Included in $1.9 Trillion Covid-19 Relief Bill is a Modification to 162(m) of the Internal Revenue Code
By Adam Swietek
Insight Type: Client Alerts
COVID Impact on Incentive Compensation
By Adam Swietek
LTI Grants in a Volatile Environment
By Adam Swietek
Impact of COVID-19 on 2020 Annual and In-Flight Long Term Incentives
By Adam Swietek
COVID-19 and Short-Term Incentive Designs
By Adam Swietek
Our Meridian Client Update published May 28, 2020 discussed the impact of COVID-19 on 2020 Short-Term Incentive (STI) plans and how Committees may determine appropriate payouts (if any) at year-end. Payout decisions for 2020 STI in many instances will be impacted and driven by liquidity constraints, affordability, relative performance and/or investor expectations. The design for … Continued
Announced Pay Reductions
By Adam Swietek
Meridian is currently tracking announced pay reductions within the oil and gas space. The largest number of reductions to date have been announced in the oilfield services sector. We’re planning on regularly updating this list and re-posting at https://www.meridiancp.com/insights/energy/ Oilfield Services, Equipment, and Drilling ▪ Forum Energy Technologies salary reduction 4/2 (deferred compensation suspension 6/10) … Continued
Long-Term Incentives: Before, During and After COVID-19
By Adam Swietek
In response to the constantly evolving COVID-19 pandemic, companies have announced a litany of executive compensation-related actions including layoffs, furloughs, base salary reductions and much more. For long-term incentives (“LTI”), most companies have adopted a “wait and see” approach with respect to issues like: modeling implications of a V, W or U-shaped recovery; valuing existing … Continued
Stock Ownership Guidelines in Challenging Times
By Adam Swietek
Stock ownership guidelines are nearly universal for both executives and directors. They help ensure alignment with shareholders by encouraging executives and outside directors to hold onto a substantial amount of company stock. They have historically not required a substantial open-market purchase of company stock. Rather, both executives and directors can typically meet their required guidelines … Continued
In-Flight Long Term Incentives—What, if Anything, Should Energy Companies be Doing?
By Adam Swietek
The energy industry has some particular challenges with long-term incentives (LTI): • Multi-year equity value decline: Many energy companies entered 2020 with multiple years of underwater stock options and equity awards tracking well below their original grant date value. • New shocks to the system: COVID-19 has exacerbated the long term supply and demand imbalance … Continued
COVID-19 and Short-Term Incentives
By Adam Swietek
For many companies, it is unlikely that there will be significant (if any) payouts under the executive or managerial bonus plans for 2020. Alternatively, for those that do have payouts, it is similarly unlikely that plan mechanics alone will determine final earned awards. Rather, most will have to apply some degree of discretionary adjustments in … Continued
Executive and Director Pay Reductions
By Adam Swietek
Over the last several weeks, as the global economy shut down, we have seen a steady stream of U.S. companies announcing store and facility closures, reduced hours for workers, layoffs and furloughs. In addition, in response to cash preservation needs, a desire to “share the pain” and to align with the shareholder experience, a number … Continued
Director Compensation—What Public Boards are Considering in Light of Substantial Energy Price Declines and/or COVID-19
By Adam Swietek
This will be the first in a series of updates that Meridian will produce, on potential impacts to executive and director compensation programs and related governance issues, from the economic turndown that has followed the COVID-19 pandemic, and the recent sharp decline in oil prices. Director Compensation Directors at many companies are currently looking at … Continued
COVID-19
By Adam Swietek
First and foremost, we hope you, your families and your colleagues are staying safe and healthy during this global health crisis. We appreciate normal business operations for many companies have been upended due to the COVID-19 pandemic. Only through the extraordinary efforts of employees, executives and boards will companies be able to manage through the … Continued
New Tax Rules for Stock Options Delayed; Other Updates
By Adam Swietek
As 2019 comes to a close, this alert provides updates on three fronts: ▪ The implementation date for changes to the taxation of stock options in Canada has been delayed. ▪ A new position paper on the use of non-GAAP performance measures has been released by the Canadian Coalition for Good Governance (CCGG). ▪ Proxy … Continued
UPDATE: Draft Legislation Released Changing Tax Treatment of Stock Options Effective January 1, 2020
By Adam Swietek
The budget proposed to eliminate the preferential tax treatment of stock options, above an annual $200,000 face value, for large, long-established, mature firms. (See Meridian’s update here for details of the original proposal.) The highlights of the implementation language include: The new tax rules will take effect for grants made on or after January 1, … Continued
Mandatory Say on Pay Advisory Vote and Clawback Policy Disclosure Come to Canadian Companies
By Adam Swietek
The newly introduced Bill to implement the federal government’s budget measures includes proposals that will, if enacted, require publicly-traded companies incorporated under the Canadian Business Corporations Act (CBCA) to: 1. Hold an annual non-binding shareholder vote on the executive compensation approach (i.e., a “Say on Pay” vote). 2. Develop an approach to compensation of directors … Continued
Economic Value Added—New Governance Considerations
By Adam Swietek
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 alignment. This Client Update provides an overview of EVA, how ISS intends to use it … Continued
2019 Federal Budget: Changes to Tax Treatment of Stock Options
By Adam Swietek
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). There are two proposed exemptions to this change: 1. The proposed rule will only affect … Continued
House Committee Approves Bill to Repeal Key Provisions of Dodd-Frank
By Adam Swietek
The principal focus of the CHOICE Act is the banking provisions of Dodd-Frank and the Consumer Financial Protection Bureau. In addition, the CHOICE Act includes provisions relating to agency rulemaking requirements, judicial review of agency actions and capital formation. In the context of executive compensation and corporate governance, if ultimately approved by Congress, the CHOICE … Continued
Holding Steady with Say on Pay
By Adam Swietek
In contrast to the mandatory (but non-binding) advisory votes on executive compensation (“Say on Pay” votes) in the U.S., Say on Pay remains voluntary in Canada. Close to 80% of the S&P/TSX 60 companies have a Say on Pay vote – a level that has remained fairly stable for the last few years. The S&P/TSX … Continued
Treasury, Cash Settled and Market Purchase Share Unit Plans
By Adam Swietek
The structure of a share unit plan and how a share unit is settled can have a significant impact on its taxation and accounting treatment. This update: Considers three alternative share unit plans that are generally used in Canada and outlines the key advantages and disadvantages of each alternative Summarizes the proposed changes to the … Continued
Choosing the Right Performance Peer Group
By Adam Swietek
More and more public companies are adopting performance share unit (PSU) plans as a significant component of long-term (equity) compensation for executives.[1] The most common PSU performance metric is total shareholder return (TSR – i.e., stock price growth plus dividends) compared to performance peer companies. The choice of performance peers has a significant impact on … Continued
Three Issues That Should be on the Compensation Committee Agenda
By Adam Swietek
[su_youtube_advanced url=”https://www.youtube.com/watch?v=JMVEeD7uRmc” width=”700″ height=”420″ responsive=”no” rel=”no” fs=”no”][youtube_channel][/su_youtube_advanced] In this video, Meridian Partner Jared Berman sits down with TK Kerstetter of “Inside America’s Boardrooms” to discuss three issues that should be on the compensation committee agenda.
Trends in Executive Compensation at the S&P/TSX 60
By Adam Swietek
This update reviews trends in executive pay at S&P/TSX 60 companies[1]. The general trend for the last three years has been for modest growth in actual and target pay, although actual senior executive pay fell slightly from 2013 to 2014. Performance share units (PSUs) continue to increase as a proportion of long term incentive compensation, … Continued
Canadian Companies Continue to Voluntarily Adopt Say on Pay
By Adam Swietek
Although Say on Pay remains voluntary in Canada, the number of companies with an advisory resolution on executive compensation continues to rise, with 162 companies holding Say on Pay votes in 2015 – up from 156 in 2014 and 133 in the year prior (a 22% increase since 2013). Participation among Canada’s largest companies continues … Continued
SEC Releases Proposed Rule on Mandatory Clawback
By Adam Swietek
Introductory Comments from Matt Isakson, Lead Consultant As discussed last week in Seattle, the Compensation Committee’s review of management’s proposed goals is now a primary focus for directors. There are many tools available to the Compensation Committee to help assess the goals from an objective perspective. On a related note, the SEC’s proposed no fault … Continued
Clawbacks: Proposed SEC Rules Will Apply to Canadian Companies with a U.S. Listing
By Adam Swietek
Many large Canadian companies have adopted a clawback policy as a good governance practice and in anticipation of U.S. rules under Dodd Frank. On July 1st, SEC staff released these proposed clawback rules. Surprisingly, under the proposed rules, all companies listed on a (U.S.) national securities exchange, including foreign private issuers, are required to have … Continued
Proposed Pay for Performance Disclosures May Actually Help
By Adam Swietek
The SEC recently proposed rules outlining a new CD&A disclosure coming out of Dodd-Frank (see Meridian Alert here) – these rules require disclosure of the link between performance and compensation “actually paid”. While the proposed disclosures will likely require a significant amount of legwork to calculate and there is a lot of information proposed to … Continued
Compensation Challenges of a Falling Canadian Dollar
By Adam Swietek
After a long period of relative stability and near parity, the Canadian dollar has fallen to about 80 cents U.S. – a six-year low. The outlook for further movement up or down, is unclear and is tied both to the general economic outlook for Canada and the U.S., as well as to worldwide commodity prices. … Continued
Compensation When Oil is in the $40’s
By Adam Swietek
Oil prices in the $40s create an entirely new environment for oil and gas compensation decisions this year. From our vantage point across the industry we’ve noted several important themes and realities: Situations differ. Low prices impact everyone, but some worse than others. A healthy balance sheet can spell a big difference between “peers” with … Continued
Thinking Like an Activist—The Benefits of Looking at Executive Compensation Programs through a Critical Lens
By Adam Swietek
The significant increase in shareholder activism has many companies and compensation committees playing defense. While the specter of activist interest is generally viewed with concern, looking at your executive compensation programs from the perspective of an activist investor can focus compensation committees on three critical areas: Performance of the company relative to competitors for business … Continued