As I’m sure my readers know, the Dodd-Frank Act requires public companies to allow shareholders to vote on their executive compensation programs beginning next year. On October 18, the SEC proposed regulations governing how these votes will work, bringing us one step close to the inevitable.
Say-on-Pay Regs Proposed The regulations require three non-binding votes:
Say-on-Pay: Shareholders must be permitted to vote on executive compensation every one, two, or three years. The first vote must be held at the company’s first annual meeting on or after January 21, 2011. Shareholders will be voting on the compensation paid to executives as disclosed in the proxy statement.
Say-When-on-Pay: Shareholders must also be permitted to vote on how frequently the company holds a Say-on-Pay vote. This vote must occur at least every six years, with the first vote at the company’s first annual meeting on or after January 21, 2011.
Say-on-Parachutes: Shareholders must be permitted to vote on golden parachute arrangements. If these arrangements have not previously been voted on, this vote must be included in the proxy statement relating to the merger (or any similar transaction, such as a sale of the company’s assets) for which the compensation will be paid. In connection with this, the SEC is requiring enhanced tabular disclosure of parachute payments in proxy statements for mergers and similar transactions.
Effective Date
The Say-on-Pay and Say-When-on-Pay votes must be included in the proxy for the first annual meeting on or after January 21, 2011, even if the SEC has not finalized these regulations by then. The Say-on-Parachutes vote is not required until the regulations are finalized.
Non-Binding with a Kick
All of the votes are non-binding, which means the company doesn’t have to abide by them. For the Say-on-Pay vote, however, the proposed regulations require companies to discuss in the CD&A how the vote has been considered in setting executive pay. Likewise, for the Say-When-on-Pay vote, companies must disclose in the 10-Q following the vote whether they intend to comply with it. Woe to those companies that don’t choose to comply; shareholders can then introduce a proposal regarding the frequency of Say-on-Pay votes in the next year’s proxy statement.
More Information
We’ve posted an alert on the proposed regs that includes the memos we are receiving from law firms and compensation consultants; look for even more memos to be posted in the next few days. Check out the excellent summaries by Maslon Edelman Borman & Brand and Morrison & Foerster (co-authored by CompensationStandards.com’s David Lynn).
Conference Audio Available Are you ready for Say-on-Pay? Make sure with the many sessions on Say-on-Pay offered at this year’s NASPP Conference. All of the sessions have been recorded and can be downloaded in MP3 format. Purchase just the session(s) you want or save by purchasing a package of sessions.
Free Conference Session Audio If You Renew by Dec 31 All NASPP memberships expire on a calendar-year basis. Renew your membership by Dec 31 and you’ll qualify to receive the audio for one NASPP Conference session for free!
Join Now and Get Three Months Free and Free Conference Session Audio! If you aren’t currently an NASPP member, now is the time to become one! Join the NASPP for 2011 and you’ll get the rest of 2010 for free. If that’s not enough, you’ll also get the audio for one NASPP Conference session for free. Tell all your friends!
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.
This week marked the annual changing of my EDGAR password. I rarely use EDGAR these days, so I have an appointment in my Outlook calendar to remind me to do this every year. Even though, in the event that my password expired, I could easily generate a new password using the EDGAR Filer Management website and my EDGAR passphrase, I prefer to be proactive about these things. Since the topic of EDGAR access codes is fresh in my mind, I thought it might be helpful to review the various codes for our blog readers.
EDGAR Access Codes Demystified Access to the EDGAR system requires five codes (the SEC takes security seriously–that’s more codes than my online bank and credit card accounts require):
Central Index Key (CIK): Anyone using EDGAR and any entity for which filings are submitted is assigned a CIK and keeps that same CIK for his/her/its entire existence. The CIK identifies filers and users in the system. Even if an insider moves to a new company or is a insider in multiple companies simultaneously, he/she only has one CIK. This allows investors to query all of an insider’s filings using one search, even if the insider has changed companies or changed names (e.g., in the case of marriage). CIKs are public–you can find out any company’s or insider’s CIK just by querying EDGAR.
CIK Confirmation Code (CCC): The CCC is similar to a password and is used to validate EDGAR filings. CCCs should be known only to the insider and those making filings on his/her behalf. CCCs don’t expire and generally don’t change, even when an insider moves from one company to another, but you can and should change a CCC if you think it has been compromised (see my Sept 15, 2009 blog entry “Fraudulent Section 16 Filings“).
Password: The EDGAR password is necessary only to log onto the EDGAR website. It isn’t included in the EDGAR filing and it isn’t necessary for an insider’s password to be current for you to submit filings on his/her behalf. EDGAR passwords have to be changed every 12 months or they expire (but, see my March 10, 2009 blog entry, “EDGAR Passwords: One Less Thing To Do,” about how you can avoid updating all your insiders’ password if you have your own EDGAR login).
Password Maintenance Authorization Code (PMAC): This code must be entered to change an EDGAR password.
Passphrase: This code is used to generate new EDGAR codes (except for the CIK). When a CIK is first assigned, the passphrase is used to generate the rest of the required EDGAR codes. On an ongoing basis, the passphrase can be used to generate new codes when necessary. For example, if I had forgotten to renew my password before it expired, I could use my passphrase to generate a new password (along with the other EDGAR access codes). Passphrases do not need to be updated, but if it necessary to generate a new one (e.g., if you’ve forgotten it or if it has been compromised), you can do so via the EDGAR Filer Management website.
Less Than Two Weeks Left Until the NASPP Conference Catch up with all the latest Section 16 and Rule 144 developments at the 18th Annual NASPP Conference. The Conference is less than two weeks away and the Conference hotel has already sold out–register today to make sure you can attend.
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.
Form 4 filings can be complex. Ideally, your company has a process in place that is designed to mitigate the risk of erroneous data ending up on a Form 4. However, if an error is discovered, it may be necessary to amend the original filing with a footnote explaining the reason for the amendment. When filing an amended Form 4, there is no need to restate the original Form 4 in its entirety. Rather, the amended Form 4 can include only the line items that are being updated. Additionally, there is no need to amend inaccurate Form 4 filings resulting from the original error that took place between the original erroneous filing and the amendment. Upon discovery of a filing error, the company will need to determine if it is something that must be disclosed in the proxy statement per the requirements of Item 405 (which requires disclosure of late reports and known failures to file required reports).
This week, I’d like to address a few common errors. Obviously, this blog entry shouldn’t be taken as advice. Only your legal counsel (or the SEC) can confirm the appropriate action that you should take when it comes to specific erroneous data in a Form 4 filing. If you subscribe to Section16.net or the Romeo and Dye Section 16 Treatise and Reporting Guide, you can find additional common errors in form filings along with fantastic guidance on correct reporting and best practices.
Duplicate Grant
If a grant is inadvertently reported twice, removing the duplicate can be done by filing an amended Form 4 with the correct details of the grant along with a footnote clarifying that the grant was originally reported twice. There is no need to show a “disposition” of the erroneous duplicate.
Incorrect Grant Type
If a Form 4 is filed with an incorrect title of derivative security listed in Column 1 of Table II, the correction can be made by filing an amended Form 4 with the correct grant type in Column 1 and a footnote to explain the discrepancy. This is not the same as an amendment to an existing grant, which is considered the disposition of the original grant and acquisition of a new grant. In the case of an incorrect ISO/NQ split, as long as all the other details on the grants (grant date, exercise price, etc.) are the same, then both the ISO portion of the grant and the NQ portion of the grant can be reported on the same line and a correction to share allocation between the two may not require an amendment.
Incorrect Securities Beneficially Owned
If there was an error in the number of shares reported in Column 5 of Table I or Column 9 of Table II, the amended filing is pretty straight forward as long as the total holdings are not incorrect because of an error in or omission of an actual transaction. An amendment with the correct holdings can be filed with a footnote explaining the correction. Likewise, if holdings are incorrectly reported as directly or indirectly held, the same amendment filing would apply. Even if the issue is simply that direct holdings are reported as indirect (or vice versa), it may be best to file an amended Form 4 to show both line items with the correct number of shares. It’s also important to note that the number of shares reported in Column 9 of Table II should only reflect the total of the same class as the derivative security being reported on that line, not the total number of all derivative securities held by the filer.
Immaterial Details
Some errors may not require an amended Form 4 at all because they are not material enough to warrant an amendment. Of course, you’ll want to work closely with your legal counsel to determine the most appropriate course of action in each case. Examples of some details that most likely would not require an amended filing are using the incorrect title, including an incorrect mailing address, failing to disclose that a transaction took place under a Rule 10b5-1 Plan, or accidentally putting the wrong vesting schedule in a footnote.
Section 16 Updates
At the beginning of each year, Alan Dye partners with the NASPP to provide our members with valuable Section 16 updates. NASPP members can access our archive recordings of Section 16 update webcasts in the NASPP Webcast Archive.
Ask the Experts
Speaking of fantastic NASPP programs, mark your calendar for June 29th at 4:00 EST. We will be airing our Latest “Ask the Experts” webcast, Estimating, Applying and Reconciling Forfeiture Rates! If you have a specific issue you would like to have our experts address, it’s not too late to submit your question to the panel.
The SEC released a Statement last Wednesday addressing many of the concerns raised during the comments period for the proposed Roadmap for transitioning U.S. issuers to a high-quality global accounting standard, presumably IFRS. Although the SEC confirmed its commitment to an impending convergence and adoption of a single set of global accounting standards, the SEC really appears to have taken a serious look at the potential impediments to adopting IFRS as a single global accounting standard.
More Time
In the 2008 proposed Roadmap, the SEC set 2011 as the date when a determination will be made on the viability of adopting IFRS for U.S. issuers; and last week’s Statement keeps 2011 as the target date for that determination. What has changed is that the original Roadmap would have required, should the 2011 determination be made if favor of transition, the adoption of IFRS starting in 2014. This date is pushed out to 2015 as the earliest adoption date (pending the determination).
Preparing for a Determination
The milestones set by the proposed Roadmap are still in place as a baseline requirement for the SEC to make its 2011 determination. In addition, the SEC Statement stresses that convergence between FASB and IFRS will be an essential step in preparing for a determination. What this new Statement expands on is additional preparation by way of a Work Plan designed to position the SEC to make a solid determination. This Work Plan clearly reflects the SECs commitment to addressing concerns raised in the comments on the Roadmap. The Work Plan delves into analyzing the viability of IFRS as a high-quality global accounting standard and also evaluating the potential benefits and costs associated with U.S. adoption. Specifically, through the Work Plan, SEC staff will strive to:
Determine if IFRS is sufficiently developed and consistently applied;
Ensure that global accounting standards are independently set and are for the benefit of investors;
Provide investor understanding and education on IFRS;
Examine how a change in accounting standards will impact U.S. regulatory environment;
Determine full impact on issuers (both large and small);
Establish the readiness of U.S. financial statement preparers and auditors to make the conversion to IFRS.
Reactions
Although concerns over the viability of IFRS adoption in the U.S. are still prevalent, there is a general consensus that an international accounting standard is desirable, even inevitable. The Work Plan outlined in the SEC’s Statement was well-received, even if there are still major roadblocks to be overcome. There’s a lot to be done before next year’s determination is made to get not only the SEC, but also U.S. issuers and investors ready!
In a prepared speech, SEC Commissioner Luis A. Aguilar expressed some concerns around IFRS, including potential discretion afforded to financial statement preparers under IFRS, the ability to audit and enforce IFRS-based accounting standards, and whether or not adopting IFRS is ultimately in the best interest of investors.
The AICPA issued a statement supporting the move to a global accounting standard, but also urging the SEC to provide a certain date for IFRS adoption.
In a press release, CAQ Director Cindy Fornelli expressed her support and commitment to work with the SEC on carrying out the Work Plan.
FEI issued a statement applauding the SEC for developing the Work Plan.
More Information on IFRS
Although the SEC isn’t ready to say for certain if IFRS will ultimately be the “high-quality global accounting standard” that both the Roadmap and the Statement call for, it is certain that continued convergence between U.S. GAAP and IFRS will be ongoing. In addition, U.S. companies with overseas subsidiaries may need to adopt IFRS before any general transition, at least for the subsidiary. If you want to learn more about IFRS, check out our recorded webcast, “The Race to IFRS-Don’t be Left Behind”, the “IFRS–A Lesson in Implementation” session materials from our 2009 Conference (under Accounting, Auditing and Controls), and Deloitte’s guide to IFRS posted to our Document Library.
Heading into the new year, many companies will be starting the annual grant process. If your insiders are due for a new grant this year, they may be looking to modify their Rule 10b5-1 Trading Plan or enter into one for the first time. So, now is the time to review your company’s policy and make sure that it’s solid.
Affirmative Defense
Section 10(b) of the Securities Exchange Act of 1934 prohibits the use of any “manipulative and deceptive device” in connection with the purchase or sale of securities. In 2000, the SEC released Rule 10b5-1, clarifying that trading on the basis of material nonpublic information is just such a “device”. Additionally, the Rule states that entering into a trade while aware of material nonpublic information constitutes trading on the basis of that information. Fortunately, paragraph c of Rule 10b5-1 provides an affirmative defense that basically allows an individual to demonstrate that she or he is not trading on the basis of material nonpublic information.
In order to rely on the affirmative defense, an individual must enter into a contract, instruction, or plan to trade at a point in which she or he isn’t in possession of material nonpublic information. And that is the problem. When exactly is an officer of your company not privy to some piece of nonpublic information? When can an insider enter into a Rule 10b5-1 trading plan?
Timing of Plan Creation
In May of last year, the SEC published interpretive guidance on Rule 10b5-1. Question 120.20 really caught my eye. The question is whether or not the Rule 10b5-1 affirmative defense is available if an individual is aware of material nonpublic information at the time the plan is created, but the trade doesn’t take place until that information is made public.
The SEC answered with a single word: no. Just no. What that means is that no length of “cooling off period” is long enough; in order to garner the protection provided by Rule 10b5-1 a person simply must not be in possession of material nonpublic information at the creation of the trading plan.
When is That Even Possible?
So, what does that mean for companies trying to create a solid policy on Rule 10b5-1 trading plans? How is it even possible that insiders can find a period of time when they are not in possession of information that would negate the affirmative defense? To help me with this dilemma, I called on one of our fabulous panelists from the “10b5-1 Plans: Practical Advice and Implementation” session at our 2009 Conference, Michael Andresino of Boston’s Posternak Blankstein & Lund. (If you missed this session, take time to listen to it now!)
First, I still feel very strongly (and Michael agrees) that companies should require at least their Section 16 insiders to trade exclusively through a plan designed to comply with Rule 10b5-1. You have zero chance of relying on the Rule 10b5-1 affirmative defense if there is no plan in place. Second, the most basic precaution to take on the timing of the creation of these plans is to only allow insiders to enter into a plan after the company has made its quarterly financial disclosures; during an open trading window after the quarterly or annual press release (and conference call) is complete. A lot of companies take the position that at that point all material information has been made public.
Material Nonpublic Information
After that, it’s important to keep in mind that it isn’t just any nonpublic information that creates an issue with the Rule 10b5-1 affirmative defense. The problem is with material nonpublic information. It may be difficult to decide what information is material and what is not. An obvious distinction is that if the information could lead to an event that must be disclosed on a Form 8-K, then it’s reasonable to consider that information to be material. For example, if an individual is aware that your company is in the middle of negotiating a merger or acquisition, then it may be inadvisable for that person enter into a trading plan at that point. On the other hand, if the individual is aware of regular ongoing sales deals or the status of the new widget a company is producing that is part of the normal course of business, these pieces of information may not be considered material.
Situations must be considered on a case-by-case basis. Some companies approach this issue by requiring individuals to disclose to the legal department any nonpublic information that they are aware of at the time they enter into a new plan. This allows the legal department to help insiders determine if that information could be considered material before approving the plan.
How Does Your Policy Measure Up?
Does your company’s insider trading policy address Rule 10b5-1 trading plans? If not, now is the perfect time to have that conversation with your legal team. If you do have a policy, check to see what it says about the timing of the creation of new plans. Confirm that the policy contains components that help ensure that the insider may rely on the Rule 10b5-1 affirmative defense and review those components with your legal team to be sure that everyone is still comfortable that they are adequate.
With so many proposed, pending, or newly finalized pieces of legislation right now, I feel a little overwhelmed trying to keep up. Fortunately, we have a couple great resources on our site to help me keep it all straight. First, there is the “Cheat Sheet” provided by OnSecurities.com (posted to the Say on Pay portal). There is also this article by Choate, which has a great chart that details the legislation and which parts of corporate governance it impacts.
Here are a couple of the latest developments, along with a little newsworthy item that caught my eye.
FASB Exposure Draft
As I’m sure you are all aware, the U.S. is moving toward the adoption of IFRS. Nobody is sure when we will adopt IFRS as the U.S. accounting standard, but we do occasionally see signs that progress is being made in that direction. The Exposure Draft issued by FASB on December 17th is a perfect example.
The Exposure Draft is a proposed clarification regarding companies that issue equity awards that are denominated in a foreign currency. If enacted, the amendment in this exposure draft won’t impact very many companies at all. This is because Topic 718 (formerly FAS123R) already addresses the more common situations of companies denominating their equity awards in a foreign currency: using the functional or the payroll currency of the foreign entity. The scenario missing from the current wording in Topic 718 is where a company denominates their equity awards in a currency that is neither the functional nor the payroll currency, but is instead the currency of the market in which a substantial amount of the company’s shares trade. This draft clarifies that such an award would also be considered an equity award, providing that it would otherwise qualify for equity treatment. (For more information, check out our alert.)
What FASB is attempting to do with the clarification offered in this proposed change to Topic 718 is create uniformity with respect to the expensing of certain equity awards. More importantly to me, however, is the fact that FASB specifically addresses how the proposed amendments compare with IFRS. The trouble is that neither Topic 718 nor IFRS currently specifically call out the situations in which this amendment would be applicable, but it is likely that if IFRS were to be updated to include this situation, it would be the same. This is because, as stated in the Exposure Draft, most companies currently reporting under IFRS already expense these awards as equity awards.
Facilitating Shareholder Director Nominations
The SEC recently reopened the comment period for the proposed rule, Facilitating Shareholder Director Nominations. The proposed rule is designed to empower certain shareholders (based on ownership thresholds and minimum holding periods) to influence (presumably to improve) corporate governance by means of introducing both director nominations and proposals to amend director nomination process or disclosure requirements.
Existing comments can be viewed here. One of the concerns being voiced are that the bar for determining which shareholders may submit nominations and proposals is set too low, which could potentially allow short-term investors (like hedge funds) to encourage inappropriate risk-taking. Another concern is the amount of time and energy boards may potentially need to divert from day-to-day business decisions in order to deal with the politicization of board elections.
Although it is unlikely that this rule, if adopted, would impact the daily responsibilities of most stock plan managers, it does highlight SEC efforts to create better corporate governance by giving shareholders more power to influence corporate business strategy. Maybe what it does mean for you stock plan managers out there is that it’s time to renew (or initiate) your relationship with your company’s investor relations group.
FAR Out!
I came across this interesting article in the Hedge Fund Law Report on the merits of granting hedge fund managers appreciation rights that would be similar to a stock appreciation right (although the article compares them to stock options), but track against the increase in the fund’s value.
Two things really struck me about this article. First, it’s encouraging and powerful to keep seeing the conviction that creating an ownership mentality improves the long-term success of a company by aligning employee interests with shareholder interests. Much like the Treasury Special Master’s determinations highlighted the preference of performance-based equity compensation over cash compensation, the idea of granting an appreciation right that pays out with the success of a hedge fund really highlights the importance of appropriate equity compensation as a motivating vehicle.
The second thing that really caught my eye is that the name “Fund Appreciation Right” (FAR) has actually been trademarked by a particular compensation administration company (Optcapital). So, it’s not that other administrators (or funds) can’t issue an equity vehicle that is in the form of an appreciation right; they just can’t call it a FAR. It makes me wonder what our conversations would sound like if someone had trademarked “stock option” or “restricted stock unit”, forcing each company to come up with their own nomenclature!
We have several fantastic webcasts planned between now and the end of April; two in January alone! All our webcasts are a complementary benefit provided to our members. Don’t miss out; renew today.
We all know that the quality of your employee communications program is essential to gaining employee support and enthusiasm for your stock programs. But, sometimes it’s hard to find fresh ideas on exactly how to go about communicating with your employees. You know the general idea; presentations, FAQs, intranet, information packets, e-mails, etc. There are two basic pieces to conquer: what communication methods work best for your employee groups and what content should you provide.
It’s great if you can ramp up your learning curve by taking advantage of others’ experiences. You can do this by seeing how other companies communicate to their employees and by learning what has been effective for them. Unfortunately, because many companies are hesitant to make their employee communications public it can be difficult to find sample communications to compare against your own.
One big exception to this is any program or corporate transaction that involves a Tender Offer (such as options repricings or mergers). Because every communication regarding the transaction must be included as an exhibit in the Schedule TO, you can find great samples on how other companies have approached the communication process. You can search for these filings on the SEC website either by company or by the Form type (“SC TO” for Tender Offers). Even better, you can use the Full Text Advanced Search to drill down on your search criteria. For example, you can use the Boolean phrase search to find the phrase “options exchange” (keep the quotes in there) used in any Form SC TO-C. You can even narrow it down by Standard Industrial Classification (SIC).
You may also choose to search the news first for companies that have filed a Schedule TO with the SEC. For example, Intel’s option exchange progam has been in the news recently. VP and Director of HR, Richard Taylor, has been doing a great job of trying to stay ahead of the rumor mill with informative updates like this one. In this communication, Taylor has taken some of the common questions that he’s received regarding the options exchange program and addressed them publicly (and in several languages). This is a fantastic strategy not only for options exchanges, but for all of your equity compensation programs. The truly advantageous part of finding communications like this for the rest of us is that it provides a window into the types of problems that companies may be encountering. If you see that another company has had to address a particular issue, you can turn around and try to proactively provide information to your employees to squelch that particular issue.
Of course, there are many other types of communication that would be wonderful to have samples of. We do have a variety of sample communications in our Document Library. Remember, though, that sample documents are just that; samples. You can use them to get ideas or to see if other companies are dealing with similar issues, but you should not expect them to be templates that you can just plug your company’s information into and use. I would like to encourage all our members to submit whatever communications materials they can to the Document Library. Sometimes the best resource a stock plan professional has is another stock plan professional!
Also, if you are looking to put some zing into your ESPP communications strategy, don’t miss the Conference Session of the Week from Barbara’s Tuesday entry!
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.