Early Bird Rates – Act by April 24th: 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 special early bird discount rate to help you attend these critical conferences (both of the Conferences are bundled together with a single price). So register by April 24th to take advantage of the 33% discount.
Today, he acknowledges making mistakes. He was too invested in the game: In just his last four years at Tyco, he made more than $300 million, according to regulatory filings. “I’d go to Harvard Business School and get a standing ovation when I was introduced as the highest-paid C.E.O. in the country,” he recalled.
Over the years, Chesapeake Energy has been in the news over its CEO pay practices for its outlandish CEO Aubrey McClendon (for example, see this blog). Now, according to this Reuters article, McClendon has left – but the company has sued the former CEO for stealing ‘trade secrets’ to start a new firm…
This new 38-page report from Equilar & RR Donnelley entitled “2015 Innovations in CD&A Design” may help those putting the finishing touches on their proxy statement…
Last month, the Financial Accounting Standards Board adopted a change in its rules regarding company financial statement presentation that will require companies to review their grants of performance-based compensation.
The FASB change to Generally Accepted Accounting Principles would simplify the income statement presentation requirements in Subtopic 225-20 (“Income Statement — Extraordinary and Unusual Items”) by eliminating the concept of extraordinary items and replacing it with a new standard. Before this change, extraordinary items were defined as events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Once the change is effective, companies would instead disclose items that are either of an unusual nature or of a type that indicates infrequency of occurrence as a separate component of income from continuing operations.
While this change might seem esoteric and of interest only to accountants, some housekeeping may be in order for compensation plans or grants that would exclude the effect of extraordinary items under the existing standard. In the short term, companies making multi-year performance grants in early 2015 should take the time to understand the impact of this change because it can relate both to how performance is measured and tax deductibility under Code Section 162(m). The FASB amendment is effective for fiscal years beginning after December 15, 2015, although companies may apply the amendments retrospectively to prior periods. Performance periods straddling this effective date would be affected.
An analysis of ISS Governance QuickScore data finds: 54.3% of Russell 3000 companies have a policy prohibiting hedging of company shares by employees, while 84% of large capital S&P500 companies have such a policy. Executive or director pledging of company shares was prevalent at just 14.2% of Russell 3000 companies, and, notably, 15.8% of S&P500 companies.
In reaction to the SEC’s hedging & pledging policy disclosure proposal last week, I received this nifty chart on possible approaches from one in-house member – as well as this note below:
From where I sit, companies would do a disservice to themselves – and their stockholders – by adopting a blanket “one-size-fits-all” rule with regard to hedging of company securities. Instead, I believe we should consider different policy decisions on how we view hedging with regard to (i) outstanding equity awards v. shares owned outright and (ii) rank-and-file employees v. directors and officers. Also, even though the proposed rules are focused on hedging activity, I believe that companies should re-visit their pledging policies because they raise similar issues. See my attached snapshot summary.
Check out this new free app for iPhone and iPad – Stock Compensation Glossary – from myStockOptions.com. It’s available from The App Store and iTunes. It’s a glossary in the form of a searchable reference guide that defines almost 1000 terms in the areas of equity compensation and executive compensation, along with the related taxation, corporate accounting, and securities law. An Android version is available to be downloaded from Google Playstore too…
In this blog, Taylor French of McGuireWoods provides the news:
According to ISS, Emerson Electric (the Fergusson, Mo. – based electrical equipment manufacturer) was the first U.S. company to which ISS applied its new Equity Plan Scorecard policy. On February 3rd, Emerson held its shareholder meeting, at which time, it put its 2015 Incentive Shares Plan up for shareholder approval. Based on a recently filed Form 8-K, Emerson’s shareholders resoundingly approved the plan.
In general, the new ISS policy analyzes equity plan proposals pursuant to three pillars:
– Estimated Cost – total potential cost relative to industry/market cap peers, measured by estimated Shareholder Value Transfer in relation to peers.
– Plan Features – review of problematic plan terms (e.g., single-trigger change in control vesting, discretionary vesting authority, liberal share recycling, minimum vesting periods).
– Equity Grant Practices – relative burn rate, vesting terms in most recent CEO grants, estimate plan duration, portion of CEO’s most recent equity grants subject to perfomance conditions, clawback policy, post-exercise/vesting holding requirements.
Emerson’s shareholder proposal to approve the plan seems drafted with an eye to the Equity Plan Scorecard. In particular, the proposal points out that:
– The plan will have enough shares to last through the next two performance cycles (October, 2015 and October, 2018).
– The company has reduced it’s weighted average diluted shares via share repurchases.
– The plan incorporates key ISS best practices concerning minimum vesting periods, clawbacks, double-trigger change in control provisions.
– The plan does not allow liberal share counting or contain a liberal change in control definition.
– The company’s grant practices should be viewed favorably under ISS standards.
It will be intersting to see if companies use the ISS Equity Plan Scorecard as a rubric of sorts when drafting equity plan shareholder proposals. Emerson’s proposal certainly touched on many ISS key issues and appears to have been embraced by shareholders.