April 30, 2015

SEC Proposes P4P Rules: Our Upcoming Webcast

Yesterday, as noted in this press release, the SEC proposed pay-for-performance rules as required by Section 953(a) of Dodd-Frank. The vote was 3-2, with Commissioners Gallagher & Piwowar dissenting. Here’s statements by Chair White and Commissioner Stein.

The 137-page proposing release is posted – and we’re posting memos in our “Pay-for-Performance” Practice Area on And I have just calendared this webcast – “P4P: What Now After the SEC’s Proposal” – for Monday, May 11th, featuring Mark Borges, Mike Kesner, Dave Lynn & Ron Mueller!

Here’s coverage in this “Borges blog” and this Cooley blog – and here’s some bullets from “Melbinger’s Compensation Blog“:

– Proposed rules rely on Total Shareholder Return (TSR) as the basis for reporting the relationship between executive compensation and the company’s financial performance.
– Based on the explicit reference to “actually paid” in Section 14(i), the proposed rules exclude unvested stock grants and options, thus continuing the trend to reporting realized pay. Executive compensation professionals will need to sharpen their pencils to explain the relationship between these figures and those shown in the Summary Compensation Table.
– For equity-based compensation, companies would use the fair market value on date of vesting, rather than estimated grant date fair market value, as used in the SCT.
– Proposed rules also would require the reporting and comparison of cumulative TSR for last 5 fiscal years (with a description of the calculations).
– Proposed rules would require a comparison of the company’s TSR against that of a selected peer group.
– Proposed rules would require separate reporting for the CEO and the others NEOs – allowing use of an average figure for the other NEOs.
– Proposed rules would require the use of an interactive data format (ie. XBRL)
– Compensation actually paid would not include the actuarial value of pension benefits not earned during the applicable year.
– Proposed rules would phase-in the number of years covered. For example, in the first year for which the requirements are applicable for larger companies, disclosure would be required for the last 3 years only – with it rising eventually to five years worth of information eventually. For smaller reporting companies, they would start with two years worth of information – eventually moving to three years worth.
– Proposed rules exclude foreign private issuers and emerging growth companies, but not smaller reporting companies. However, the proposed rules would phase in the reporting requirements for smaller companies, require only three years of cumulative reporting, and not require reporting amounts attributable to pensions or a comparison to peer group TSR.

The proposing release will be published in the Federal Register within the next week, followed by a 60-day comment period (here’s our checklist to guide you in drafting comments to the SEC on a rulemaking). Depending on the nature and extent of the comments received, it’s possible that the SEC could adopt final rules sometime in the Fall. Assuming everything goes smoothly, it’s possible that the rules could be in effect next year. As we all know, however, things rarely go as planned…

May-June Issue: Deal Lawyers Print Newsletter

This May-June Issue of the Deal Lawyers print newsletter includes:

– M&A Antitrust Playbook for In-House Counsel
– Managing Regulatory Risk in Bank M&A
– Rep & Warranty Insurance: Negotiating Tips & Market Trends
– European M&A Dos & Don’ts for Non-European Buyers
– Break-Up Fees in Delaware: A Delicate Balance for All Parties

If you’re not yet a subscriber, try a no-risk trial to get a non-blurred version of this issue on a complimentary basis.

Cap’n Cashbags: Just a Lil Case of Peer Envy

As noted in this 20-second video, Cap’n Cashbags is keeping a close eye on the pay levels of the other CEOs in his industry (stay til the end for the blooper!):

– Broc Romanek