Executive Compensation

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Companies with securities listed on NASDAQ must file a one-time certification of compliance in regard to the amended compensation committee listing rules as provided in Rule 5605(d) and IM-5605-6 within 30 calendar days following the earlier of the issuer’s first annual meeting occurring after January 15, 2014, or October 31, 2014.
Continue Reading NASDAQ Listed? Compensation Committee Certification!

Over the past year, boards of directors continued to face increasing scrutiny from shareholders and regulators, and the consequences of failures became more serious in terms of regulatory enforcement, shareholder litigation and market reaction. We expect these trends to continue in 2014, and proactive board oversight and involvement will remain crucial in this challenging environment.
Continue Reading Selected Issues for Boards of Directors in 2014

The Commissioners of the SEC voted 3-2 on September 18, 2013 to propose regulations (the “Proposed Rules”)[1] implementing the mandate of Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) [2] to require disclosure by a reporting company of the median annual total compensation of all its employees (excluding the company’s principal executive officer (“PEO”)) and the ratio of that median to the annual total compensation of the PEO.  This memorandum summarizes the requirements of the Proposed Rules.
Continue Reading SEC Proposes Pay Ratio Disclosure Rule

In the years since the financial reporting scandals and the Sarbanes-Oxley Act of 2002, and in particular following the financial crisis and the Dodd-Frank Act of 2010, boards of directors have faced greater burdens and more intense scrutiny of their activities and performance. One manifestation of this has been pressure to change the role of directors from one of partnership with and oversight of management to one of an almost quasigovernmental watchdog directly responsible for monitoring management’s performance, including its compliance with increasingly complex and burdensome regulation. In addition, activist investors continue to publicly push some boards to pursue strategies focused on short-term returns, even in instances where those strategies are inconsistent with the directors’ preferred, sustainable long-term strategies for the corporation.
Continue Reading Selected Issues for Boards of Directors in 2013

On October 16, 2012, proxy advisory firm Institutional Shareholder Services (ISS) issued for comment proposed changes to its U.S. voting policies for 2013.  ISS’s proposed changes focus primarily on compensation-related matters.  Of particular note in that regard is a modest revision to ISS’s approach to peer group selection for purposes of its pay for performance analysis.  ISS also proposed a change that highlights its concern with companies’ responsiveness to majority-supported shareholder proposals.
Continue Reading ISS Focuses on Pay and Majority-Supported Shareholder Proposals in Proposed Changes to U.S. Voting Policies for 2013

In 2002, the UK began requiring an advisory shareholder vote on the annual executive and non-executive director compensation practices of UK-incorporated quoted companies (“UK Companies”).  Eight years later, in July 2010, the US followed suit when President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), providing for an advisory say-on-pay vote for most large US public companies.[1],[2]
Continue Reading Binding Shareholder Say-on-Pay Vote on Route to Reality in the UK: US Companies Take Note

  1. Introduction

On 14 March 2012, the UK Government published a consultation on shareholder voting rights in connection with “executive” pay.  The consultation follows an earlier discussion paper in which, among other questions, the Government asked whether a binding vote on remuneration would improve shareholders’ ability to hold quoted companies to account on pay and performance.  The proposals form part of a package of measures the Government intends will address failings in the UK corporate governance framework for executive remuneration.
Continue Reading UK Government Consults on Increasing Shareholder Voting Rights in Relation to Quoted Company Directors’ Pay

An interpretive position recently taken by the Staff of the Securities and Exchange Commission in correspondence with Verizon Communications Inc. has potentially broad implications for reporting compensation in the Summary Compensation Table.  The correspondence involved the characterization of a performance-based equity award under which the compensation committee had significant discretion to adjust the payout based on non-objective criteria.  In the correspondence, the Staff took the position that a portion of the award should have been disclosed in the Summary Compensation Table in the year it was earned, rather than the year in which, based on Verizon’s accounting, the grant date occurred.  The conclusion is notable because:
Continue Reading New Considerations Regarding the Reporting of Equity Rewards in the Summary Compensation Table