Executive Compensation

While much of the focus today is on restarting segments of the economy and developing action plans to reopen businesses, history outside of corporate America teaches us important lessons on how incentives can play a role in driving effective outcomes.  It shows us that incentives, not just rules, may be the solution businesses need.  Consider the British prisoner dilemma over two centuries ago as a powerful lesson in incentives and how these lessons can be applied to the current pandemic.
Continue Reading Incentives in the Pandemic

On April 8, Institutional Shareholder Services (“ISS”) published additional guidance on application of its benchmark voting policies amid the COVID-19 pandemic.[1] ISS had previously issued its 2020 benchmark policies update to be applied for shareholder meetings on or after February 1, 2020.[2] Noting the societal and economic uncertainty wrought by COVID-19 since its prior update, ISS provides further guidance focused on four key areas:

  • Annual General Meeting (“AGM”) Issues;
  • Poison Pills, Shareholder Rights and Boards/Directors;
  • Compensation Issues; and
  • Capital Structure and Payouts.


Continue Reading ISS Issues Additional Voting Policy Guidance in Response to COVID-19 Pandemic

Executive pay in the midst of the pandemic presents an obvious dilemma.  On the one hand, it would be a stretch to blame fairly management teams for most of the adverse financial performance that will stretch across a broad range of industries.  On the other, they cannot escape the consequences either.

Consider that while stock values may bounce back for many companies in the reasonably short term, it is unlikely that business will quickly return to the status quo ante.  In some industries, the markets for products and services may change permanently; in other industries, supply chain and inventory management may also be permanently affected.  Not least, rank and file employees and other stakeholders across the economy will suffer.  Many executives will take short-term salary cuts in recognition of the hardship, but that is a preliminary and largely symbolic step and compensation committees need to find the right overall balance between reward and respect for the economic environment.
Continue Reading The Executive Pay Dilemma

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2020”.

Corporate Purpose

On August 19, 2019, the Business Roundtable released its latest Statement on the Purpose of a Corporation, emphasizing commitment to all stakeholders.[1] The Statement received a lot of attention

Recent changes in political climates, legal reforms and social norms have had varying (and sometimes conflicting) impacts on how companies are run; however, they have all contributed to a growing demand that companies expand their focus beyond shareholder value creation.

Environmental, social and governance concerns dominate shareholder proposals and engagement efforts, and discussions of corporate

Section 162(m) of the Internal Revenue Code limits the deductibility of compensation paid by public companies to certain of their executives in any year to $1 million. The 2017 Tax Cuts and Job Act amended Section 162(m) to expand the number of executives at a public company whose compensation may be non-deductible by reason of

On November 22, 2019, the First Circuit Court of Appeals held in Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, that two private equity funds, Sun Capital Partners III, LP and Sun Capital Partners IV, LP were not liable for approximately $4.5 million in multiemployer pension

A week after Glass Lewis issued its 2020 proxy voting guidelines,[1] Institutional Shareholder Services (ISS) released its final updates to its 2020 proxy voting policies.  The updated policies will be applied to shareholder meetings beginning on February 1, 2020, and the changes to U.S. polices are summarized below.
Continue Reading ISS Updates its 2020 Proxy Voting Policies

Glass Lewis recently released its 2020 proxy voting guidelines and shareholder initiatives.[1]  The following is a summary of Glass Lewis’ proposed changes and updates for 2020.  Most significantly, the updated guidelines reflect a response to the Securities and Exchange Commission’s recent announcement that it may decline to take a view or may respond orally to no-action requests for shareholder proposals under Rule 14a-8 of the Exchange Act.[2]  Starting in 2020, Glass Lewis generally will recommend a vote against members of a company’s governance committee if a company omits a shareholder proposal from its proxy statement without evidence of receiving no-action relief from the SEC, as described in more detail below.
Continue Reading Glass Lewis Updates Its 2020 Proxy Voting Guidelines

Vice Chancellor Slights, of the Delaware Court of Chancery, included a slightly self-effacing, and only slightly humorous, note in his recent opinion in a fiduciary claim against the directors of Tesla, Inc., to the effect that the defendants have reason to believe that they drew the wrong judge in the case.  The case relates to the 2018 incentive compensation award to Tesla’s CEO, Elon Musk, that caps out at about $55 billion (that “b” is not a typo).  The footnote concerns, in part, Vice Chancellor Slights’ determination, in a separate recent claim alleging fiduciary breaches by the Tesla board, that members of Tesla’s board were not independent.[1]
Continue Reading Update on Director Independence