Category Executive Compensation

Katten Webcast Replay Available Now for 2011 Proxy Season Update: Insiders’ Perspectives

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Looking for more information on the 2011 Proxy Season? Want the take on things from a few “insiders?” Missed the Katten webcast, 2011 Proxy Season Update: Insiders’ Perspectives, when it originally was broadcast on December 9th? Never fear! Katten has made this webcast available on its website, http://www.kattenlaw.com/2011-proxy-season-update-insiders-perspectives-12-09-20101/

Topics that were discussed include:

  • Dodd-Frank Governance Rules Overview
  • Say on Pay: Overview and How to Prepare
  • ISS Policy Updates
  • 2010 Proxy Season SEC Comments

New Say on Pay Site Launched

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With all the focus recently on Say on Pay issues, I have launched a new website to focus on Say on Pay, www.say-on-pay.com. The site is in its early stages (just went up today – 12/15/2010), but I hope to add to it over the next week so it becomes a useful resource to companies as they contemplate Say on Pay issues.  I’ve dedicated a page to tracking the say on pay vote frequency recommendations from companies, and have it updated through the proxies filed today, http://say-on-pay.com/say-on-pay-frequency-tracking/.

Ed Hauder’s Upcoming Speaking Engagements

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Ed Hauder will be participating in several upcoming events that will look at preparing for the 2011 proxy season:

  • December 9, 2011—Webinar: 2011 Proxy Season Update: Insiders’ Perspectives.  Ed will join Michael Diver, Wayne Wald and Robert Wild of Katten Muchin Rosenman LLP and Rhonda Brauer of Georgeson Inc. for this webinar. The webinar will include an overview of the SEC’s new proxy Say on Pay rules and what to expect from the coming proxy season, with insights and preparation tips from legal, proxy solicitation and executve compensation experts. To register for this webinar, please click: http://www.kattenlaw.com/events/register.aspx?event=1590

  • December 14, 2011—How to Prepare for the Upcoming Proxy Season. Ed will participate in this Practising Law Institute seminar to be held at the University of Chicago Gleacher Center in Chicago, IL. For more information and to register for this seminar, please click: http://www.pli.edu/product/seminar_detail.asp?id=88599

  • January 18, 2011—Webcast: The Proxy Solicitors Speak on Say-on-Pay. Ed will join Art Crozier of Innisfree M&A, David Drake of Georgeson and Reid Pearson of Alliance Advisors for this CompensationStandards.com webcast that will cover what companies are doing to engage their shareholders, the “hot button” compensation issues for shareholders and ISS, what tactics have been successful to bring in the vote at the last minute, and how to solicit now that say-on-pay will be on the ballot. For more information and to register, please click: http://www.compensationstandards.com/webcast/2011/01_18/index.asp

Will your company be taking an equity plan to shareholders in 2011? Do you any assistance in determining the best plan design and structure to help minimize negative shareholder reaction from ISS, Fidelity, etc. to your proposal? Do you want to figure out how Say-on-Pay might influence your pay disclosures and pay design going forward?  If so, Ed would be happy to help.  Ed has limited capacity to help a few additional companies with their 2011 proxies and proposals. If interested, please contact him at: edward.hauder@exqty.com or at (847) 996-3990.

ISS 2011 DRAFT Policy Updates – Comments Accepted Thru 11/14

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Well, it is that time of year when ISS becomes a bit of a flirt and shows us a little bit of what its policy updates for the next proxy season might look like (but not all of them).  ISS just posted some of the draft policies its thinking of issuing as final policies to apply to the 2011 proxy season. ISS is asking for comments on these specific draft policies (which I expect won’t be the only policy updates that get issued in November) before November 11, 2010.

The draft 2011 policies out for public comment and ISS’  request for comments can be found HERE.

So what are the US draft Compensation Policies that ISS has out for comment?

  • Management Say on Pay Frequency Vote Proposals
  • Vote on Golden Parachute Proposals

Management Say on Pay Frequency Vote Proposals

  • Basically, ISS is supporting an annual vote frequency for MSOP.
  • But, ISS is asking whether an anuual vote provides the most effective format and what circumstances might warrant a different format.
  • ISS is also asking about what the consequence of failing to follow a shareholder vote in favor of annual MSOP vote frequency and if that should be considered when evaluating the MSOP itself?

Vote on Golden Parachute Proposals

  • ISS will evaluate votes of golden parachutes in accordance with Dodd Frank Act requirements on a CASE-BY-CASE basis.
  • However, consistent with ISS’ problematic pay practices policy the following items could cause ISS to recommend AGAINST the golden parachute proposal:
    • Recently adopted or amended agreements that include excise tax gross-up provisions (since prior annual meeting);
    • Recently adopted or amended agreements that include modified single trigger agreements (since prior annual meeting);
    • Single trigger payments that will happen immediately upon a change in control, including cash payments and such items as the acceleration of performance-based equity despite failure to achieve performance measures;
    • Single-trigger vesting of equity based on a definition of change in control that requires only shareholder approval of the transaction (rather than consummation);
    • Potentially excessive severance payments;
    • Recent amendments or other changes that may make packages so attractive as to influence merger agreements that may not be in the best interests of shareholders;
    • In the case of substantial gross-up from pre-existing/grandfathered contract: what triggered the gross-up—option mega-grants at low point in stock price, unusual or outsized payments in cash or equity made or negotiated prior to the merger;
    • The company’s assertion that a proposed transaction is conditioned on shareholder approval of the golden parachute advisory vote.
  • ISS is asking the following questions about this proposed policy:
    • Whether the potential for having disparate recommendations (e.g., FOR a transaction, but AGAINST on the non-binding vote on parachute payments) raises any concerns?
    • Whether the factors listed above are appropriate?
    • Whether the total cost of severance payments serve as a primary or secondary consideration in the evaluation of say-on-golden parachute proposals?