A few days ago, the SEC announced that Corp Fin Director Keith Higgins is leaving in early January. I am happy for Keith – sad for the rest of us. Keith did an amazing job under tough circumstances. For example, getting the “disclosure effectiveness” project off the ground was a huge challenge. Having seen the launch of the “aircraft carrier” up close, I know how difficult it is to engage in comprehensive reform. Directors never get the time to achieve their goals these days, as Congress gives them plenty to do. I’m sure we would have even seen more change during Keith’s tenure if he was given the leash.
And Keith is among the best speakers out there. His wit never dimmed, even wearing the “Gov” mantle…I’m glad that Keith got this rousing standing “O” at the ABA meeting last month…
Deputy Director Shelley Parratt will serve as Acting Director as she did during the last transition…
Recently, the SEC brought this SEC enforcement case with insider trading charges against a board member (who also happens to be a lawyer) who allegedly purchased securities of a target company during a board committee meeting where the not-yet-announced deal was being discussed. Here’s an excerpt from the SEC’s press release:
According to the SEC’s complaint, Cope learned confidential details about the planned merger during a board executive committee meeting on Jan. 5, 2016, and proceeded to place his first order to purchase Avenue Financial stock while that executive committee meeting was still in progress. He allegedly placed four more orders within an hour after the meeting ended.
As I mention during this 8-minute podcast, it’s about the craziest case I’ve ever heard – meaning that I can’t believe the director was that dumb. I call it the “Golden Ticket” for corporate secretaries as it’s a great way for them to scare directors when they provide insider trading reminders.
And what can be better than a reenactment of how this situation went down? In this 30-second video, a director places a trade with her broker to buy shares in the company being acquired while she is learning about the not-yet-announced deal:
Recently, a member asked: “How do you see the Presidential election influencing incentive compensation and corporate governance in 2017?” Here’s my response (also see this Choate memo):
Although it is difficult to know in practice, on paper, there is a wide gulf in difference in how the markets would be regulated between a Trump Administration & a Clinton one. Whereas a Clinton Administration might have been widely influenced by Senator Elizabeth Warren and resulted in restraints on how Wall Street operated, a Trump Presidency might result in unprecedented deregulation at the behest of a GOP Congress. A Clinton Administration was rumored to pick an investor as the next SEC Chair – which would have been a first. It appears that Trump will tap someone who believes that minimal regulation is good regulation.
So I think it’s clear that restraints on how companies can govern themselves will become looser. However, executive compensation specifically could be another matter. Trump ran a populist campaign, often railing about excessive executive compensation. It’s unknown whether that was empty campaign fodder to generate votes – or whether he’ll follow through and do something concrete in this area. And I note that during a House hearing about Mylan’s controversial EpiPen pricing, some GOP reps really grilled Mylan’s CEO about her pay package…
Also see this note from myStockOptions.com entitled “How The Trump Presidency And Tax Reform May Affect Stock Compensation.” This Bloomberg BNA article has quotes with experts giving mixed reactions to guessing whether pay ratio will disappear…
It’s that time of year. Dusting off the ole “D&O questionnaire” for 12/31 companies. Luckily, the only update is for Nasdaq-listed companies – who now have to face a “golden leash” disclosure requirement. I’ve updated our “D&O Questionnaire Handbook” – see Question 19 in our Model D&O Questionnaire on page 47 including footnote 79.
Just like ISS announced earlier this week, the window is now also open to update your peer groups with Equilar, which is the service used by Glass Lewis. The deadline is December 31st. This applies to companies that file their proxy between January 15th & July 15th, 2017.
How to Order a Hard-Copy: Remember that a hard copy of the 2017 Treatise is not part of a CompensationStandards.com membership so it must be purchased separately. Act now as this will ensure delivery of this 1600-page comprehensive Treatise soon after it’s done being printed. Here’s the “Detailed Table of Contents” listing the topics so you can get a sense of the Treatise’s practical nature. Order Now.
This nifty chart from Exequity’s Ed Hauder looks at failed equity plan proposals at S&P 1500 companies – using the ISS Voting Analytics database – to show how this group of companies fared during the past 3 years & found the failure rate to be less than 1% (and generally less than 0.3% in the two most recent years)…
As noted in this Cooley memo, ISS has announced that companies with annual meetings between February 1st and September 15, 2017 may notify ISS of any updates to their self-selected benchmarking peers between 9:00am EST on November 28th and 8:00pm EST on December 9th…
The Investment Association (IA)—the leading trade association for trust and fund managers in the UK—has written to the chairs of remuneration committees in the FTSE 350 to outline changes to its Principles of Remuneration. The latest guidance emphasises the IA’s attempts to ensure the UK’s top companies address concerns surrounding executive pay, and the letter is primarily focused on updating the Principles to reflect the publication of the Executive Remuneration Working Group’s final report in July 2016. The main changes are as follows:
– The Principles have been slimmed down to a set of high level issues and updated to reflect the recommendations of the Executive Remuneration Working Group;
– Amendments to acknowledge the need for increased flexibility of remuneration structures;
– Updates to ensure that the Principles do not promote a single remuneration structure;
– Updates to ensure that the level of remuneration has appropriate focus and that companies should disclose pay ratios between the CEO and median employee, and the CEO and the Executive team, to provide the context of the remuneration provided;
– Inclusion of a new section on the importance of improving shareholder consultation, ensuring that it is based on the strategic elements of remuneration and leads to consultation rather than affirmation of the company’s position; and
– Post retirement shareholding guidelines have also been encouraged.
Yesterday, ISS issued its 2017 policy updates, which applies to meetings starting in February (here’s the policy updates for outside the US). Similar to Glass Lewis, the ISS’ updates aren’t too significant for existing public companies – but there are several new & revised policy changes related to equity plans, including on director compensation. Davis Polk’s Ning Chiu gives a rundown of the most significant changes in this blog…