As Mike Melbinger blogged yesterday, the NYSE revised its “Equity Compensation Plan FAQs” recently for the first time in nearly a decade. The revised FAQs are the ones that have “Clarified August 18, 2016” written beneath them. As Mike notes, FAQ C-1 clarifies the NYSE’s position that an amendment of an equity incentive play to allow for maximum tax withholding is not necessarily a “material amendment”…
Not much is written about executive pay at private companies – probably because those pay levels are not publicly disclosed, so I found this memo by Willis Towers Watson to be interesting…
After an initial flurry of questions last fall, things have really died down since the first of the year. In speaking with colleagues, I believe that most companies have yet to really begin to focus on this disclosure requirement. Given that it doesn’t apply until the 2018 proxy season, it just hasn’t been as high a priority as more pressing immediate issues. I expect that we will see a significant uptick in questions beginning this Fall – as companies turn their attention to the rule and prepare a “dry run” to ensure that they have an effective process in place prior to the end of fiscal 2017.
So far, very few companies have voluntarily disclosed pay ratios – and the handful that have used a format & approach selected by the company, not the SEC (eg. Ionis Pharma just comparing cash comp; this PayScale report just compares cash comp too). Here’s this blog from Mark Borges entitled “The Initial SEC-Compliant CEO Pay Ratio Disclosure?” You can keep track of pay ratio disclosures as they come in via this search box…
Our Executive Pay Conferences: 10% Reduced Rate – Only Two Weeks Left!: Here’s the registration information for our popular conferences – “Tackling Your 2017 Compensation Disclosures: Proxy Disclosure Conference” & “Say-on-Pay Workshop: 13th Annual Executive Compensation Conference” – to be held October 24-25th in Houston and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days.
Discounted Rates – Act by September 9th: Huge changes are afoot for executive compensation practices with pay ratio disclosures on the horizon. We are doing our part to help you address all these changes – and avoid costly pitfalls – by offering a reduced rate to help you attend these critical conferences (both of the Conferences are bundled together with a single price). So register by September 9th to take advantage of the 10% discount.
This NY Times column by Gretchen Morgenson notes how Hain Celestial had increasing levels of “no” votes on its say-on-pay over the past four years – growing from 31% to 59% over that period – and the fact that the company didn’t seem to care might have been a good harbinger of the accounting problems that came to light last week. The company had other red flags too – such as its peer group composition…
In this brief paper, Dr. Stephanie Thomas examines the behavioral and neurological connections between pay & performance as she cites a new experiment that indicates a decrease in performance when a monetary reward is removed – but no change in performance when a monetary reward is introduced, suggesting that the effect of performance-based pay is not so straightforward…
Here’s news from Scott Kimpel of Hunton & Williams: As described in this press release, the SEC brought yet one more settled administrative case on Monday against a public company – Health Net – based on confidentiality & waiver provisions contained in employee severance agreements – paying a $340k penalty. Like in the BlueLinx action brought last week, the SEC determined that these provisions violated the anti-whistleblower rules it adopted under Dodd-Frank – and again, there is no indication that the company actually sought to enforce the offensive provisions. Here’s the SEC order, which contains excerpts of the impermissible contractual language.
Toni Chion, an Associate Director in the SEC’s Enforcement Division, supervised both cases – which may suggest that the cases are the product of a broader enforcement sweep…
I recommend that you watch my quasi-parody before you watch the SEC’s video. When I fed my buddies their lines before we taped, I didn’t inform them that this was a spoof. They thought I had written the lines as a joke. After we taped – in just one take! – I showed them that they actually came from the SEC’s real video. Someone wrote those lines in all seriousness! I call my video a “quasi-parody” because I think we showed more teamwork in creating the thing. Let us know your feelings about them in the poll below…
Poll: Which Teamwork Video Is Better?
Please take a moment to participate in this anonymous poll:
Now that Nasdaq’s new golden leash disclosure requirement is effective, it’s time to get up-to-speed. Here’s an excerpt from this Gibson Dunn memo about how Nasdaq’s new disclosure requirement intersects with the Form 8-K disclosure requirements:
However, under SEC rules, for directors appointed outside of a shareholder meeting, Item 5.02(d)(2) of Form 8-K requires disclosure of “any arrangement or understanding between [a] new director and any other persons, naming such persons, pursuant to which such director was selected as a director.” Where a company provides the 8-K disclosure, Rule 5250(b)(3)(A) states that separate additional disclosure “in the current fiscal year” is not necessary under the rule. This provides companies with one-time relief from the requirement to provide proxy disclosure, for the fiscal year in which an Item 5.02(d) 8-K announcing the appointment of a new director is filed, if the third-party compensation arrangement was disclosed in the Form 8-K. However, this relief may prove to be largely
technical.
In this regard, it seems likely that companies would repeat the information in the proxy statement because of the likelihood that shareholders would view it as relevant to the director’s election. Moreover, disclosure would be required in future years because the NASDAQ rule imposes an annual disclosure obligation thereafter.
As the dust settles on yet another eventful AGM season, a report by The Investment Association — the leading trade association for trust and fund managers in the UK — has sought to address the problems that have led to a growing disconnect between companies and their shareholders over the amounts paid to top executives. Certainly, the 2016 AGM season will be remembered for publicised spats over pay. Indeed, such was the media scrutiny on remuneration practices at FTSE-listed firms that Theresa May, the new UK prime minister, sought fit to promise a curb on boardroom excesses, which included making all remuneration votes binding in nature.
A lot has been written over the last week about PayScale’s recent study of pay ratios in the workforce. PayScale found an average ratio of 71:1 comparing median cash compensation for 168 of the highest-paid CEOs in the annual Equilar 200 study to cash compensation of the median employee for those companies.
This ratio is far below what other organizations – like the “AFL-CIO PayWatch” – have found. That’s because PayScale only used cash compensation in its calculations – not the big hitter items like options, restricted stock, etc. As noted in this blog, equity accounted for 68% of the CEO compensation included in the Equilar 200 study used for the PayScale comparison. In other words, on average, less than one-third of CEO compensation was earned in cash.
I find PayScale’s exercise a tad misleading because the SEC’s rules don’t allow a comparison of just cash compensation – annual “total” compensation must be used in the ratio. Enough said.
One good thing about the PayScale study is that it provides information about employee perception of CEO pay, including:
– 55% of employees were not aware of their CEO’s compensation – among those that were, 80% believed it was appropriate
– 57% of those who felt that their CEO is overcompensated also believe that this negatively affects their view of their employer
– Employees at higher levels have more knowledge about – and more readily approve – of CEO compensation than lower level employees