We’re into late March and I’m reminded of the centuries old English proverb: “March comes in like a lion and goes out like a lamb.” Somehow I think it’s the reverse for the stock plan world; as many of us get to this point in the year, we’ve found that we moved on from year-end reporting to a busier proxy season.
Say-on-What?
Perhaps I speak for many of us when I suggest that the term “say-on-pay” has almost become like white noise in the background. For so long it was talked about everywhere – with so much attention spent on dissecting how companies were implementing say-on-pay driven practices and proxy voting outcomes. Well, say-on-pay is still here, and while many of us are used to it, there are still a fair number of companies that still fail to gain an affirmative say-on-pay vote when proxy season comes. A few days ago, Broc Romanek of CompensationStandards.com blogged that the 2nd say-on-pay failure for this proxy season just happened. This particular company was one that received an affirmative say-on-pay vote the year before. All in all, 74 companies failed the say-on-pay vote last year. Let’s hope those numbers start a downward trend this season. I’m not sure if I’d put my money on a downward spiral just yet, though. According to an informal poll on CompensationStandards.com, 82% of respondents felt that somewhere between 41-90 companies would fail to obtain affirmative say-on-pay votes this season. Yikes!
Keep Your Eyes Wide Open
The message of today’s blog is that while say-on-pay is not so much a “hot topic” in stock compensation at the moment, it is proxy season, and shareholders are still very much engaged in expressing themselves via their say-on-pay votes. Additionally, last year we had much discussion on the wave of litigation aimed at better proxy disclosures. These are the things to keep in mind as you sit at the proxy table this year. While it’s obviously good to care about any proposal in your proxy statement, if you’ve got stock plan related proposals on the table, you’ll want to have your radar up to understand how shareholders (and their lawyers?) are reactive to your proxy statement as a whole. A negative vote against a stock plan matter may simply be a by-product of shareholder unhappiness related to other aspects of the company’s disclosures.
Although we many be feeling complacent with the concept of say-on-pay, now is not the time to relax our efforts to ensure that all disclosures will stand up to the continued scrutiny of shareholders and their advisors.
In separate proxy related news, the Wall Street Journal reports that it looks like proxy advisory firm ISS is set to change hands (for the third time in seven years).
-Jennifer
Tags: disclosure, ISS, proxy, proxy advisory firm, Say-on-Pay, stock plan litigation
It’s been a while since we’ve had major regulatory updates that impact stock compensation. Knowing that, I sometimes find myself scanning the horizon, looking for the next “thing” that’s going to have us examining our practices, changing procedures or implementing something new. This week my radar went into action when I heard that SEC Chair Mary Jo White had laid out quite a list of upcoming initiatives in a recent address.
Technology on the Brain
In spite of some significant cutbacks in technology dollars available to the SEC for long term initiatives, the SEC seems to still have advancement in this area on the brain. Chair White announced that the SEC has deployed a new analytical tool called “NEAT” (National Exam Analytics Tool) to help identify possible insider trading or other misconduct. This tool can identify red flags in a fraction of the time it took to do so in the past. I’m guessing this means that the wave of insider trading investigations and scrutiny is not over.
In the spring of 2013, the SEC issued guidance permitting issuers to use social media sites to communicate company announcements (see the NASPP Blog, May 16, 2013). White has now indicated that the SEC is broadly rethinking disclosure requirements for public companies and the role of technology in sharing information with investors. Last month the SEC recommended to Congress in a report (which was mandated by the JOBS Act) that the disclosure rules undergo comprehensive reexamination and reform. White shared some insight into the SEC’s thinking: “I believe we should rethink not only the type of information we ask companies to disclose, but also how that information is presented, where and how that information is disclosed, and how we can take advantage of technology to facilitate investors’ access to information and make it more meaningful to them.” Saying it and issuing a report doesn’t mean new rules are imminent, but it is perhaps a hint of things to come. It seems within the realm of possibility that this type of reform may be fairly significant if and when it happens.
New Investigation Focus
White says that as the SEC wraps up investigations stemming from the financial crisis, attention is now shifting to other areas of enforcement – namely financial reporting fraud and accounting irregularities amongst others. This is a good time to make sure our controls, checks and balances are operating full force. While we can’t control other areas of financial reporting beyond stock administration, we can ensure that the areas under our realm can stand up to the possibility of an intense audit or investigation. This seems particularly wise, since Chair White also said that “The coming year promises to be an incredibly active year in enforcement, as we continue to vigorously pursue wrongdoers and bring enforcement actions across the entire industry spectrum.”
It looks like the SEC continues on their roll of assertive enforcement actions and attempt to progress into more modern times. Let’s see what the horizon holds in that regard.
-Jennifer
Tags: audit, disclosure, enforcement, financial reporting, insider trading, SEC, social media