Mergers and Acquisitions, Corporate Governance, Shareholder Activism
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…
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.Continue Reading German Government Plans to Reduce Dismissal Protection for “Risk Takers” in the Financial Sector
Following its 2019 benchmark voting policy consultation period, Institutional Shareholder Services (“ISS”) recently released its updated voting guidelines for the 2019 proxy season.[1]
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.[1]
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.
Continue Reading Shut Up! (Someone Is Actually Suing on the Basis of a Non-Disparagement Clause)
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…
Cleary Gottlieb and PwC’s Governance Insights Center have teamed up to create the Executive Compensation Series, which looks at the factors motivating boards to increasingly engage with shareholders about executive compensation.
The final installment in the series can be found here and a list of past editions can be accessed here.
During the course of the last month, the Securities and Exchange Commission (“SEC”) brought two enforcement actions related to inadequate disclosure of perquisites. In early July, the SEC issued an order finding that, from 2011 through 2015, an issuer failed to follow the SEC’s perquisite disclosure standard,[1] which resulted in a failure to disclose approximately $3 million in named executive officer perquisites.[2] In addition to the imposition of a $1.75 million civil penalty, the SEC order mandated that the issuer retain an independent consultant (at its own expense) for a period of one year to conduct a review of its policies, procedures, controls and training related to the evaluation of whether payments and expense reimbursements should be disclosed as perquisites, and to adopt and implement all recommendations made by such consultant.
Continue Reading Recent SEC Enforcement Actions on Inadequate Perquisite Disclosure
In recent years, shareholder plaintiffs have brought a series of claims before the Delaware Court of Chancery alleging that directors of Delaware companies have abused their discretion in granting themselves excessive equity compensation for their board service. These cases raised the threshold question of whether the plaintiffs’ challenges should be reviewed under the “entire fairness” standard, which requires the company to bear the burden of proving that the director awards were fair, or the more deferential “business judgment” standard, which grants considerable discretion to directors’ decisions, often resulting in dismissal of claims that fail to plead particularized facts indicating fiduciary lapses by the directors.
Continue Reading New Year’s Resolutions For Director Compensation From Investors Bancorp
Following the enactment of the Tax Cuts and Jobs Act (the “TCJA”) in late December 2017, which introduced significant reforms to the U.S. tax system, the Internal Revenue Service (“IRS”) issued new withholding guidance in January 2018.[1] Recently, two Democratic legislators have openly questioned whether the IRS’ 2018 withholding tables may result in systematic under-withholding of W-2 earnings. Companies will need to comply with the IRS withholding guidance, through administrative procedures that are typically the responsibility of payroll departments and outside payroll service providers. Companies may also be concerned about the consequences of under-withholding from an employee-relations perspective.
Continue Reading Withholding Judgment
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