Updating risk factors in form 10 q
When plans are submitted for shareholder approval, the proxy disclosure should be sufficiently clear to establish that the shareholder vote was obtained on a fully informed basis.Board diversity, especially with respect to women and minorities serving as directors, is an issue that has garnered a growing amount of attention in the corporate governance arena New York City Comptroller Scott M.Therefore, companies should assume that pay ratio disclosure will continue to be required for the 2019 proxy season.Say-on-pay has become an important feature of annual shareholder meetings, having a major impact on proxy statement design and planning, shareholder engagement and features of executive compensation programs Generally, if a company receives a substantial vote against its say-on-pay proposal (even if less than a majority of shares voting at the meeting), investors will expect the company to either make changes to its compensation program going forward or to provide an understandable rationale for not making such changes If the company does not, in future years, the company’s investors may cast a binding vote against compensation committee members or other directors in addition to voting against named executive officer compensation when the next say-on-pay vote is conducted As a result, companies are very focused on receiving not only majority approval of their executive compensation, but achieving high levels of support. This post is based on a Mayer Brown memorandum by Ms. A typical place to include pay ratio disclosure is following the other compensation tables. The pay ratio rule does not dictate the location of the ratio disclosure within the proxy statement.The average support for say-on-pay during this period was 90.4 percent, with 76 percent receiving support above 90 percent.Proxy advisory firms such as Institutional Shareholder Services (ISS) have become very influential in the say-on-pay process As a result, if a company receives a negative proxy voting recommendation from a proxy advisory firm, it often (but not always) prepares additional material in support of its executive compensation program.
Executive compensation consultant Semler Brossy’s July 12, 2018 report (the Semler Brossy report) observed that the pay ratio “is more heavily influenced by the magnitude and variance in CEO compensation than by median employee compensation.” Semler Brossy also reported that “CEO compensation scales as company size increases, while median employee compensation has little correlation with company size.” It is not clear how much impact pay ratio disclosure has on investors.
As a result, companies should focus not only on the pay ratio calculation and proxy disclosure, but also on how they present and discuss this required public information both within their organization and to the public at large.
While there had been some predictions that pay ratio would be eliminated with Republican control of both the White House and Congress, there now appear to be other, higher priorities for legislative actions.
For example, Black Rock has publicly stated that it expects to see at least two women directors on every board, indicating that it may vote against nominating/governance committee members if it believes that a company has not accounted for diversity in its board composition.
State Street Global Advisors (SSGA) advised that it will vote against the chair of the nominating and/or governance committee or board leader of companies that fail to take action to increase the number of women on their board of directors and reported that by early March 2018 it had voted against more than 500 companies for failure to demonstrate progress on board diversity.
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Companies are allowed to identify the median employee based on any consistently applied compensation measure, such as compensation amounts reported in their tax and/or payroll records.