About this BlogWelcome 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.
Public Companies Should Consider Shareholder Reapproval of Section 162(m) Performance Compensation Plans Approved in 2012
As public companies continue to prepare for the 2017 proxy season, we wanted to provide a final reminder of an executive compensation related item that might require shareholder approval in 2017. As reported in Part 1 of our End of Year Plan Sponsor “To Do” Lists, Section 162(m) of the Internal Revenue Code limits the deduction a public company may take for compensation payable to “covered employees” to $1,000,000 per year. “Performance-based compensation” that meets the requirements of Section 162(m) is not subject to this limitation. The Section 162(m) regulations require that, if the Compensation Committee has the discretion to select among a variety of performance goals, those goals must be reapproved by shareholders every five years. Read More ›
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As reported in a prior blog post, public company employers that are adopting or amending equity-based compensation plans should consider adding a separate annual limit on director equity awards. In a recent Delaware Chancery Court opinion (Calma v. Templeton), the Chancery Court refused to grant the board of directors of Citrix Systems, Inc. the protection afforded by the business judgment rule when they approved equity awards to themselves under the Company’s 2005 shareholder-approved equity compensation plan. The Chancery Court’s failure to review the director equity awards using the business judgment rule meant that the shareholder derivative action in Calma could proceed to trial under a more plaintiff-friendly “entire fairness” standard of review. Read More ›
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