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Welcome to the Snell & Wilmer Benefits Blog. We will be posting about current employee benefits and executive compensation topics and issues. We invite you to contact the authors with your thoughts or questions.Blog Contributors
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Updated Glass Lewis Proxy Voting Guidelines
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.
Posted in Executive Compensation
| Tagged change in control, compensation, discretion, Glass Lewis, incetnvei plans, ISS, proxy, shareholder
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ISS Expands List of Egregious Equity Plan Factors
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 ›
Posted in Employee Benefits, Qualified Retirement Plans
| Tagged 2020, Glass Lewis, guideline update, ISS, problematic pay practices, Proxy voting
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Yet Another Reason to Focus on Director Pay
We have previously encouraged our readers to focus on the size of their director pay packages and the processes their boards undertake in setting director compensation. Prior focus on these issues was recommended largely as a way to mitigate the risk of litigation for excessive pay. In their current U.S. Compensation Policies FAQ, Institutional Shareholder Services Inc. (“ISS”) has given boards yet another reason to focus on director compensation. In the FAQ, ISS indicates the following:
- In evaluating non-employee director pay, ISS will look for “reasonable practices” that “adequately align the interests of directors to those of shareholders.”
- A director pay program should incorporate “meaningful” stock ownership and/or holding requirements.
Posted in Executive Compensation
| Tagged compensation, director, director pay, Institutional Shareholder Services, ISS
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Say on Pay Failure Results 2017
Of the 7% of Russell 3000 companies that received “against” vote recommendations from ISS on their say on pay proposals this 2017 proxy season, some of the cited reasons for the negative vote recommendations from ISS consisted of the following:
- Pay for failure (i.e., pay for performance disconnect).
- Lack of rigorous performance goals.
- A substantial portion of granted equity awards were not performance-based.
- Presence of an ISS “problematic pay practice” including:
- Abnormally large bonus payments without proper link to performance.
- Change in control payments exceed 3 times base salary/target bonus.
- Single trigger change in control or severance payments.
A full list of the ISS “problematic pay practices” can be found here. Read More ›
Posted in Employee Benefits, Executive Compensation
| Tagged corporate governance, governance, ISS, performance, problematic pay practice, proxy, Say on Pay, severance payments
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ISS Issues FAQs on Equity Plan Scorecard
As reported in my October 24, 2014 post, Institutional Shareholder Services Inc. (“ISS”), a leading proxy advisory firm, has adopted a new “scorecard” approach to evaluating public company equity compensation plans. In a recent set of FAQs, ISS offers additional guidance on how it will apply the new scorecard when analyzing equity plan proposals made on or after February 1, 2015.
Among other things, the FAQs clarify that regardless of other scorecard factors, the following equity plan features will continue to result in an “against” vote: (i) a liberal change in control definition that could result in vesting of awards by any trigger other than a full double trigger, (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, and (iv) any other plan features that are detrimental to shareholder interests which may include tax gross-ups or reload options. Read More ›
Posted in Employee Benefits, Executive Compensation
| Tagged Equity Plan Scorecard, equity-based compensation, Institutional Shareholder Services, ISS, Section 162(m)
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ISS Offers New Equity Compensation Plan Data Verification Portal
Institutional Shareholder Services Inc. (“ISS”), a leading proxy advisory firm, recently launched a new data verification portal to assist it in verifying the information it uses in evaluating public company equity compensation plans. Public companies that file their proxy statements after September 8, 2014 (and that have an equity plan proposal on their proxy ballot), can use the portal to verify the key data points that ISS will use in its equity plan evaluation.
According to a recent set of FAQs, the data verification period will open after the date a participating company files its proxy statement. After the proxy is filed, ISS will direct the participating company to verify key data points and to request changes. Read More ›
Posted in Employee Benefits, Executive Compensation
| Tagged equity-based compensation, Executive Compensation, ISS, verification portal
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