCounsel.net blog, Dave shared highlights from the discussion during the panel he moderated at the Northwestern Securities Regulation Institute called “Taking a Fresh Look at Company Policies.” One of his blogs is especially relevant to this audience as it focuses on three compensation policies that companies should review in light of recent SEC action. The panel suggested companies establish or revisit their equity grant policies and practices in light of SEC developments in this area — namely, Staff Accounting Bulletin No. 120 and new Item 402(x) of Regulation S-K.

What do those policies look like? This recent client alert from White & Case and Equity Methods includes sample equity grant procedures and guidelines, which “companies can consider as practical guidelines, even if they are not adopting a formal equity grant policy,” and an illustrative timeline for equity awards.

Here’s how the sample addresses a common issue — timing the vesting of full-value awards:

For the vesting of Full Value Awards, if the Company plans to facilitate sales of equity by award recipients with access to MNPI to cover withholding taxes, the vesting date should be scheduled to occur in an open quarterly window under the Company’s insider trading policy and when the Company otherwise is not expected to have MNPI.

If this is not feasible, the Company may provide for language in the award agreement that “locks in” and makes automatic the sales without any discretion by the award recipient. This may be, but is not required to be, in the form of a formal 10b5-1 plan (which includes the applicable cooling-off period and certification of no MNPI by the insider at the time of grant).

– Meredith Ervine