On December 16, 2022, Institutional Shareholder Services (âISSâ) released its updated FAQs on Equity Compensation Plans, which will apply to its âEquity Plan Scorecardâ evaluation of equity plan proposals in shareholder meetings held on or after February 1, 2023. Under the Equity Plan Scorecard, ISS scores a proposed equity plan based on factors relating to (i) plan âcostâ under a âShareholder Value Transferâ model, (ii) plan features and (iii) company grant practices. Although the only…
It’s been 12 years in the making, but the SEC has finally released rules to implement the “pay versus performance” disclosure required by Section 953(a) of the Dodd-Frank Act. The new disclosure of the relationship between executive compensation “actually paid” and financial performance is required to be included in proxy statements or information statements for fiscal years ending on or after December 16, 2022 and is therefore effective for the upcoming 2023 proxy season. For a…
Proxy advisors (e.g., Institutional Shareholder Services (“ISS”) and Glass, Lewis & Co (“Glass Lewis”)) have played a substantial role in the design of executive compensation for many years.   This has been due to the strong reliance of institutional investors (as well as investment advisors) on the proxy voting recommendations of firms such as ISS and Glass Lewis. Some commentators have viewed the proxy advisors as being quasi-regulators without any formal oversight of their potential conflicts…
On May 11th, the staff of the SECâs Division of Corporation Finance issued 45 Compliance and Disclosure Interpretations (CDIs), replacing previously published telephone interpretations on proxy rules and Schedule 14A. Most of the updates are non-substantive, as noted by the SEC, and therefore the updates are primarily helpful for consolidating the relevant guidance in one place. Twelve of the CDIs relate to Item 10 of Schedule 14A, which sets forth the disclosure rules when a…
At the ABA Annual Meeting on Friday, September 15th, the Securities and Exchange Commission (SEC) Division of Corporation Finance Director Bill Hinman (speaking for himself and not the SEC) said that the SEC did not plan to delay the implementation of the CEO pay ratio disclosure rules. Mr. Hinman also mentioned that the SEC anticipates issuing guidance on the pay ratio rule in the near future. Â We note that although the Financial Choice Act that…
Itâs hard to believe itâs been a little over two years since the Securities and Exchange Commission (SEC) adopted the final rule for the CEO pay ratio disclosure as part of its implementation of the Dodd-Frank Act. As most readers will know, the CEO pay ratio rule requires public companies (with certain exceptions) to disclose the ratio of the annual total compensation of their Chief Executive Officer (CEO) to the annual total compensation of their…
Many companies that are taking their stock plans out for shareholder approval this proxy season to replenish their share reserve are also amending their plans to accommodate recent changes in law, governance practices and new developments, such as the recent change that FASB adopted to the accounting rules for share-based awards (ASC 718) allowing withholding of shares to satisfy tax withholding rates at a rate higher than the minimum tax withholding rate without triggering liability…