Updating risk factors in form 10 q
Of course, constituencies in addition to investors are interested in pay ratio disclosures, including a company’s employees.Some consumers, governmental authorities, politicians and media outlets are also paying attention to pay ratio disclosures.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.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.Therefore, companies should assume that pay ratio disclosure will continue to be required for the 2019 proxy season.
Companies may find it worthwhile to emphasize in their proxy statements the corporate governance processes followed when setting director and executive compensation, as well as compensation decisions Companies may want to include additional narrative detail in their proxy statements describing the objectives and resulting design for determining director compensation.Although shareholders approved the plan itself, the court held that because they did not ratify specific awards under the plan, “the directors must demonstrate the fairness of the awards to the Company.” To minimize this risk, companies and boards should carefully review existing director compensation arrangements (perhaps on a separate cycle from executive compensation) and consider adding shareholder approved annual limits or annual formula-based awards to current (or new) plans Alternatively, companies and boards may choose to develop a factual record of these arrangements with a view to withstanding an “entire fairness” scrutiny, including by reviewing director compensation paid at a carefully selected group of comparable companies, possibly with the assistance of an outside expert.Executive compensation and directors compensation decisions should be made, and compensation disclosures should be prepared, with care, especially for companies that anticipate resistance to any aspects of their compensation programs Compensation committee members should be able to demonstrate that they exercised due care in applying their business judgment to determine executive compensation by reviewing adequate information, asking questions and understanding the pros and cons of various alternatives, any or all of which can involve the assistance of company personnel or outside experts, as appropriate.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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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.