Category Archives: Executive Compensation

Just as the U.S. seeks to roll back regulations, the European Parliament adopts new corporate governance rules

by Cydney Posner

Just when the U.S. is looking at how to roll back its regulations on corporations (among others) (see, e.g., this PubCo postthis PubCo post and this PubCo post), the rest of the world seems to be headed in the opposite direction.  On Tuesday, the EU Parliament approved a Shareholder Rights Directive, which introduces, among other things, the concept of binding say-on-pay votes for companies listed in EU markets (over 8,000 of them). The Directive also includes some interesting measures intended to impede short-termism.  According to the press release fact sheet issued by the European Commission, the Directive must still be adopted by the European Council (expected shortly) and, assuming adoption, will become effective two years thereafter. Continue reading

Leave a comment

Filed under Corporate Governance, Executive Compensation

BlackRock sets its priorities for board engagement

by Cydney Posner

Asset management firm BlackRock (reportedly the largest, with $5.1 trillion under management) has identified its “Investment Stewardship” priorities for 2017-2018, intended to help companies prepare for engaging with BlackRock. Among the hot topics are governance (including board composition and diversity), corporate strategy for long-term value creation in light of shifting assumptions, executive pay linked to long-term strategy, climate risk disclosure and human capital management.  According to BlackRock, its engagement process is designed to be constructive, and its goal is “to build mutual understanding and ask probing questions, not to tell companies what to do. Where we believe a company’s business or governance practices fall short, we explain our concerns and expectations, and then allow time for a considered response.” However, Blackrock’s approach is not limited to engagement; although, as a long-term investor, the firm will be “patient” as companies work to address concerns, in the absence of progress, BlackRock “will not hesitate to exercise our right to vote against management recommendations.” Continue reading

Leave a comment

Filed under Corporate Governance, Executive Compensation

Recent trends in proxy statements

by Cydney Posner

It just isn’t proxy season without some kind of account of the latest trends in proxy statements, so here’s one from CFO.com. Continue reading

Leave a comment

Filed under Corporate Governance, Executive Compensation, Securities

Proposed changes in the Financial CHOICE Act 2.0

by Cydney Posner

A just-released memo (subscription required) from Jeb Hensarling, Chair of the House Financial Services Committee, to the Committee’s Leadership Team outlines the proposed changes from the original Financial CHOICE Act, introduced last year (see this PubCo post), to be included in the Financial CHOICE Act 2.0. Of course, we won’t know precisely what the bill provides until it is actually made public.  While the vast majority of proposed changes identified in the memo relate to the banking provisions and the Consumer Financial Protection Bureau, some are related to compensation and corporate governance matters, such as the following: Continue reading

Leave a comment

Filed under Corporate Governance, Executive Compensation

Dodd-Frank pay-ratio disclosure rules to be reconsidered — pencils down for now?

by Cydney Posner

Today, Acting SEC Chair Michael Piwowar issued yet another statement directing the Corp Fin staff to revisit the pay-ratio disclosure rules.  Of the non-bank related mandates imposed by Dodd-Frank, disclosures regarding resource extraction payments, conflict minerals and pay ratio were the provisions that seemed to elicit the greatest ire from the business community.  With resource extraction payment disclosure rules now almost out of the picture — the President still must sign off — as a result of action under the Congressional Review Act (see this PubCo post), and Piwowar having already reopened for review Corp Fin’s 2014 Guidance on conflict minerals (see this PubCo post), all that remained of the low-hanging fruit was the pay-ratio provision.  Continue reading

Leave a comment

Filed under Executive Compensation, Securities

SEC charges company with violations of the rules related to non-GAAP financial measures

by Cydney Posner

The Corp Fin staff have been dropping hints for quite a while about potential enforcement actions in connection with abuses of non-GAAP financial measures (see, e.g., this PubCo post), and an interesting one has now materialized.  In an Order released today, the SEC announced settled charges against MDC Partners, Inc., a publicly traded marketing firm, for failure to comply with the rules related to non-GAAP financial measures.  In addition, the company was charged with failure to disclose millions in perks awarded to its former CEO. Continue reading

Leave a comment

Filed under Corporate Governance, Executive Compensation, Litigation, Securities

Is there a fix for short-termism?

by Cydney Posner

Much has been written about the problems associated with the prevalence of short-term thinking in corporate America.  As noted in a post from The Harvard Law School Forum on Corporate Governance and Financial Regulation, a recent academic study revealed that “three quarters of senior American corporate officials would not make an investment that would benefit a company over the long run if it would derail even one quarterly earnings report.”  (See this PubCo post and this article in The Atlantic.)  Apparently, they weren’t kidding. Data compiled by S&P and Bloomberg shows that companies in the S&P 500 spent 95% of their earnings on repurchases and dividends in 2014, including spending $553 billion on stock buybacks (which can drive increases in EPS), leaving little for alternative uses of capital, such as long-term strategic investment in productive assets, including investment in R&D. (See this PubCo post.) As observed by Professor John Coffee in this post, “[p]resumably, it is self-evident that if an economy cuts back drastically on its investment in ‘R&D,’ it will experience less innovation and technological advances in the future…. That should be a cause for concern.” (See this PubCo post.)

The question is: is there a fix for this scourge? The American Prosperity Project, sponsored by the Aspen Institute, has some ideas. Continue reading

Leave a comment

Filed under Corporate Governance, Corporate law, Executive Compensation, Securities