The overarching goal of incentive compensation plan design is, of course, to incentivize management to focus on value creation for shareholders. Recent developments concerning corporate “sustainability” suggest that compensation committees of public company boards of directors, as well as human resources executives, should consider the use of metrics developed to measure sustainability in incentive compensation plans. By way of illustration, Chevron Corporation’s latest climate report, released last week, notes that it plans to set greenhouse gas emissions targets and said the goal would be added to the scorecard that determines incentive pay for executives and approximately 45,000 employees. Continue Reading Using Sustainability Metrics in Incentive Compensation Plans
The market reaction to reports of harassment and misconduct in the wake of the #MeToo movement has led to a re-evaluation of the materiality of these complaints from a due diligence perspective, both in the context of mergers and acquisitions (M&A) and securities offerings. Companies and lawyers therefore need to re-examine the due diligence process, its role in considering harassment and misconduct claims, and how the process in M&A and securities offerings should be tailored to ensure the complete disclosure of these claims.
As 2019 begins, companies continue to face global uncertainty, marked by volatility in the capital markets and global instability. And while change is inevitable, what has been particularly challenging as we enter this new year is the frenzied pace of change, from societal expectations for how companies should operate, to new regulatory requirements, to the evolving global standards for conducting business.
As companies navigate how to adapt, they are being held to increasingly higher standards in executing a coherent, thoughtful and profitable long-term strategy in this ever-evolving landscape. This memorandum identifies the issues across a number of different areas on which boards of directors, together with management, should be most focused.
We invite you to review these topics by clicking on the links below.
For a PDF of the full memorandum, please click here. Continue Reading Selected Issues for Boards of Directors in 2019
ISS recently released updates to its Frequently Asked Questions (“FAQs”) on U.S. Compensation Policies and Equity Compensation Plans. The FAQs are intended to provide general guidance regarding the way in which ISS will analyze certain issues as it prepares proxy analyses and determines vote recommendations for U.S. public companies.
A summary of updates to the FAQs is provided below. In addition to the ISS and Glass Lewis proxy voting guidelines that were released in the fall of 2018, U.S. public companies should consider the applicability of the ISS FAQs in light of their individual facts and circumstances. Continue Reading ISS Finalizes Updates to its FAQs on Compensation Policies and Equity Compensation Plans
In late December 2018, the Securities and Exchange Commission adopted a final hedging disclosure rule, as required by Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Final Rule generally requires U.S. public companies to disclose any company practices or policies regarding the ability of employees, officers, directors or their respective designees to engage in hedging transactions. Although most companies will be required to comply with the Final Rule for proxy and information statements for fiscal years beginning on or after July 1, 2019, companies may wish to begin reviewing their existing hedging policies and practices in light of the new disclosure requirements.
Please click here to read the full alert memorandum, which provides a summary of the Final Rule and relevant changes from the SEC’s 2015 proposed rule.
The German Government published a draft legislation which would facilitate the dismissal of so-called “risk takers” in the German financial sector. This is one of various measures by which the German Government intends to address upcoming Brexit challenges and to increase the attractiveness of Germany as business location for financial institutions currently based in the UK.
Current Legal Situation
German employees are benefitting from extensive protection against dismissal. Under German labor law, the termination of an employment relationship requires a valid justification (e.g., redundancy or misconduct) for which the German labor courts have set high standards. Therefore, the affected employee is often in a good position to challenge the validity of the termination and claim the continuation of the employment relationship before court.
Following its 2019 benchmark voting policy consultation period, Institutional Shareholder Services (“ISS”) recently released its updated voting guidelines for the 2019 proxy season.
A summary of notable governance and compensation policy updates is provided below. Most significantly, the updated guidelines suggest that ISS continues to be focused on enhancing shareholder rights through increased board responsiveness and accountability. In general, the updated proxy voting guidelines will be in effect for annual meetings occurring on or after February 1, 2019. In connection with their preparations for the 2019 proxy season, U.S. public companies should consider the applicability of the new guidelines in light of their individual facts and circumstances. Continue Reading ISS Updates its 2019 Proxy Voting Guidelines
As 2018 draws to a close, both Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis are in the process of updating their 2019 proxy voting guidelines.
In mid-October, ISS launched its 2019 benchmark voting policy consultation period, pursuant to which ISS solicits feedback on certain of its proposed voting policies for the upcoming proxy season. This year, ISS requested comment on proposed policies for U.S. public companies related to board gender diversity and its pay-for-performance model, as described in greater detail below. ISS plans to announce its final policy changes in mid-November.
In addition, Glass Lewis recently released its 2019 shareholder initiatives and proxy voting guidelines, which include the implementation of previously announced policies that were in grace periods, new policies and codifications and clarifications of previously existing approaches to issuing vote recommendations.
A summary of notable executive compensation and governance updates is provided below. The recent policy updates, and in particular the new Glass Lewis guidelines, are fairly extensive. In preparing for the 2019 proxy season, U.S. public companies should consider the applicability of the new and proposed policies in light of their individual facts and circumstances. Continue Reading Recent Updates to Proxy Advisory Firm Guidelines
Last month, former Uber executive Eric Alexander filed a complaint (the “Complaint”) against another former Uber executive, Rachel Whetstone. The Complaint alleges breach of a mutual non-disparagement clause in Whetstone’s separation agreement with Uber; a clause that Whetstone, during her negotiation with Uber, apparently insisted specifically name Alexander and preclude them from disparaging each other. In the Complaint, Alexander alleges that he is a third party beneficiary of the contract and can therefore enforce the non-disparagement obligation against Whetstone.
On August 21, 2018, the Internal Revenue Service (“IRS”) issued Notice 2018-68 (the “Notice”), which provides initial guidance on the application of Section 162(m) of the Internal Revenue Code, as amended by the 2017 Tax Cuts and Jobs Act (“TCJA”).
The guidance is limited to the definition of the term “covered employees” and the application of the transition rule accompanying the TCJA amendments. Certain aspects of the Notice will be of practical significance for many companies in connection with the potential deductibility of their executive compensation, even though the amount of the lost deductions may not be material to each company from a financial perspective.
The Notice states that the IRS plans to issue further guidance in the form of proposed regulations and solicits comment on certain aspects of Section 162(m) as amended that are not addressed by the Notice.
Please click here to read the full alert memorandum.