May 24, 2023
Say-on-Pay Frequency: Reporting Your Decision on Frequency
For many companies, this is a “say-on-pay frequency” year, and as Dave pointed out a few months ago, failing to timely file an Item 5.07(d) Form 8-K disclosing the company’s decision, in light of the results of that vote, about how frequently it will include a say on pay vote in its proxy materials can have significant negative consequences for public companies, including the loss of S-3 eligibility & WKSI status.
There are a number of ways to skin the cat when it comes to complying with the Item 5.07(d) disclosure requirement, and this excerpt from a recent Goodwin blog sets out a few common approaches:
– Report Item 5.07(b) and Item 5.07(d) in a Single Form 8-K Report. The company can simultaneously report the results of the annual meeting shareholder votes under Item 5.07(b) and its decision on the frequency of say-on-pay votes under Item 5.07(d) in the same Form 8-K report. It is important to review the Form 8-K report to confirm that it complies not only with Items 5.07(a)-(c) but also with Item 5.07(d) before filing.
– Report Item 5.07(b) in a Form 8-K Report followed by Item 5.07(d) in a Form 8-K/A Amendment. If the company reports its annual meeting voting results in an Item 5.07(b) Form 8-K report but does not, or cannot, include the information required by Item 5.07(d) in the same Form 8-K report, the company can report its frequency decision in a Form 8-K/A amendment to the original Item 5.07(b) Form 8-K report. In this case, the Item 5.07(d) report should not be filed as a new Form 8-K report.
– Report Item 5.07(b) in a Periodic Report followed by Item 5.07(d) in a Subsequent Form 8-K Report. The company can report the annual meeting voting results in a Form 10-Q or Form 10-K report that is filed on or before the due date for the Item 5.07(b) Form 8-K, as permitted by General Instruction B.3 to Form 8-K. If the company does not, or cannot, report its decision on the say-on-pay frequency vote in the periodic report, it should file a new Item 5.07(d) Form 8-K to report its decision. In this case, the Item 5.07(d) report should not be filed as an amendment to the periodic report. If the filing of the Form 10-Q or Form 10-K report is delayed to a date more than four business days after the company’s annual meeting, the company should comply with Item 5.07 by filing a Form 8-K report before the filing deadline for the Item 5.07(b) report on the shareholder votes on other matters at the meeting.
It’s nice to have alternative ways to comply with this disclosure requirement, but I wish the SEC would consider eliminating it. It made sense when the say-on-pay requirement was introduced and there was uncertainty about how often votes would be held, but with an annual say-on-pay resolution now an almost ubiquitous practice among public companies, this requirement is little more than a trap for the unwary. It seems to me that a better approach would be to require this disclosure only if a company decided to hold its say-on-pay vote on something other than an annual basis.
– John Jenkins