In this 23-minute podcast, Russ Miller & Yonat Assayag of ClearBridge Compensation Group discuss the evolution of director compensation, including:
1. What is the upshot of the recent director compensation lawsuits?
2. Why haven’t boards been sued more frequently since there is the tricky circumstance that directors set their own pay?
3. How are companies reacting by changing their plans? (see their study: “S&P 500 Trends in Director Pay Limits“)
4. Are directors resisting the movement to amend their pay plans & place limits on their pay?
5. What is the role of the compensation consultant in helping directors set their own pay?
This podcast is also posted as part of my “Big Legal Minds” podcast series. Remember that these podcasts are also available on iTunes or Google Play (use the “My Podcasts” app on your iPhone and search for “Big Legal Minds”; you can subscribe to the feed so that any new podcast automatically downloads…
As noted in this Gibson Dunn blog, ISS has posted its annual policy survey (here’s info about the survey). The deadline is August 29th – and the big topics include:
A recent Equilar study found that 37.5% of S&P 500 companies have at least one compensation committee member that is a named executive officer (NEO) at another public company. Of those boards, 27.8% had one outside NEO on their compensation committees, while 8.3% had two sitting executives on their compensation committees. Three or four outside executives served on 1.4% of S&P 500 compensation committees.
Here’s a blog from the UK proxy advisor Manifest about the experience in the United Kingdom with their new pay ratio rule. The blog describes this study that outlines what happened with the disclosure during the first year of the rule’s existence…
Our Executive Pay Conferences: 10% Reduced Rate: We have posted 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.
Here’s the intro from this blog by Cooley’s Cydney Posner:
As reported in the WSJ, a new study from corporate-governance research firm MSCI showed that, over the long term, there was a signficant misalignment between CEO pay and stock-price performance. The study looked at CEO pay relative to total shareholder return for around 800 CEOs at more than 400 large- and mid-sized U.S. companies over a decade (2006 to 2015).
For the companies surveyed, the study found, on average, that CEO pay and performance had an inverse relationship; according to the WSJ, “MSCI found that $100 invested in the 20% of companies with the highest-paid CEOs would have grown to $265 over 10 years. The same amount invested in the companies with the lowest-paid CEOs would have grown to $367.” In light of how deeply embedded the concept of performance-based pay is among compensation consultants, boards, proxy advisory firms and institutional holders, characterizing that result as counter-intuitive might be considered an understatement.
What accounts for these stunning results? The WSJ concluded that the study “results call into question a fundamental tenet of modern CEO pay: the idea that significant slugs of stock options or restricted stock, especially when the size of the award is also tied to company performance in other ways, helps drive better company performance, which in turn will improve results for shareholders. Equity incentive awards now make up 70% of CEO pay in the U.S.” Fortune, reporting on the same study, quotes MSCI to similar effect: “‘[W]e found little evidence to show a link between the large proportion of pay that such awards represent and long-term company stock performance. In fact, even after adjusting for company size and sector, companies with lower total summary CEO pay levels more consistently displayed higher long-term investment returns.’”
Over the past six months, the SEC has issued two different concept releases relating to its disclosure effectiveness project – the first one dealing with Regulation S-X and the second one regarding Regulation S-K. As the Staff continues to analyze the comments submitted on those, the SEC decided a few weeks ago to issue this 318-page proposing release in an effort to update & simplify certain disclosure requirements with the goal of eliminating redundant, overlapping, outdated & superseded requirements. This includes proposing to eliminate the “Equity Compensation Plan Information Table” – under Item 201(d) of Regulation S-K – that is included in the proxy if a plan is being placed on the ballot for a shareholder vote.
The proposing release also seeks the same type of input for US GAAP. There is a 60-day comment period. Here’s the press release – and this is a “demonstration” version of the proposed redlined rule changes, which is another 193 pages by itself…
This is the piece of the SEC’s disclosure effectiveness project that has stirred up Senator Elizabeth Warren. Here’s an angry letter that Sen. Warren wrote to Chair White recently. I don’t believe that criticism is warranted as the SEC has said all along that the project is likely to elicit more disclosure than reduce it on balance – this just happens to be the part of the project that would reduce the volume of repetitive or useless disclosure…
As part of my “Big Legal Minds” podcast series – check out this 11-minute podcast, during which Shannon Kinney of ConocoPhillips describes how to best disclose a compensation committee’s decision to exercise negative discretion for an annual incentive plan, including:
1. How has the company improved the format & usability of the proxy in recent years?
2. Can you give us the background of how the compensation committee applied negative discretion for its annual incentive plan?
3. How did the company decide to describe its decision to apply negative discretion (pages 49-52 of the 2016 proxy)?
Remember that these podcasts are also available on iTunes or Google Play (use the “My Podcasts” app on your iPhone and search for “Big Legal Minds”; you can subscribe to the feed so that any new podcast automatically downloads…
Spanking brand new. By popular demand, this comprehensive “Form S-8 Handbook” covers the entire terrain, from share counting & filing fees to updating prospectuses & deregistration. This one is a real gem – 69 pages of practical guidance – and its posted in our “Form S-8″ Practice Area.
