Resource

On June 30, 2014, the SEC issued a Staff Legal Bulletin (referred to as "SLB 20") which provides guidance regarding the responsibilities of investment advisers and proxy advisory firms with respect to the voting of corporate proxies.

In the three years that U.S. public companies have held non-binding Say on Pay (SOP) votes under the Dodd Frank Act, compensation committees, compensation advisors, and financial regulators have seen the clout of Institutional Shareholder Services (ISS) increase dramatically in the executive compensation arena.

For the past several years, executive compensation policies and practices have been under intense scrutiny by lawmakers, the media and governance experts.

Given that the IPO market has heated up in the last few years – 2013 brought us 222 IPO pricings in the U.S., up almost 80% from 2012(1) – we thought it worthwhile to look at pre-IPO equity practices and the implications for companies after the initial offering.

Say on pay (SOP) vote results continue to indicate that shareholders seem to be endorsing the executive pay model.

A Pay Governance study of executive compensation programs at 175 publicly-traded manufacturing companies reveals that, despite a "rust belt" reputation, companies in this sector are employing not only contemporary program designs, but also leading edge solutions for ensuring pay and performance alignment.

Key institutional shareholders use CEO pay for performance as a critical consideration in determining how to vote on Say on Pay, especially as a CEO's tenure grows and company returns increasingly reflect the incumbent's strategies and performance.

After nearly three years, on September 18, 2013, the SEC issued proposed rules for one of the most contentious executive compensation provisions of the Dodd-Frank Act –CEO pay ratio disclosures.

Driven by volatile stock markets, stock option expensing, and shareholder advisory firm mischaracterization of stock options as non-performance-based compensation, many companies have significantly shifted away from stock options toward service-based restricted stock and/or long-term performance plans such as performance shares, performance share units, or performance cash units.