Executive compensation practices, disclosures, and the regulatory environment have evolved considerably since Dodd-Frank, and Say-on-Pay has become a key process for shareholder-board dialogue. With the new Pay-versus-Performance disclosure requirement and soon-to-be-effective listing standards on clawback policies, all the generally applicable executive compensation rules mandated by Dodd-Frank will be in place. We are entering a new era for Say-on-Pay!
Tune in today at 2 pm Eastern for the free webcast – “The Evolution of Say-on-Pay: Where We Started; Where We Are Now; What’s Next” – co-hosted by ISS Corporate Solutions and CCRcorp – to hear ISS Corporate Solutions’ Cameron Abrahams O’Neill & Valeriano Saucedo, and our very own Meredith Ervine and John Jenkins, as we examine the history of Say-on-Pay, current trending topics in executive compensation, a look back at the 2023 U.S. Proxy Season, and the future of pay-for-performance and pay practices.
Yesterday, the SEC posted a notice of filing – and immediate effectiveness – of a Nasdaq proposal to amend Listing Rules 5610 and IM-5610 – which is the rule and corresponding interpretation that requires listed companies to maintain a “code of conduct” and disclose certain waivers.
The amendment will permit board committees to approve waivers of the code of conduct for directors or executive officers, rather than requiring that approval to be granted exclusively by the board, which is what the rule currently requires. The updated rule also requires Foreign Private Issuers to disclose these types of waivers within 4 business days. Here’s more background:
Nasdaq is proposing to allow waivers of the code to be approved either by the board of directors or a committee of the board. This would give listed companies flexibility to place the oversight of a company’s code of conduct within the jurisdiction of a particular committee if that structure is more effective and appropriate, while following the obligations of ethical conduct required by Listing Rules 5610 and IM-5610.
The approach of delegating oversight authority to a board committee is also consistent with the provisions of Listing Rule 5630 that requires approval of related party transactions by the company’s audit committee or another independent body of the board of directors. In addition, Nasdaq believes that the proposed change would align the requirements of this rule with the requirements of Rule 303A.10 of the Listed Company Manual of the New York Stock Exchange (“NYSE”).
And here’s what the exchange says about FPIs:
Nasdaq is also proposing to clarify that Foreign Private Issuers are required to disclose any waivers of the code for directors or executive officers within four business days by providing website disclosure that satisfies the requirements of Item 5.05(c) of Form 8-K, by including disclosure in a Form 6-K or by distributing a press release. The disclosure of any code of conduct waivers provides investors the comfort that waivers are not granted except where they are truly necessary and warranted, and that they are limited and qualified so as to protect the company and its shareholders to the greatest extent possible.
Accordingly, Nasdaq believes that Foreign Private Issuers, like other Nasdaq listed companies, should be required to make such disclosure within four business days by providing website disclosure that satisfies the requirements of Item 5.05(c) of Form 8-K, by including disclosure in a Form 6-K or by distributing a press release rather than providing such disclosure in the next Form 20-F or 40-F.
If you’re a Nasdaq company, this amendment may be a point to consider when you next review your committee charters. The amendment is immediately effective, but there is still an opportunity for public comment, and the SEC may temporarily suspend the rule change if it determines within 60 days that a suspension is necessary or appropriate.
We’ve blogged a few times about the DOJ’s enforcement sweep for problematic director interlocks under the Clayton Act. In August, the agency announced that it had secured a couple of more director resignations pursuant to this initiative. Once again, the press release casts a wide net for tips, which makes it pretty clear that the DOJ is actively looking for more violations:
Anyone with information about potential interlocking directorates or any other potential violations of the antitrust laws is encouraged to contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or antitrust.complaints@usdoj.gov.
As John noted in a recent DealLawyers.com blog, the DOJ’s interlocks initiative has now led to 15 interlocking director resignations from 11 boards. Moreover, a recent FTC settlement clarifies that non-corporate entities are also in the cross-hairs.
As we look ahead to proxy season, this is a reminder to revisit this topic in your annual D&O questionnaires (or any time a new director is joining the board). Our “D&O Questionnaire Handbook” has a couple of sample questions. And if you find yourself with a director who may be considered as also serving on the board of a competitor, this WilmerHale memo from last year gives a good primer on Clayton Act exceptions and consequences.
In this 23-minute episode of our “Women Governance Trailblazers” podcast, Courtney Kamlet & I had the pleasure of speaking with Anat Alon-Beck. Anat (a.k.a. the “Unicorn Lady”) is an Associate Professor of Law at the Case Western Reserve University School of Law. Her extensive research on large privately held companies – and their impact on our market – has been cited to Congress, the SEC, and federal courts. Her findings have also influenced conversations & policy on a variety of high-profile corporate governance and securities law issues – including board diversity and human capital, corporate purpose, risk oversight, public benefit corporations, direct listings, and more. Listen to hear:
1. How Anat found her way into academia after practicing as a corporate & tech lawyer, and what led her to focus her research on corporate governance & securities issues.
2. The common thread that ties Anat’s published topics together – and a bit about her forthcoming research.
3. What the research shows about legal & regulatory reforms that could improve opportunities for corporate governance & securities practitioners and our markets overall – and what practitioners could do from a practical perspective to support reforms.
4. Thoughts on how boards & advisors can navigate the competing tensions and fraught political environment. Specifically, whether there are theories or data that could guide decision-making on sensitive topics without diverting too much time and money from the company’s core mission.
5. What Anat thinks women in the corporate governance field can add to the current conversation on the role of corporations in society.
To listen to any of our prior episodes, visit the podcast page on TheCorporateCounsel.net or use your favorite podcast app. If there are “women governance trailblazers” whose career paths and perspectives you’d like to hear more about, Courtney and I always appreciate recommendations! Shoot me an email at liz@thecorporatecounsel.net.
Welcome back from the long weekend, everyone. In a treasured end-of-summer tradition, ISS recently announced that it has released its Annual Global Benchmark Policy Survey. There is nothing quite like this annual event to help us focus on what lies ahead in the upcoming proxy season. This year I’m particularly grateful for the opportunity to focus on the future, because my middle child is excitedly heading to his first day of kindergarten today, and there have been tears (from me, not him).
Anyway, in addition to executive compensation topics, this year’s survey includes questions on:
– Impact on director independence of being employed by a firm that provides professional services to the company
– Application of FPI vs. market-specific policy to companies that dual-list in the country of incorporation
– Whether the ISS policies should aim for global consistency on certain E&S issues vs. take a market-specific approach
– How investors and companies are considering single vs. double materiality
– What actions investors should expect companies to take to reduce an environmental or social risk that appears to be material to a company
– For high GHG emitters, whether risk should be assessed based on meeting standards under all of the governance, strategy, risk management, and metrics & targets pillars vs. each pillar individually
– Input on what guidelines, standards and frameworks are most relevant to companies and investors for drafting a climate transition strategy or plan
– How much tolerance investors will have for a reduction in transparency that results from risks from increased politicization of “ESG”
The survey is slated to close on September 21, 2023, at 5 p.m. ET.
In addition to feedback from the annual survey, as ISS develops its 2024 voting policies, it will also gather input from investors, company directors, and others by hosting various regionally-based, topic-specific roundtable discussions and other engagements. ISS will then publish for public comment the key proposed changes to its voting policies for next year, before adopting and publishing the final policies that will apply to 2024 meetings.
Glass Lewis historically has conducted a less formal process for annual voting policy updates, compared to ISS. On its “current policies” page, you can submit feedback on policy guidelines by emailing guidelinescomments@glasslewis.com. You can email Glass Lewis at any time, but if you want your feedback to be considered for the 2024 guidelines, you should probably reach out this month.
This year, a few members have informed us that Glass Lewis is also running a policy survey for its clients, which seeks feedback on specific governance, sustainability, and executive compensation topics. As a reminder, Glass Lewis’s policy updates last year related to board diversity, board oversight of E&S issues, director overboarding, cyber risk oversite, officer exculpation, and long-term incentives being tied to performance – and the updates are usually published in November or December.
When it comes to getting the votes you want during proxy season, if you want to look especially smart to your boss and save your company (and yourself) from time-consuming back & forth, the best thing you can do is sign up for our “Proxy Disclosure & 20th Annual Executive Compensation Conferences.” Our panel on “Navigating ISS & Glass Lewis” features a conversation with Rachel Hedrick – who is VP of US Executive Compensation Research at ISS – and Krishna Shah – who is Director of North America Executive Compensation at Glass Lewis – moderated by Davis Polk’s Ning Chiu. This is going to be a very practical session on the types of disclosures & practices that will (or won’t) help your cause on say-on-pay, compensation committee elections, and equity incentive plan approvals. Rachel & Krishna will bust some myths and share a few predictions for 2024.
Monday is Labor Day, which is traditionally the day that we bid farewell to summer. Unlike almost everywhere else in the country, we here in Northeast Ohio have been blessed with a really nice, temperate summer (well, aside from the 12 tornadoes that hit us last Thursday), so I’m a little sorry to see it go. On the other hand, I know that for my CCRcorp colleagues in the “Sun’s Anvil” formerly known as Austin, Texas, fall can’t come soon enough.
Still, regardless of whether the end of summer makes you a little melancholy or just makes you look forward to a lower risk of heat stroke, it seems appropriate to have a nice cool drink to give it a proper send-off this holiday weekend. If your preference for refreshment includes something with a little booze in it, then I’ve got a cocktail recommendation to pass along.
About a decade ago, I was at a soiree at a more sophisticated local watering hole than I’m accustomed to frequenting. The bartender was pushing a rum-based concoction that I’d never tried before. It was delicious. I asked what it was, and she told me that it was something called a “Dark ‘n Stormy.” To make a long story short, I’ve been happily quaffing them every summer since.
For my money, the Dark ‘n Stormy is close to a perfect summer drink. It’s not too sweet, but it’s very refreshing. It’s apparently Bermuda’s national cocktail, and the recipe is ridiculously simple – it’s a classic boat drink, just dark rum and ginger beer, with a squeeze of lime if you like. The only thing that’s a little complicated is that the name “Dark ‘n Stormy” is a registered trademark of Gosling’s Rum in Hamilton, Bermuda, and is only supposed to be made with their product, which can sometimes be hard to find. It’s worth the effort though because other dark rums don’t taste anything like Gosling’s, and you won’t appreciate the drink nearly as much.
If you’re looking for an alternative to the usual summer weekend gin or vodka & tonic or one of those hop-bomb IPAs that you kids can’t seem to get enough of, give a Dark ‘n Stormy a try. I think you’ll like it. If you prefer something non-alcoholic, then maybe give one of these summer mocktails a try. In any case, have a safe and enjoyable Labor Day weekend. Our blogs will be back on Tuesday.