Insights

Economic Value Added—New Governance Considerations

Starting this proxy season, Institutional Shareholder Services (ISS) will be disclosing in U.S. and Canadian company proxy reports Economic Value Added (EVA) metrics. These metrics will be shown for informational purposes only. However, we believe it is likely that ISS will incorporate EVA metrics into its CEO pay-for-performance analysis within the next two proxy seasons, subject to investor feedback.

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ISS’s introduction of EVA metrics is likely to foster discussion among compensation committees about the nature, merit and implication of these metrics. EVA may also be of interest among institutional investors as an additional lens to assess pay and performance…

2019 Helen Keller Achievement Awards and AFB Leadership Conference

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Meridian Compensation Partners was proud to sponsor the American Foundation for the Blind (AFB) 2019 Leadership Conference held February 27 – March 1, 2019 in Arlington, VA, which covered the most pressing and relevant topics in the field of blindness…

Market Data in Context

Benchmarking compensation is the process of comparing pay levels and incentive design practices to the “market.”

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It is a quantifiable, objective way for a compensation committee to gauge how an executive is positioned versus the market, and helps the committee to understand what competitive pay is and if compensation arrangements are adequate to attract, retain and…

How to Structure a Fair Executive Severance Agreement

From Boardroom Resources...Ryan Harvey frames the importance of a well-structured severance arrangement and outlines several best practices for today’s boards and compensation committees.

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Few things cause shareholder or media outrage like a poorly structured executive severance agreement. When a CEO is terminated for poor performance and walks away with tens of millions in severance payments, it’s understandably a hard pill for company stakeholders…

Glass Lewis Launches New Service that Provides U.S. Companies the Opportunity to Give Feedback on its Vote Recommendations

On March 14, 2019, Glass Lewis announced the launch of a new Report Feedback Statement (RFS) service, which will allow a U.S. public company to provide feedback on Glass Lewis’ analysis of the company’s proxy proposals for its annual meeting. Glass Lewis will then disseminate these comments directly to its investor clients.

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The RFS service provides an opportunity for U.S. public companies1 to express their differences of opinion with Glass Lewis’ analysis on proxy proposals (e.g., Say on Pay proposal) to be voted on at their annual meeting. Glass Lewis will then…

House Passes Bill to Curb Potential Abuses of Rule 10b5-1 Trading Plans

The U.S. House of Representatives passed a bipartisan bill that would require the Securities and Exchange Commission (SEC) to determine whether to adopt specified amendments to the rules governing 10b5-1 trading plans.

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Background SEC Rule 10b-5 prohibits securities fraud, including insider trading through the purchase or sale of securities on the basis of material non-public information. SEC Rule 10b5-1, which was adopted in 2000, allows insiders to transact in their company’s securities…

2019 Federal Budget: Changes to Tax Treatment of Stock Options

One of the proposed legislative changes in the Liberal government’s 2019 Federal Budget directly affects executive compensation.

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The government has proposed to limit the preferred tax treatment for stock options. Currently options are eligible for a deduction the effect of which is to tax them at one-half the ordinary income tax rate (similar to capital gains treatment).…

IPOs and Executive Pay

Reprinted from Ethical Boardroom Autumn 2018 Issue

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As the equity markets have recovered and continued to grow since the financial crisis, many private companies are considering an initial public offering (IPO) of their stock as a way to raise capital and create liquidity for their existing investors…

Compensation Committee Issues in 2019: From Discretion to Down Cycles

From Boardroom Resources...In this episode, Partner Annette Leckie discusses the impact of the latest tax reform on executive incentives.

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When the latest tax reform was introduced, companies immediately began calculating what it meant for their business. Compensation committees and their outside consultants went through a similar process to identify new rules that may affect how they structure executive compensation…

Will the New Year Bring Regulatory Oversight of the Proxy Advisory Firms?

The Senate and the SEC are operating on parallel paths toward the potential regulation of proxy advisory firms. However, the outcome remains uncertain.

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We have seen many false starts on the road to regulate proxy advisory firms. Several recent Congressional attempts to pass legislation to regulate the proxy advisory firms have failed. In 2017, the U.S. House of Representatives passed two bills (the…

SEC Adopts Final Rules for Disclosure of Hedging Policies

On December 18, 2018, the Securities and Exchange Commission (SEC) adopted final rules that require companies to disclose in proxy statements their policies on hedging employer securities.

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In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which, among other things, directed the SEC to adopt rules requiring public companies to disclose their hedging policies. On February 9, 2015, the SEC issued proposed…

Let’s Push Things Forward

Reprinted from Chief Executive Officer Winter 2018 - With long-term incentives being the largest pay component for CEOs in the US, where are design practices heading?

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For well over 50 years, there has been the same three general design categories of long-term incentives for US-based CEOs. These have been full-value share grants, which vest over time and focus on retention; stock appreciation vehicles, such as stock…

ISS Updates QualityScore Methodology

Institutional Shareholder Services (ISS) recently announced that it has updated its Governance QualityScore (“QualityScore”) methodology, its governance-scoring tool. The key changes to the methodology include new factors related to board and C-Suite gender diversity and the levels of shareholder support for director elections and Say on Pay proposals.

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Overview of ISS Governance QualityScore ISS applies its QualityScore methodology solely to S&P 500 and Russell 3000 companies. According to ISS, QualityScore is intended to aid institutional investors in monitoring and evaluating portfolio company governance by providing such investors insights…

“Tis the Season…Are You Ready?

It’s hard to believe that another proxy season is upon us.

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It seems like just yesterday we were trying to figure out what the CEO pay ratio would look like, how it might compare to peers and what internal unrest would be created as a result. Although companies worried about the…

ISS Issues Final Policy Updates for 2019

On Monday, November 19, 2018, Institutional Shareholder Services (ISS) issued final updates to its proxy voting policies for 2019 – the most important of which relates to board gender diversity.

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ISS final policy updates cover four key areas: (i) board of directors, (ii) shareholders rights and defenses, (iii) capital/restructuring, and (iv) social and environmental issues. No updates specifically relate to executive compensation. Equally important, ISS chose not to issue a…

The Demise of TSR as the Primary Executive Pay Performance Measure

Reprinted from NACD Directorship November/December 2018 Issue

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During the past decade, the use of total shareholder return (TSR) has risen rapidly in prevalence as a performance metric in executive long-term incentive plans. Many compensation committees believed this was a direct way to align executive pay and performance.…

SEC Announces Agenda and Panelists for Roundtable on Proxy Process

The Securities and Exchange Commission (SEC) has announced the agenda and panelists for the SEC staff roundtable on proxy process to be held on November 15, 2018 in Washington, D.C.

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As we previously reported in our Client Update dated August 9, 2018, SEC Chair Jay Clayton announced that the SEC staff would be holding roundtable discussions with investors, public companies and other market participants about whether the SEC’s proxy rules…

2018 Study of Executive Severance Arrangements Not Related to a Change in Control

Data for fiscal 2017 executive severance arrangements is derived primarily from 2018 definitive proxy statements filed by 160 major public companies (“Study Group”).

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This is only a summary of the full 2018 Study of Executive Severance Arrangements Not Related to Change in Control. To obtain the full report, please contact Donald Kalfen. About Meridian Compensation Partners, LLC Meridian Compensation Partners, LLC (“Meridian”) is…