Corporate governance watch: vote failures signal investor dissatisfaction with executive pay
NEW YORK, May 10 (Business Law Currents) – Stockholders are making their discontent heard through say-on-pay votes that have not been flattering to executives. So far this year, multiple companies have outright failed these votes and even more have not been able to reach the 70 percent approval threshold. In light of Institutional Shareholder Services’ (ISS) 2012 Corporate Governance Policy Updates, evaluations of company pay policies are in line for even greater scrutiny.
According to ISS, a majority vote that does not reach at least a 70 percent approval rate is considered as a failure. A simple majority alone is no longer deemed a mandate of a board’s policies, and any approval level below 70 percent is now perceived as a serious exhibition of shareholder dissatisfaction. (more…)
Corporate governance: SEC, shareholder activism driving enhanced director disclosure
NEW YORK, Feb. 17 (Business Law Currents) – With a slew of Dodd-Frank and SEC driven regulations headlining the 2012 proxy season, enhanced director disclosure will be a prominent issue as investors demand heightened corporate accountability and broader levels of transparency. Rules put in place a couple years ago on compensation policies, risk incentivizing, director/nominee disclosure, board structure and oversight have now had the time to incubate sufficiently for companies to respond in a serious manner.
The Main Street versus Wall Street debate and the ensuing Occupy Wall Street movements have done much to expand public angst from mere disgruntlement with corporate America to even more emphasis on corporate governance in general. The public battle is now being waged increasingly on the battlefield of executive compensation, and as a consequence, on director disclosure. (more…)
The chair of the UK high pay commission gives her analysis of executive pay in the UK:
http://nutmeg.co.uk/blog/56/the-truth-ab out-executive-pay
Corporate Governance: proxy advisory guidelines and the shifting landscape of benchmarking executive compensation
By Alex Lee
NEW YORK, Jan. 30 (Business Law Currents) – Last year’s introduction of say-on-pay regulations via Dodd-Frank helped to arm shareholders with the capacity to disapprove compensation policies, but the SEC’s evolving compensation disclosure regulations and recent updates from proxy advisory firms’ guidelines indicate that executive compensation remains a key issue. While the post-Lehman headlines of public outrage and calls for legislative scrutiny over executive compensation may have waned, now more than ever, companies need to exercise great care when considering executive compensation policies.
Boards are stuck between a rock and a hard place. On one hand, they must recruit, retain, incentivize, and properly compensate prized executives. On the other, the must deal with a growing public animosity towards excessive executive compensation and shareholder unrest, especially in periods where companies are not performing optimally. (more…)
New Canadian compensation rules make work for issuers in coming proxy season
By John Mackie
Aug. 16 (Business Law Currents) With the recent announcement by the Canadian Securities Administrators (CSA) that changes in executive disclosure requirements will apply for financial years ending on or after October 31, Canadian issuers may want to do some advance planning in order to avoid last minute scrambling in the New Year.
The proposed amendments to Form 51-102F6 – Statement of Executive Compensation range from simple drafting changes and clarifications to new substantive requirements, and reflect both the proposal issued last November and the comments received in response.
Perhaps the biggest changes contemplated by the new form are the obligation to disclose an issuer’s risk management practices vis-à-vis compensation policies and practices, and the emphasis placed on discussions of performance targets. For issuers, the former may require stepping onto unfamiliar ground, and the latter may test their willingness to share financial planning data with the street at large.
As regards risk management practices, the new form will require each issuer to disclose whether or not its board of directors, or a committee of the board, considered the risks associated with the company’s compensation policies and practices. If so, the issuer is required to provide additional disclosures regarding mitigation practices and risks considered “reasonably likely to have a material adverse effect on the company.”
The current practice on disclosing risk management practices in this area is mixed, with many issuers providing no information, or little information – quite possibly because many boards may not have formally turned their minds to the matter. Many companies continue to focus on the central purpose of compensation plans – to attract and retain qualified individuals at a competitive cost, and to ensure that they are motivated to create shareholder value. Other issuers, such as Toronto’s Just Energy, which sells natural gas and electricity to residential and commercial customers, have at least begun the process of assessing compensation-related risk.
In Just Energy’s most recent proxy circular, the company notes that, in the previous year, the Compensation Committee of the Board implemented formal processes for ensuring that risk is appropriately considered in the company’s compensation plans. On the issue of mitigation, the company comments that:
U.S. corporate shareholders gain more (frequent) say-on-pay (Westlaw Business)
By Erik Krusch
Feb. 2 (Westlaw Business) – Dodd-Frank and SEC-bolstered shareholders officially have a say on company pay. The SEC recently adopted rules requiring companies to hold say-on-pay, say-on-pay frequency, and golden parachute approval votes. Companies from Deere & Co. and Apple to Johnson Controls and Monsanto’s proxies are drafted, filed and poised to comply with the new rules. Companies and shareholders, however, still have plenty to hash out around the mechanics of executive compensation votes this proxy season. (more…)
US SEC cracks down on how companies are governed
Rachelle Younglai
WASHINGTON, Dec 16 (Reuters) – U.S. companies will have to disclose their compensation practices and board members’ qualifications under rules adopted by the Securities and Exchange Commission on Wednesday.
The SEC voted 4-1 to change how companies govern themselves and provide more information to investors, who have criticized lax boards and lavish executive compensation.
“Good corporate governance is a system in which those who manage a company … are effectively held accountable for their decisions and performance,” SEC Chairman Mary Schapiro said at an open meeting.
Amid the worst financial crisis in decades, shareholders have voiced frustration over how companies performed and executives are paid.
Shareholders have taken a more active role in how their companies are governed, pushing for say on pay and seeking an easier way to influence the composition of the corporate board.
Under the SEC’s new rules, companies would be required to tell shareholders more about pay policies, board members’ qualifications and why they chose a certain leadership structure.
US pay czar caps more salaries at bailed out firms
By Karey Wutkowski and Steve Eder
WASHINGTON/NEW YORK, Dec 11 (Reuters) – The U.S. pay czar on Friday expanded a crackdown on pay packages at four companies rescued with taxpayer money, limiting most cash salaries at $500,000 for a second tier of top earners.
The Treasury Department’s Kenneth Feinberg issued the new limits amid outcries from some companies on a government lifeline that they cannot retain or attract key employees, sending the firms racing for a bailout exit.
He set the compensation structures for the 26th through 100th highest-paid employees at four firms: Citigroup Inc, American International Group, General Motors Co, and GMAC.
Chrysler and Chrysler Financial were exempted during this round of rulings because total pay for their second-tier executives is already under $500,000.
Feinberg, a Washington lawyer appointed by President Barack Obama in June after public anger exploded over high pay at bailout firms, said he granted less than a dozen special exemptions from the cash salary cap.
“In a very few cases, we did recognize there was an individual who, based on company input, was deemed to be truly essential,” he told reporters.
Goldman top executives to take bonuses in stock
By Steve Eder
NEW YORK, Dec 10 (Reuters) – Goldman Sachs Group Inc plans to pay top managers their 2009 bonuses in stock, rather than cash, as it seeks to deflect outrage over a near-record pay haul months after it repaid billions of dollars in taxpayer aid.
The decision to pay top managers in stock that cannot be sold for five years puts Goldman at the forefront of the push to align Wall Street pay with long-term performance. Still, the firm’s total compensation is on pace to top $20 billion this year.
That figure has put Goldman in the crosshairs of an international debate on pay.
“I think Wall Street is well aware of the broad direction they need to move,” said Douglas Elliott, a former JPMorgan investment banker now with the Brookings Institution. “The devil’s in the details.”
Goldman’s plan, announced Thursday, applies to its 30-person management committee, an elite group that includes Chief Executive Lloyd Blankfein as well as some of the firm’s most senior risk-takers and managers, including the heads of sales and trading operations.
Those managers will receive all of their discretionary compensation in “shares at risk” — stock that must be held for five years. They will also face a stricter clawback provision that allows the company to recoup pay should employees later be found to have engaged in improper risk-taking.
U.S. pay czar vows to rework 2010 AIG bonuses
By David Lawder WASHINGTON, Oct 28 (Reuters) – Renegotiating bonuses to American International Group employees is a “top priority,” the Obama administration’s pay czar said on Wednesday, adding he believes he can do so without losing key employees.
Bank of America’s Ken Lewis to receive no pay for 2009
CHARLOTTE, Oct 15 (Reuters) – Bank of America Corp (BAC.N) Chief Executive Kenneth Lewis will receive no pay or benefits for his last year of work at the company.
-
Author Profile
-
