Protective Measures for Director Compensation New Delaware Supreme Court Case Sheds New Light

Posted by Aon Hewitt on Dec 19, 2017 10:54:58 AM

In Re Investors Bancorp, Inc. Stockholder Litigation (2017)

Background

In recent years, plaintiffs’ lawyers have turned their aim to director compensation. They have generally alleged that directors have paid themselves too much equity, breaching their fiduciary duties and wasting corporate assets. If directors grant themselves equity, they must prove the amount is entirely fair to the corporation, unless stockholders ratify the equity plan, in which case, the action is subject to the more deferential business judgment rule. For equity plans that provide for fixed grants and no board discretion, stockholders know exactly what they are approving, and ratification generally inoculates the directors. Equity plans that provide for discretion, if there are “meaningful limits,” may also be defended if there is stockholder ratification. Absent such meaningful limits, though, the reasonableness of the equity grants is subject to review under the more exacting “entire fairness” standard.

Recent Court Decision

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Topics: Corporate Governance, Board of Directors

H.R. 4015, the Corporate Governance Reform and Transparency Act of 2017

Posted by Aon Hewitt on Dec 19, 2017 10:44:18 AM

Many companies have been asking recently about the purpose and impact of proposed legislation that would create a regulatory regime for proxy advisory firms, H.R. 4015, the Corporate Governance Reform and Transparency Act of 2017. This recent activity is, perhaps, in response to petitions circulated recently by the NYSE and NASDAQ on the topic. Given strong interest in the legislation from our clients, the following is a brief summary of the significant parts of the bill:

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Topics: Corporate Governance

Institutional Shareholder Services, Inc. (“ISS”) Publishes Compensation Related FAQs

Posted by Aon Hewitt on Nov 27, 2017 3:27:20 PM

On November 21, 2017, ISS released preliminary U.S. Compensation FAQs for the 2018 proxy season that address the new secondary quantitative filter under the CEO Pay-for-Performance Policy and new policy application for the Equity Plan Scorecard (EPSC). Consistent with prior years, the FAQs provide fairly significant policy changes even though they were not included in the formal 2018 Proxy Voting Guidelines published on November 11, 2017. We expect additional clarification throughout the remainder of this year and during the 2018 proxy season, through additional FAQs and an updated white paper on the CEO Pay-for-Performance Policy.

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Topics: ISS

Glass Lewis & Co. (“Glass Lewis”) Announces 2018 Proxy Season Policy Updates

Posted by Aon Hewitt on Nov 27, 2017 3:12:37 PM

On November 22, 2017, Glass Lewis published proxy voting policy updates, effective for the 2018 proxy season. Consistent with prior years, the 2018 policy updates include amended and new policies,  and additionally provide clarification on existing policies.

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Topics: Proxy Disclosures, Glass Lewis

Institutional Shareholder Services, Inc. (“ISS”) Announces 2018 Proxy Season Benchmark Policy Updates

Posted by Aon Hewitt on Nov 17, 2017 1:02:46 PM

On November 11, 2017, ISS announced proxy voting policy updates, effective for shareholder meetings taking place on or after February 1, 2018.

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Topics: Corporate Governance, Executive Compensation, ISS

Tax Reform Would Lead to Major Changes in Executive Compensation in the U.S.

Posted by Aon Hewitt on Nov 8, 2017 9:40:58 PM

On November 2, 2017, the U.S. House of Representatives Ways and Means Committee introduced a tax reform bill, the Tax Cuts and Jobs Act. The bill has a long legislative road ahead of it in the House (the Chair, Kevin Brady, already introduced the first amendment to the bill on November 6, 2017), and then the Senate, and passage in its current form is far from certain. It’s important to note that the bill is just the opening bid, and is the most ambitious version.

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Topics: Executive Compensation

How the New Tax Reform Bill Could Impact Your Equity Plans

Posted by Aon Hewitt on Nov 7, 2017 10:05:30 PM

The draft tax reform bill from the U.S. House of Representatives Ways and Means Committee titled “The Tax Cuts and Jobs Act” was introduced on November 2, 2017. If passed in its current form, this act will have a significant impact on the way corporations grant equity and recognize the tax effects of equity programs on their financial statements. These changes would go into effect in 2018, including transition provisions.

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Topics: Executive Compensation

Investor Stewardship Group Governance Framework to be Effective January 2018

Posted by Aon Hewitt on Oct 25, 2017 10:05:48 PM

The Stewardship and Governance Principles of the Investor Stewardship Group (ISG), a collective formed in January 2017 of some of the largest U.S.-based institutional investors and global asset managers along with several of their international counterparts, are slated to go into effect January 1, 2018. The ISG recently also announced a partnership with the John L. Weinberg Center for Corporate Governance (Weinberg Center) at the University of Delaware to support the ISG and its Investor Stewardship and Governance Principles. Through the promulgation of a governance code for U.S. companies and stewardship princi

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Topics: Corporate Governance

ISS Releases Results of “Governance Principles” Part of Annual Policy Survey of Investors and Companies

Posted by Aon Hewitt on Sep 29, 2017 1:29:23 PM

Institutional Shareholder Services released the results of the first of two parts of its annual policy survey, the “Governance Principles” part, which is a step in its 2018 policy formulation process. The results on these concept-oriented topics offer a window into the views of institutional investors and companies on certain key subjects included by ISS. ISS will use these results, together with the results of the second part of the survey on policy application, to inform its draft policy updates, which it will publish in the second half of October for comment. Then, after obtaining comments on its draft updates, ISS will issue final policy updates in mid-November that will be effective for annual meetings after February 1, 2018.

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Topics: Corporate Governance, ISS

New SEC Guidance on the CEO Pay Ratio

Posted by Aon Hewitt on Sep 26, 2017 9:58:16 AM

The SEC Corporation Finance Staff, on September 21, 2017, issued three forms of guidance on the CEO Pay Ratio Rule, an interpretive release, a press release and new and revised C&DIs. This long-awaited guidance came out just nine days prior to October 1, 2017, the first date that calendar year filers may select as their median employee determination date—that is, nine days before many calendar year filers intend to calculate their median employee and weeks or months after many issuers had begun to prepare for this new disclosure. While much of the new guidance simply restates prior guidance (whether given through the adopting release or prior C&DIs from October of last year), several points stand out.

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Topics: Corporate Governance, Pay Ratio

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Executive Compensation & Corporate Governance

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