By David Engvall, Reid Hooper, Keir Gumbs, and David Martin
On April 29, 2015, the Securities and Exchange Commission (the “SEC”) proposed a new rule that would require public companies to provide new disclosures annually regarding the relationship, over a five-year period, between executive compensation actually paid and a measure
Continue Reading SEC Proposes “Pay for Performance” Disclosure Rule
On September 18, 2013, the Securities and Exchange Commission (“SEC”) proposed a rule that would require most public companies to disclose, annually, the ratio of the median of the annual total compensation of all of the company’s employees to the annual total compensation of the company’s principal executive officer. This rule is mandated by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The comment period on the proposed rule ends 60 days after the proposing release is published in the Federal Register.
While the pay ratio disclosure is mandated by the Dodd-Frank Act, the statute sets no deadline for the SEC to act, and there are legitimate questions about the usefulness of the proposed disclosure to investors. In this respect, the proposed rule is, arguably, yet another example of using SEC disclosure rules to advance public policy goals not squarely rooted in the SEC’s historic mission of protecting investors. Further, despite steps taken by the SEC to reduce compliance costs for companies, the proposed rule would, if enacted, certainly increase the costs and time required for companies to accurately prepare their executive compensation disclosures, including the likely need for many companies to retain outside advisors to assist in the statistical sampling and compilation process.
Continue Reading SEC Proposes Pay Ratio Disclosure Rule
The Securities and Exchange Commission (SEC) recently approved changes to the listing standards of the New York Stock Exchange (NYSE) and NASDAQ relating to the independence of compensation committee members and the responsibilities of compensation committees when selecting compensation consultants, legal counsel, and other advisers. The final listing standards are substantially the same as those proposed by the exchanges, but there are a couple of noteworthy changes.
Continue Reading SEC Approves NYSE and NASDAQ Independence Standards for Compensation Committees
Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis & Co., LLC (“Glass Lewis”) recently updated their proxy voting guidelines for the 2013 proxy season. The complete 2013 Updates to ISS’s U.S. Corporate Governance Policy are available here. Key updates from both proxy advisors relating to executive compensation and compensation-related matters are discussed below. While the 2013 policy updates represent incremental rather than wholesale changes to the respective advisor’s voting guidelines, they also reflect, at least in part, responses to critiques of their pay-for-performance analyses voiced during the 2012 proxy season. Public companies are urged to take the 2013 policy updates into account when reviewing existing practices and policies and considering changes.
Continue Reading ISS and Glass Lewis Release 2013 Policy Updates
The New York Stock Exchange (NYSE) and Nasdaq recently filed proposals with the SEC setting forth standards to determine the independence of (a) a member of a compensation committee, and (b) a compensation consultant, legal counsel, or other advisor to a compensation committee. The exchanges’ proposals generally follow Rule 10C-1, which the SEC adopted in June 2012. However, the Nasdaq proposal would impose a stricter standard in one significant respect: a director would not be considered independent under any circumstances if the director accepts any compensatory fee from the company, other than board and committee fees and fixed amounts under a retirement plan for prior service. In addition, Nasdaq would, for the first time, require listed companies to have a separate compensation committee which must consist of at least two directors and which must have a charter.
Continue Reading Independence Standards for Compensation Committees Proposed by NYSE and Nasdaq