June 5, 2015

SEC Issues New Pay Ratio Analysis (& Our 20% “Executive Pay Conference” Discount Ends Today!)

The SEC is now moving fast on the last of its Dodd-Frank rulemakings! Yesterday, as noted in this press release, it released additional analysis from its “DERA” (former nickname of “RiskFin”) Division related to its pay ratio proposal. Comments on this new analysis are due by July 6th (coincidentally, the same deadline as the P4P proposal). As I blogged yesterday, the SEC has become more cautious during its rulemaking process since a 2011 court decision struck down part of the SEC’s proxy access rule after finding the economic analysis was incomplete – so the practice of releasing additional economic analysis for public comment is becoming fairly common.

In addition to reading this review of the SEC’s new analysis (& this MarketWatch piece), check out my example that helps illustrate the SEC’s new findings:

– If the standard deviation of compensation (meaning the variability among positions) is 55%, and the exclusion of non-US, part time and seasonal jobs results in the elimination of 20% of the workforce from the calculation, the ratio would decrease by 15%

– Thus, a ratio of 300:1 would become 255:1

– If the standard deviation is only 25% – and the exclusion removes 20% of the workforce from the calculation – the impact is only 6.5%, thus the 300:1 ratio might drop to 281:1

Today is the last day left at the reduced rate. The SEC’s new pay-for-performance & hedging proposals – not to mention the coming clawback proposal and final pay ratio rules – are causing a stir – and you should prepare now. These rules will be among many topics that Corp Fin Director Keith Higgins & other experts will be talking to at our popular Conferences — “Tackling Your 2016 Compensation Disclosures” — to be held October 27-28th in San Diego and via Live Nationwide Video Webcast on Act by the end of today, Friday, June 5th for the phased-in rate to get more than 20% off.

The full agendas for the Conferences are posted — and include the following panels:

– Keith Higgins Speaks: The Latest from the SEC
– The SEC’s Pay-for-Performance Proposal: What to Do Now
– Creating Effective Clawbacks (& Disclosures)
– Pledging & Hedging Disclosures
– Pay Ratio: What Now
– Proxy Access: Tackling the Challenges
– Disclosure Effectiveness: What Investors Really Want to See
– Peer Group Disclosures: The In-House Perspective
– The Executive Summary
– The Art of Communication
– Dave & Marty: Smashmouth
– Dealing with the Complexities of Perks
– The Big Kahuna: Your Burning Questions Answered
– The SEC All-Stars: The Bleeding Edge
– The Investors Speak
– Navigating ISS & Glass Lewis
– Hot Topics: 50 Practical Nuggets in 75 Minutes

SEC Considers Updating “Accredited Investor” Definition

You might recall that Dodd-Frank requires that the SEC to review the “accredited investor” definition for natural persons beginning in 2014 and every four years thereafter. As part of its review process, the SEC has received a significant number of recommendations from comment letters and from two SEC advisory committees. While the vast majority of commenters recommended not changing the current definition, others recommended raising the financial thresholds cited in the definition or adjusting them for inflation. Still others offer alternate recommendations, including adding a new category for financial sophistication or allowing a percentage of income or net worth to be used in qualifying private placements. This memo does a great job of summarizing all this activity…

Also check out this Cooley summary of the latest meeting of SEC’s Advisory Committee on Small & Emerging Companies, focusing on the SEC’s disclosure effectiveness project. And see this “Crazy Quilt Chart of Regulation” graphic from SEC Commissioner Gallagher..

Environmental Liabilities: Shareholder Lawsuits Continue

In this blog, Kevin LaCroix reminds us that cybersecurity and mergers are not the only issues triggering lawsuits these days…

– Broc Romanek