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The significant stock price declines of many companies over the past few months have raised the question of whether a company’s traditional approach to impending equity awards should be revised. The first widescale evidence of companies’ responses to this dynamic is unfolding in the context of 2020 director equity awards. This Client Alert analyzes the equity grant practices of 109 S&P 500 companies holding their annual meetings between April 1, 2020 and May 1, 2020 to identify trends in director equity grant policies resulting from the market impact of COVID-19.
Click here to download the Client Alert in PDF. Do you think the effect of COVID-19 has destroyed your company’s 2020 bonus plan? Many companies are taking a “wait and see” approach to how they will ultimately evaluate the impact of the pandemic on incentive plan performance goals. When the time is right, that assessment is likely to include the application of backward-looking discretion, informed by a comprehensive review of a variety of quantitative and qualitative factors. However, many companies will likely be uncomfortable with both the ambiguity of an undefined and arbitrary “discretionary” review process, and the well-established negative connotations associated with the exercise of discretion in setting pay. As a result, many companies will be looking for well-reasoned, easily articulated approaches to applying discretion. This Client Alert offers one example of the analytical approach that companies may consider in evaluating 2020 performance while maintaining pre-COVID-19 performance frameworks.
While it is safe to say every economic crisis is different, it does not seem fair to compare this crisis to any other. The global impact of the COVID-19 pandemic is unprecedented in modern times. In turn, companies are responding with unprecedented actions. This Client Alert describes how the repercussions of COVID-19 are impacting pay programs, based on data gathered from public filings as of April 1, 2020. We will continue to update this data throughout the pandemic as companies respond, at https://www.exqty.com/newsroom/covid-19-impact-on-pay-summary-statistics.
Click here to download this Client Alert in PDF Recently, both Glass Lewis and ISS issued their U.S. policy updates for the 2020 proxy season. None of the updates are significant in and of themselves but are likely to impact a select group of companies that have not yet acted with respect to current corporate governance best practices.
This Client Alert looks at both the Glass Lewis and ISS updates as well as ISS' preliminary compensation FAQs. Click Here to download the Client Alert in PDF. On November 5, 2019, the SEC met and issued two sets of proposed changes to existing rules. One impacts proxy advisors (known in SEC-speak as "proxy voting advice businesses"), such as Institutional Shareholder Services, Inc. and Glass, Lewis & Co., and the other proposed rule impacts the requirements for shareholders to submit proposals.
This Client Alert summarizes these proposed rule changes. Click here to download this Client Alert. On August 21, 2019, the Securities and Exchange Commission (SEC) issued guidance to proxy advisors regarding the applicability of the proxy rules to proxy voting advice. The SEC also issued separate guidance to investment advisers regarding their proxy voting responsibilities. Combined, this guidance likely will impact both proxy advisors and how investment advisers handle proxy voting, which, in turn, could significantly change the proxy voting landscape for public companies.
This Client Alert reviews this SEC guidance as well as some of the potential impacts. Click here to download this Client Alert In December 2018, ISS released two documents covering frequently asked questions (FAQs) on final U.S. Compensation Policies and U.S. Equity Compensation Plans. The FAQs on Equity Compensation Plans also contained the ISS burn rate benchmarks applicable to meetings on or after February 1, 2019. This Client Alert reviews the changes in the FAQs and includes the 2019 ISS burn rate benchmarks.
Click Here to download the Client Alert (PDF) On November 19, 2018, ISS released its policy updates for the 2019 proxy season. Then on November 21, 2018, ISS issued a set of preliminary FAQs on Compensation Policies for 2019. These policy updates and FAQs will apply to shareholder meetings on and after February 1, 2019.
This Client Alert examines the compensation-related changes to ISS policies for 2019 as well as the preliminary Compensation FAQs. Click Here to Download the PDF of this Client Alert. On November 21, 2017, ISS released a set of preliminary U.S. Compensation FAQs that make some significant changes to its Quantitative Pay-for-Performance (P4P) tests and its Equity Plan Scorecard (EPSC) Policy. While several of the proposed changes are significant, they were not treated as "policy changes" and released with ISS's policy updates for 2018.
These preliminary FAQs represent only the most common questions ISS received, and the final, comprehensive FAQs could alter these FAQs and contain changes to other ISS U.S. Compensation policies. Exequity's Client Alert examines these preliminary FAQs and the changes they make to the Quantitative P4P tests and EPSC Policy. Download Client Alert (PDF) On November 16, 2017, ISS released its updated policies for 2018. The updated policies apply to shareholder meetings on and after February 1, 2018. Exequity's Client Alert examines the United States policy updates focused on compensation matters.
Download Client Alert (PDF) GOP Tax Proposal Eviscerates Current Executive Compensation Designs and Practices—Perhaps?11/10/2017
On November 2, 2017, the House Ways and Means Committee released the GOP's Tax Proposal, also known as the Tax Cuts and Jobs Act and the potential harbinger of death for many current executive compensation programs. The Tax Proposal has already been amended by the Chairman of the House of Representatives' Ways and Means Committee, and is likely to undergo further changes as it winds its way through Congress. Also, the Senate released a summary of its plan late on November 9 and reconciliation between the House and Senate bills will need to occur. President Trump wants this signed into law by Christmas, so there is a lot to be done in a very short period of time. Thus, there could be many changes between now and then, including the possibility of no bill.
This Client Alert details the "worst-case scenario" key provisions that impact executive compensation directly and also discusses the immediate issues companies need to think through so they at least have some chance to take action before December 31, 2017 if they want to try and address some of the potential issues that this Tax Proposal would raise if it makes it into law in its current form before the end of the year. Download Client Alert (PDF) On September 21, 2017, the SEC released several items providing additional guidance regarding CEO Pay Ratio. The new guidance took the form of an SEC Release, guidance from the Division of Corporation Finance, and new, modified and withdrawn Compliance and Disclosure Interpretations. The Exequity Client Alert reviews all of this new guidance.
Download Client Alert [PDF] This Client Alert provides information about the peer group submission windows of ISS and Equilar (for Glass Lewis) for shareholder meetings during the first half of 2017. Links to each firm's website for submitting peer group changes for setting 2016 compensation that will be disclosed in a company's next proxy statement are provided. ISS's peer group submission window runs through 8 p.m. Eastern on December 9, 2016 and Equilar's window runs through December 31, 2016.
Download Client Alert (PDF) On June 22, 2016, the Treasury Department and the Internal Revenue Service issued new proposed regulations under Section 409A as well as withdrew certain portions of previously issued proposed regulations under Section 409A. This Client Alert summarizes the key proposed changes and clarifications under these new proposed regulations.
Download Client Alert (PDF) On April 21, 2016, the National Credit Union Administration (NCUA) issued new proposed rules governing incentive compensation arrangements for financial institutions.1 The U.S. Securities and Exchange Commission (SEC) issued its version of these proposed rules on May 6, 2016 (Proposed Rule).2 The Office of the Comptroller of the Currency, Treasury (OCC), Board of Governors of the Federal Reserve System (Board), Federal Deposit Insurance Corporation (FDIC), and the Federal Housing Finance Agency (FHFA) are all expected to issue similar rules shortly. These proposed rules are designed to implement Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). These proposed rules are revisions of the proposed rules released by all of the above agencies in 2011. This Client Alert looks at the new proposed rules.
Download Client Alert (PDF) This Client Alert examines the accounting changes wrought by Accounting Standards Update (ASU) No. 2016-09 to Accounting Standards Codification Topic 718, Compensation-Stock Compensation, including a change to the share withholding and forfeiture requirements.
Download Client Alert (PDF) This Client Alert looks at the policy updates from Institutional Shareholder Services (ISS) and Class, Lewis & Co., LLC that involve compensation and directors. The Appendix of this Alert also includes the ISS 2016 Burn Rate Benchmarks.
Download Client Alert (PDF) On April 29, 2015, the U.S. Securities and Exchange Commission (SEC) approved the issuance of proposed rules to implement Section 953(a) of the Dodd-Frank Act regarding the disclosure of pay versus performance. This Client Alert is a follow-up to our initial Client Alert (4/29/2015) on these proposed rules and takes a closer look at the proposed rules based on the proposing SEC Release.
Download Client Alert (PDF) On April 29, 2015, the U.S. Securities and Exchange Commission (SEC) met and approved the issuance of proposed rules to implement Section 953(a) of the Dodd-Frank Act regarding the disclosure of pay versus performance. This Client Alert looks at the proposed rules based on an SEC Fact Sheet that was prepared for the meeting.
Download Client Alert (PDF) On March 31, 2015, the Internal Revenue Service (IRS) published final regulations under Section 162(m) of the Internal Revenue Code. The IRS indicated that the regulations are not intended to embody substantive changes, but rather clarification of certain aspects of the application of Section 162(m).
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