February 22, 2007

Aflac to Put Executive Compensation to an Advisory Vote in ’09

After facing a shareholder proposal on the topic, Aflac has agreed to become the first major company in the US to give shareholders an advisory vote on executive compensation packages beginning in 2009 (the first year the company will have three years of comp data under the SEC’s new exec comp rules). Boston Common Asset Management had submitted the proposal last year. Here is a related Washington Post article.

At least 60 companies have shareholder proposals regarding “say-on-pay” for their shareholder meetings this year, up from seven last year. As Pat McGurn of ISS noted during our recent webcast on the proxy season (here is the transcript), these proposals are expected to average a majority level of support from shareholders this year.

Rep. Barney Frank (D-Mass.), Chairman of the House Committee on Financial Services, has been pushing a bill that would allow for advisory votes on executive compensation and he intends to hold a hearing on March 8th regarding strengthening the role of shareholders in setting executive compensation. Advisory shareholder votes on executive compensation are currently required in the United Kingdom, Australia, Sweden and the Netherlands.

More on Delaware Chancery Court’s Backdating Decisions

A few weeks back, I blogged about Delaware Chancellor Chandler two opinions in declining to dismiss complaints alleging backdating of options (in Ryan v. Gifford) and spring-loading of option grants (in Tyson Foods). In this podcast, Megan McIntyre of Grant & Eisenhofer (the firm that is bringing some of these backdating suits) provides some insight into these decisions, including:

– What did Chancellor Chandler hold in these cases?
– What does this mean for companies with backdating issues?
– Do you think these two opinions portend that more executive compensation related lawsuits will be filed in Delaware?

Survey Results: Stock Option Grant Procedures

The NASPP recently wrapped up a very popular survey regarding option grant procedures. Below is an excerpt from the survey results, along with the other questions posed to NASPP members:

1. Who approves option grants to non-executives?

– Board of Directors – 18.1%
– Compensation Committee – 47.6%
– Committee of officers – 6.0%
– CEO – 20.5%
– CFO – 0%
– Other – 7.8%

2. When are grants to new hires (non-executives) approved?

– Once a week (at the same time every week) – 3.6%
– Once a month (at the same time every month) – 23.1%
– Once a quarter (at the same time every quarter) – 10.9%
– After earnings are released – 5.3%
– Before earnings are released – 1.0%
– Only during open window periods – 4.9%
– When the board meets – 13.0%
– When the compensation committee meets – 28.9%
– Other – 16.4%
– No set scheduled – 16.8%

3. When are other (not hire-related) grants to non-executives approved?

4. How have you changed (or are planning to change) your grant procedures in light of the back-dating scandal?

5. If you conducted an investigation of historical grant dates, what was the extent of your investigation?

6. For new-hire grants (where the grant date is not the hire date), what date is vesting based on?

7. Did your external auditors apply additional procedures to validate the income statement impact of option grants?