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I previously blogged about certain compensation related updates to ISS’ proxy voting guidelines for 2020. With proxy season in full swing, I wanted to highlight some important compensation related changes to the Glass Lewis 2020 voting guidelines, a full copy of which can be found here.
- Contractual Payments and Arrangements. In their 2020 guidelines, Glass Lewis clarifies its policy for say-on-pay proposals with respect to the analysis of both ongoing and new contractual payments and executive entitlements. In particular, Glass Lewis has provided a list of certain executive employment terms that may result in a negative say-on-pay vote recommendation, which includes, but is not limited to: (i) excessively broad change in control triggers; (ii) inappropriate severance entitlements; (iii) inadequately explained or excessive sign-on arrangements; (iv) guaranteed bonuses (especially multi-year guarantees); and (v) the failure to address any concerning practices in amended employment agreements.
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As reported in prior blogs, Institutional Shareholder Services Inc. (“ISS”), a leading proxy advisory firm, uses a proprietary “Equity Plan Scorecard” approach to evaluate public company equity compensation plans and will recommend a “for” or “against” vote depending on a combination of plan features, plan cost, company grant practices, etc. Last week ISS issued its Proxy Voting Guideline Updates for 2020, which are generally effective for meetings on or after February 1, 2020 (“2020 Update”). The 2020 Update, among other things, makes changes to the current Equity Plan Scorecard.
Regardless of how a plan scores under the current Equity Plan Scorecard, ISS will generally recommend a vote against a plan proposal if any of the following egregious factors apply: (i) accelerated vesting pursuant to a liberal change in control definition; (ii) provisions that permit the repricing and/or cash out of underwater options or stock appreciation rights without shareholder approval, (iii) provisions that make a plan a vehicle for problematic pay practices or create a pay for performance disconnect, (iv) the plan is excessively dilutive to shareholder holdings, or (v) the plan contains other features that have a significant negative impact on shareholder interests. Read More ›
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