Tag Archives: Say on Pay Frequency

August 2, 2011

Happy Birthday, Dodd-Frank

They grow up so fast! July 21 was the one-year anniversary of the Dodd-Frank Act (in case you are wondering, it’s been nine years since SOX was passed–time sure flies when you’re having fun). Today I take a look at Say-on-Pay results and highlight a recent announcement from the SEC about the timeline of further Dodd-Frank rulemaking projects.

To reminisce more on Dodd-Frank developments over the past year, check out the memo “Dodd-Frank One Year Later” by David Lynn of Morrison & Foerster (and editor of TheCorporateCounsel.net).

Say on Pay: The Results So Far

With proxy season winding down, here are the latest Say-on-Pay results (courtesy of Mark Borges, who has been providing weekly Say-on-Pay updates in his excellent blog on CompensationStandards.com):

2,596 companies have reported votes. Of those, only 37 reported failed votes, but there are three additional companies (Cooper Industries, Hemispherix Biopharma, and isoRay) where whether the Say-on-Pay vote passed depends on how you count. Of course, if your Say-on-Pay vote is that close, it probably doesn’t matter whether you count it as a pass or fail; either way, you are likely to be making some changes to your executive pay.
At least three companies (Lockheed Martin, General Motors, and Umpqua Holdings) modified prior grants to be subject to performance vesting in response to shareholder comments in connection with their Say-on-Pay votes.
At a majority (about 76%) of the companies reporting votes, shareholders expressed a preference for annual Say-on-Pay votes.

SEC Delays Further Rulemaking

In his also excellent blog on CompensationStandards.com, Mike Melbinger reported yesterday that the SEC has modified its schedule for adopting rules relating to the Dodd-Frank Act, including the key provisions applicable to executive compensation. Here is the new schedule:

August – December 2011

§951: Adopt rules regarding disclosure by institutional investment managers of votes on executive compensation
§952: Adopt exchange listing standards regarding compensation committee independence and factors affecting compensation adviser independence; adopt disclosure rules regarding compensation consultant conflicts

January – June 2012

§§953 and 955: Adopt rules regarding disclosure of pay-for-performance, CEO to median employee pay ratio, and hedging policies
§954: Adopt rules regarding recovery of executive compensation (i.e., clawbacks)
§956: Adopt rules (jointly with others) regarding executive compensation at covered financial institutions

July – December 2012

§952: Report to Congress on study and review of the use of compensation consultants and the effects of such use

Given the new schedule, Mike thinks it unlikely that most of these rules will be effective for next year’s proxy season, but there is a chance that one or two provisions will be effective for proxies filed after January (as with the Say-on-Pay rules, published in January 2011). Mike notes that the SEC will propose rules first (and already has for a couple of the provisions), so we should know well in advance which provisions will be final for the 2012 proxy season.

It’s Not Too Late to Enroll in the NASPP’s Financial Reporting Course
The NASPP’s newest online program, “Financial Reporting for Equity Compensation” started on Thursday, July 14, but it’s not too late to get into the course. All webcasts have been archived for you to listen to at your convenience.

Designed for non-accounting professionals, this course will help you become literate in all aspects of stock plan accounting, from expense measurement and recognition, to EPS and tax accounting. Register today so you don’t miss any more webcasts.

NASPP “To Do” List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing “to do” list for you here in my blog.

Register for 19th Annual NASPP Conference (November 1-4 in San Francisco).
Check out the NASPP’s Facebook and Twitter pages.
Register for the NASPP’s newest online course, “Financial Reporting for Equity Compensation.”
Complete the Compliance-O-Meter quiz on Reconciling Broker Transactions.
Take the “Question of the Week” challenge.
Renew your NASPP membership for 2011 (if you aren’t an NASPP member, join today).
Don’t miss your local NASPP chapter meetings in Kansas/Missouri, Philadelphia, and Phoenix. And, next week, on August 10, the San Francisco chapter will host their annual all-day event at Wente Vineyard in Livermore, CA. You really should come out for this exceptional event.

– Barbara

Tags: clawback, dislosure, Dodd-Frank, Dodd-Frank Act, executive compensation, hedging policies, pay ratio, Say on Pay Frequency, Say-on-Pay

May 3, 2011

Eleven and Counting

Say-on-Pay vote failures have picked up, with more failures last week than any other week so far this proxy season. Today I provide an update on the latest Say-on-Pay stats and comment on a couple of companies that recently modified options granted to their CEOs in response to shareholder feedback related to their Say-on-Pay votes.

Say-on-Pay: The Latest Data
Broc Romanek and Mark Borges have been keeping track of Say-on-Pay votes in their respective blogs on TheCorporateCounsel.net and CompensationStandards.com. Last week, Navigant Consulting, Cogent Communications, MDC Holdings, and Janus Capital were the eighth, ninth, tenth, and eleventh companies to report that their Say-on-Pay proposals failed.

Say-on-Pay Frequency

Say-on-Pay Frequency votes seem to be primarily ending up in the annual camp; if my math is correct, of the companies that have held and reported votes thus far, 72% have reported that shareholders prefer annual votes. Many companies have put forth a recommendation for an annual vote, rather than risk the embarrassment of shareholders voting against managements’ recommendation.

Even so, a triennial vote is a possible outcome–Mark Borges reports that, of the 235 companies where the board has recommended a triennial vote (and the companies have reported vote results), only 43% have reported that shareholders indicated a preference for annual votes. Fascinatingly, at one company (Qualstar), management recommended an annual vote but shareholders preferred a triennial vote.

Options Modified in Response to Shareholder Feedback

I think it is also notable that, in the last two weeks, two companies, GE and Lockheed Martin, announced modifications to options held by their CEOs. The modifications added performance targets to options that were previously only service-based. In both cases, the modified options now vest based on two independent performance goals (50% of the options vest when one goal is met and 50% vest when the other goal is met). In Lockheed’s case, one goal is based on cash from operations and the other is based on ROIC. For GE, one goal is also based on cash-flow, but the other goal is tied to relative TSR–which adds a market condition to an option that was previously only service-based. I’m very intrigued by the accounting implications–or possible lack thereof–of these modifications and I hope to look at them at length in an upcoming issue of The Corporate Executive.

According to SEC filings submitted by both companies, the options were modified in response to conversations they had with shareholders (and ISS, we imagine). It seems likely that the modifications were necessary to ensure passage of their Say-on-Pay votes and are illustrative of the level of power Say-on-Pay has given shareholders.

Save Big on NASPP Conference by Completing Survey
NASPP members that complete the NASPP’s 2011 Domestic Stock Plan Administration Survey (co-sponsored by Deloitte) by May 13 can save 10% off the early-bird rate for the 19th Annual NASPP Conference (which is already a significant savings off the regular registration rate). Register to complete the survey today–so you don’t have to explain to your boss why you missed out on this rate.

Only Ten Days Left for NASPP Conference Early-Bird Rate
It’s hard to believe how time flies, but the 19th Annual NASPP Conference early-bird rate expires next Friday, May 13. This deadline will not be extended–register for the Conference today, so you don’t miss out.

NASPP “To Do” List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing “to do” list for you here in my blog.

Register for 19th Annual NASPP Conference (November 1-4 in San Francisco). Don’t wait; the early-bird rate is only available until May 13.
Participate in the NASPP’s 2011 Domestic Stock Plan Administration Survey (co-sponsored by Deloitte, with survey systems support provided by the CEP Institute).
Submit your questions for the NASPP’s next Ask the Experts webcast on Restricted Stock and Unit Awards. Questions must be submitted by May 18.
Check out the NASPP’s Facebook and Twitter pages.
Register for the NASPP’s newest online course, “Financial Reporting for Equity Compensation.”
Complete the Compliance-O-Meter quiz on Transfer Agents.
Take the “Question of the Week” challenge.
Renew your NASPP membership for 2011 (if you aren’t an NASPP member, join today).
Attend your local NASPP chapter meetings in San Diego and Wisconsin. Robyn Shutak, the NASPP’s Education Director, will be at the San Diego meeting–be sure to say hello!

– Barbara

Tags: ISS, modification, Say on Pay Frequency, Say-on-Pay