We have a lot of great new content on our NASPP site! I want to take the opportunity this week to let you know about some of the new features.
First, we have a new Quick Survey out on Global Stock Plans. Don’t forget to take a moment and complete this survey! It’s your opportunity to find out how other companies are dealing with some of the more difficult issues with global stock plans.
New Portals:
The NASPP portals provide a way to find consolidated information on the issues that matter most in stock plan management. Today, we have 26 portals listed; expect to see more in the future! You can access the NASPP portals from the list on the lower left side of the homepage, or through the drop-down menu on the navigation bar at the top of the site. The newest additions to our list of portals are:
Incentive Stock Options: Need a quick reference on the grant requirements for ISOs? Want to find the latest on Section 6039 Information Statements? The Incentive Stock Options portal not only has the comprehensive NASPP article on ISOs, it has final ISO regulations, articles, surveys, and sample documents.
Say on Pay: The Treasury, Congress, and the SEC have all proposed some form of say on pay requirements for companies. Our new Say on Pay Portal contains the proposed regulations along with memos and analysis on each. You can also find sample proxy statements from companies that have already taken steps to add a shareholder vote on compensation practices.
Surveys & Studies: I’m sure you all know that the NASPP publishes all Quick Survey, Stock Plan Design and Administration Survey, and Salary Survey results in the Surveys section of the Member Area drop-down menu on the navigation bar. But, did you know that we also have available comprehensive surveys and studies conducted by some of the best names in the industry? We’ve put them all together for you in our new Surveys & Studies portal. We’ve arranged this portal in a three-tab format so that you can find the study or survey you’re looking for by topic, year produced, or by the company publishing the information.
Updated Portals:
In addition to adding new portals, we’ve also gone back and reorganized some of our existing ones so that new developments and content are easier to find. Check out the updated 409A/Deferred Compensation portals and Executive Compensation Disclosures portal!
New content:
Our latest alerts on stock plan management practices, legislative and regulatory development, and global stock plans are always available on the NASPP homepage as well the corresponding portal. These are a few of the most recent additions:
There have been a lot of changes in global stock plan management. Don’t get left behind; sign up to have the latest alerts from specific countries send directly to your e-mail. In the past month alone, we’ve posted multiple alerts on Australia, the European Union, Portugal, Ireland, India and China. Don’t forget that you can search our global stock plan alert archives by country.
We’re not done, yet! You won’t want to miss out on what we have in store for next year. Renew your NASPP membership for 2010. If you aren’t an NASPP member, take advantage of our special offer and join today!
In April I wrote about how the current environment is renewing an interest in shareholder votes on executive compensation. The Obama administration has made it clear that “say on pay” is an integral part of efforts to reform corporate governance. On June 10th of this year, the Administration released a “Say on Pay” Fact Sheet outlining President Obama’s perspective on the need for non-binding shareholder votes on executive compensation and golden parachute payments.
The Treasury has already proposed legislation, the Investor Protection Act of 2009 that I wrote about in July, which would require a non-binding shareholder vote on executive compensation, golden parachute payments, and improve compensation committee independence.
If enacted, this bill will impose the following Say-on-Pay standards:
Annual non-binding shareholder approval of executive compensation
Disclosure (in simple tabular format) of compensation to principal executives relating to corporate transactions as well as the aggregate total for such compensation
Separate non-binding shareholder approval of disclosed compensation to principal executives related to corporate transactions
Compensation Committee Independence
In addition, it includes the following requirements to facilitate compensation committee independence:
In order to be considered independent, members of the compensation committee may not receive any compensatory fees from the company and cannot be affiliated with the company in any other way.
Companies must allow compensation committees to engage independent compensation consultants and legal counsel as well as provide funding to do so.
In their proxies, companies must disclose whether or not their compensation committees engaged the services of a compensation consultant and if not, then provide an explanation.
Further Restrictions for Financial Institutions
Additionally, the House bill would give regulators the authority to prohibit any compensation arrangement that encourages “inappropriate risks” by financial institutions which could have “serious adverse effects on economic conditions or financial stability”. Since the bill only instructs Federal regulators to come up with appropriate legislation to prohibit this type of compensation, it is not yet clear how it will be defined or what penalties may be imposed. It does reinforce that the Administration clearly feels that the compensation structures within financial institutions were at least partially to blame for the economic crisis. Although this is a small part of the bill, I think it’s worth keeping an eye on. If financial institutions are ultimately subject to this type of scrutiny, then all public companies should take note and consider keeping their own compensation policies within the guidelines set for financial institutions and banks.
One day after Canada’s Manulife Financial Corporation made its announcement to give shareholders a non-binding vote on the compensation structure for top executives, outgoing Manulife CEO Domonic D’Alessandro put his own compensation on the line by saying he would place share performance requirements on his restricted share units that are set to vest in 2011 (see “Manulife CEO bows to critics” from Globe and Mail). D’Alessandro said he was surprised that there was such bad press over the grant (estimated at a $10 million value), which was part of his compensation for the 18 weeks he will work in 2009. At a time when stock prices are down, as is public opinion of company executives, most executive compensation programs are under scrutiny. Even given the public pressure, the voluntary gesture by D’Alessandro sets him apart.
Shareholders, workers, and government agencies are clamoring for ways to ensure that executive compensation provides appropriate incentive for executives to make strong decisions for the company’s growth. The SEC is working to give shareholders access to their company’s proxy statement (see Commissioner Aguilar’s Feb. 6th remarks) as well as considering additional disclosures detailing not only company decisions on leadership structure, but also how the company’s “compensation structures and practices drive an executive’s risk-taking” (See Chairman Schapiro’s April 6th Address to the Council of Institutional Investors). Proxy access and enhanced disclosures may mean an invigorated push for “say on pay” policies similar the one announced by Manulife.
In April of 2007, the House passed H.R. 1257, which would have required companies to adopt a policy for non-binding “say on pay” shareholder votes. The bill stirred up talk about implementing these policies, but was never put to vote in the Senate. It looks like the current environment in the U.S. is forcing a closer look at “say on pay.” Already, banks participating in the TARP are required to institute “say on pay” practices. Even companies not impacted by the TARP are coming out in record numbers with shareholder votes on non-binding “say on pay” policies. According to the New York Law Journal article, “‘Say-on-Pay’: Linking Executive Pay to Performance” there were only seven such proposals put to vote in 2006, with a sharp increase in 2007 in conjunction with the House’s “say on pay” bill to 51 proposals (only 3 of which were approved). Last year, there was a small increase to 76 proposals (9 of which were approved). This year is already looking to be a much bigger year for “say on pay.” Social Investment Forum published a list of 85 companies that were prepared to put “say on pay” policies to vote by the end of March 2009 alone!
The U.S. isn’t the first on board with “say on pay.” In 2002, the UK became the first country to enact legislation requiring executive compensation to be put to a non-binding shareholder vote. Australia also requires a non-binding vote. The Netherlands, Sweden, Norway and Spain all go one step further to require a binding shareholder vote. France is set to adopt a binding vote requirement in 2009, and the Canadian Coalition for Good Governance has come out in favor of “say on pay.”
There is still much debate over whether or not “say on pay” is an effective way to control the risk-taking of company executives. It is clear, however, that providing shareholders more insight into pay practices and giving them a forum to voice their opinion on those practices is something that companies will need to address in 2009.
Speaking of our Conference this year, tomorrow is your last chance to take advantage of our unprecedented early bird rate. Register now, and pay just half the regular registration fee! Don’t count on this deal being extended past the 24th.