Category Proxy Disclosure

Where’s Waldo? Where can you put the Equity Compensation Plan Information Table?

Generally, the Equity Compensation Plan Information table is included in a company’s Form 10-K, unless a company is putting a compensation-related matter to shareholders on its proxy.

However, this could lead to confusing your shareholders as the table would then bounce back and forth between the Form 10-K and the proxy, simply depending on whether a company is putting a compensation matter to shareholders.  Some companies have wondered if they could simply just put the table into their proxy all the time and simply reference it in the Form 10-K.  The short answer: yes, companies can do that.

The rules governing the Equity Compensation Plan Information Table,Item 201(d) under Regulation S-K, can be found at: http://www.law.uc.edu/CCL/regS-K/SK201.html

 Helpfully, the SEC has issued a Compliance & Disclosure Interpretation which specifically addresses this issue and indicates that it is permissible to incorporate by reference the table if it is included in a proxy, even if no compensation plan is put to shareholders for a vote:

Question 106.01

Question: Is the Item 201(d) disclosure required in Part II of Form 10-K, given that Item 5 of Form 10-K indicates that the registrant is required to furnish the information required under Item 201, or should the Item 201(d) disclosure be included (or incorporated by reference) in Part III of Form 10-K given that Item 12 indicates that the registrant is required to furnish the information required under Item 201(d)?

Answer: The Item 201(d) disclosure should be included in Part III, Item 12 of Form 10-K. An issuer may rely on General Instruction G.3 to Form 10-K to incorporate by reference the Item 201(d) disclosure from its proxy statement or information statement, even if the issuer did not submit a compensation plan for security holder action at its annual meeting of security holders. See American Bar Association (Jan. 30, 2004). [Mar. 13, 2007]

Link to the SEC’s C&DIs: http://www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm

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SEC Updates Regulation S-K C&DIs on 10/26/09

The SEC has updated the Compliance & Disclosure Interpretations (C&DIs) for Regulation S-K as of October 26, 2009.  However, the date of the new/revised entries is August 14, 2009. Here’s the link to the C&DIs:

http://www.sec.gov/divisions/corpfin/guidance/regs-kinterp.htm

There is one that will have implications for equity award disclosures, Question 125.05. The question asks what happens when an equity awards vests and the plan from which it was granted provides for deferral of receipt of the stock. The proxy disclosure rules call for the Nonqualified Deferred Compensation Plan Table to provide the specified information “with respect to each defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.” So, would this require the deferred receipt of the vested equity award to be included in the Nonqualified Deferred Compensation Plan Table?

The answer: Yes. The SEC indicates that this would be the case regardless of whether the deferral is at the election of the named executive officer or pursuant to the terms of the equity award or plan.

Implications: If any of your equity awards have payouts deferred, you need to review this Q&A and the cited provision of the proxy rules to determine if you must include such awards in the Nonqualified Deferred Compensation Table.  A typical award that this could easily be required for is a restricted stock unit or a deferred stock unit.

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