Insights

Summary of Key Results from ISS 2019 Annual Policy Survey

ISS’s recent Policy Survey previews potential changes in its 2019 proxy voting policies.

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Each year, Institutional Shareholder Services (ISS) surveys institutional investors, public companies (“issuers”) and the consulting and legal communities on emerging corporate governance and executive compensation issues as part of its annual policy formulation process (the “Survey”). Issuers and their advisors…

Don’t Miss an Opportunity to Optimize Retirement Within Your LTI Program

As employees age, both employers and employees tend to think strategically about retirement, but their perspectives are rarely the same. 

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Employers are generally focused on maximizing productivity and facilitating smooth transitions, while employees are generally focused on timing – not only about when will they have enough money for a comfortable retirement, but also what will they forfeit when they…

California Enacts Law Requiring Gender Diversity on Corporate Boards

On September 30, 2018, Governor Jerry Brown signed into law a first-in-the nation requirement that public companies include a minimum number of women on their boards. The law solely applies to those publicly held corporations whose principal executive offices are located in California.

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Requirements of Gender Diversity Law The law’s requirements will be phased-in over a multi-year period, with compliance initially required by the close of the 2019 calendar year. A public company found to be in noncompliance with the gender diversity requirements…

In What Circumstances do Special Equity Grants Make Sense?

As executive compensation consultants, we often receive questions from Compensation Committee members regarding the possibility of “one-time” equity grants for senior executives. There are various important considerations when contemplating such awards.

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Based on our experience, it is important to understand the many inputs and ensure the Committee is making informed decisions with “eyes wide open” to avoid surprises. Awards should focus on specific intended objectives. From time to time, Compensation Committees…

2018 Meridian Corporate Governance and Incentive Design Survey

For the eighth straight year, Meridian has conducted an extensive survey based on the public filings of 200 large cap companies (“Meridian 200”). This survey seeks to capture trends on a variety of executive compensation and corporate governance topics of interest to major companies today.

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As companies review their executive compensation program designs and related corporate governance policies, current market practices and recent trends can provide competitive benchmarks that are helpful in understanding “best practices,” as well as facilitate productive boardroom discussions. Highlights of Meridian’s…

Relative TSR for Resource Companies: Does it Still Make Sense?

Similar to the U.S., Canadian institutional investors, such as the Ontario Teachers’ Pension Plan, with assets under management of ~$190 billion and an advocate for good compensation governance, have been pushing back on the use of relative TSR on the basis that this measure can reward management of “chronically underperforming” industries.

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Relative total shareholder return (relative TSR), the most commonly used performance share unit (PSU) measure, has recently been challenged by institutional investors. Earlier this year Ontario Teachers’ Pension Plan (OTPP) released an article entitled “Is Management Compensation Rewarding the Right…

Board Governance: Preparing For Next Proxy Season

Proxy season went well for the majority of boards, says Virginia Rhodes, lead consultant at Meridian Compensation Partners.

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Rhodes sat down with Corporate Board Member editor-in-chief Dan Bigman as part of the Board Governance Series to talk about the most recent proxy season and how boards can prepare for the next one. “Director elections have gone with very…

10 Keys to Great Compensation Committee Processes

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Executive compensation is complex and institutional investors and proxy advisors are increasingly aggressive and prescriptive in their views of executive compensation. This makes the role of a public company compensation committee complex and demanding. It is now more important than…

Treasury Department and IRS Issue Guidance on Code Section 162(m)

The Treasury Department and Internal Revenue Service (IRS) have issued initial guidance under Notice 2018-68 (“Notice”) on the amendments to Internal Revenue Code Section 162(m) made under the Tax Cuts and Jobs Act of 2017 (“TCJA”). The Notice provides guidance on the definition of “covered employee” and the transition rule.

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Section 162(m) Prior to TCJA Prior to its amendment under TCJA, Section 162(m) generally prohibited a public company from taking a deduction for compensation that exceeded $1 million during a taxable year that was paid to a “covered employee”. However,…

Should Companies Use Individual Performance Measures in Executive Annual Incentive Plans?

When evaluating whether including an individual performance component is appropriate, companies may want to consider some questions.

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According to the Meridian 2017 Governance and Incentive Design Survey1, 43% of Meridian 200 companies use an individual performance component in their executive annual incentive plan, typically as a supplement to financial measures. Actual usage may be higher as the…

Institutional Shareholder Services Releases its 2019 Policy Survey Questionnaire

Institutional Shareholder Services (ISS) recently issued its 2019 policy survey questionnaire, which previews potential changes in ISS’s proxy voting policies.

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Through its annual policy survey, ISS seeks feedback from institutional investors, public companies, corporate directors and the consulting and legal communities on emerging trends in corporate governance, executive compensation and other matters as part of its policy formulation process. The…

SEC Chair Announces Staff Review of Proxy Process

On July 30, 2018, Securities and Exchange Commission (SEC) Chair Jay Clayton announced that the SEC staff will be holding roundtable discussions with investors, public companies and other market participants about whether the SEC’s proxy rules should be refined.

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The last time that the SEC engaged in a wholesale review of the proxy rules was in 2010, at which time the SEC issued a concept release seeking public comment on whether the U.S. proxy system as a whole operates…

Long-Term Incentives and Stock Ownership Ensure Alignment with Shareholders

Annual incentive metrics serve an important purpose: communicate a company’s priorities and provide incremental annual feedback on performance.

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Much of the commentary on energy industry pay programs has focused on annual bonus metrics. Annual incentives are easier to analyze because the payouts are clearly disclosed each year in the Summary Compensation Table, and those payments can communicate how…

Report on Say on Pay and Select Shareholder Proposals For the 2018 Proxy Season

Meridian Compensation Partners, LLC is pleased to provide this periodic report on key voting results for the 2018 proxy season.

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Executive Summary Meridian Compensation Partners, LLC is pleased to provide this periodic report on key voting results for the 2018 proxy season. Specifically, this report will cover the following areas: ■ Standard & Poor’s (S&P) 500 Say on Pay (SOP)…

Trends in Compensation: Committee Chairs & Lead Directors

From Boardroom Resources...In this episode, Bob Romanchek discusses current trends in director compensation.

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Compensation trends for lead directors and committee chairs have been interesting to follow in the years after Sarbanes-Oxley. Audit committee chairs were the first to be rewarded with higher pay; compensation committee chairs quickly followed suit as issues like Say…

Two Companies Settle Director Pay Lawsuits

Recently, two biotech companies (Clovis Oncology, Inc. and OvaScience, Inc.) agreed to settle director pay lawsuits, one of which is pending court approval1. The settlements, which are remarkably broad and prescriptive, set specified director pay levels (or pay range), mandate certain proxy disclosures and require the reformed director pay policies to be submitted to a binding shareholder vote.

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Clovis Oncology, Inc. and OvaScience, Inc. were subject to substantially similar shareholder derivative lawsuits brought by the same law firm. The lawsuits alleged that non-employee directors breached their fiduciary duties to shareholders by awarding themselves “excessive” compensation under non-shareholder approved…

Addressing Increased Scrutiny on Director Compensation: A Call to Action

Executive compensation has long been subject to intense scrutiny from regulators, proxy advisors and investors alike.

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Until recently, outside director compensation has not been subject to similar scrutiny primarily due to the narrow range of pay practices for directors, in both pay value and design/delivery. However, a new heightened level of scrutiny is now being applied…

2018 NACD Directorship 100 Released—the Annual List of the Most Influential Leaders in Boardrooms and in Corporate Governance

Michael Powers and Jim Wolf were named to the NACD Directorship 100 list for 2018, making it the sixth consecutive year for both Partners.

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The National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 19,000 corporate board members, announced the 2018 NACD Directorship 100, an annual recognition of the leading corporate directors, corporate governance experts, policymakers, and influencers—leaders who…

Is it time for longer-term performance awards?

A variety of factors has escalated short-termism, including proliferation of technology and Wall Street’s relentless demand (and apparent rewards) for short-term profits.

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Short-termism: Acknowledging a Trend In his 2016 annual letter to CEOs, Larry Fink wrote: “I have written to the CEOs of leading companies urging resistance to the powerful forces of short-termism afflicting corporate behavior. Reducing these pressures and working instead…