Insights

California Legislature Approves Diversity Mandate for Boards of Public Companies

California Governor Gavin Newsom must sign the Diversity Bill by September 30, 2020 for it to become law.

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On August 30, 2020, the California Assembly approved a first-in-the-nation legislation that would require public companies to include a minimum number of individuals from underrepresented communities on their boards (“Diversity Bill”). If passed into law, the Diversity Bill would apply…

SEC Approves Rule Requiring Public Companies to Disclose Human Capital Resources

On August 26, 2020, by a 3 to 2 vote, the Securities and Exchange Commission (“SEC”) adopted a final rule that would amend Regulation S-K and require public companies to disclose information on their human capital resources to the extent such disclosures would be material to an understanding of the companies’ business.

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Generally, a public company is required to include a description of their business and business developments in its annual report (Form 10-K) and certain other SEC filings. The disclosure rules set forth a non-exhaustive list of topics that a company…

SEC Adopts Final Rule Regulating Proxy Advisory Firms

On July 23, 2020, the Securities and Exchange Commission (“SEC”) by a 3 to 1 vote adopted a Final Rule that imposes a new regulatory regime on proxy advisory firms (“PAFs”).

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The SEC’s adoption of the Final Rule represents the culmination of a years’ long effort to require greater transparency and accountability of PAFs. Specifically, the Final Rule: ■ Conditions the availability of certain existing exemptions from the information and filing…

SEC Releases Rulemaking Agenda for Next Twelve Months

The Securities and Exchange Commission (SEC) recently released its Spring 2020 Regulatory Flexibility Agenda (“Reg Flex Agenda”), which identifies rule-making initiatives that the SEC expects to address over the next year and beyond.

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In its latest semiannual Reg Flex Agenda, the SEC identifies the following rule-making initiatives as among those that the SEC expects to address in the short-term – potentially by October 2020. ■ Revised proposed rule on mandatory recoupment (or “clawback”)…

Recent SEC Action Signals Agency’s Close Scrutiny of Company Perk Disclosures

The Securities Exchange Commission (SEC) recently assessed a $900,000 fine against Argo Group International Holdings due to the company’s failure to fully disclose CEO perquisites over a five-year period. This enforcement action represents one of a series of actions on perquisite disclosures and related matters that the SEC has undertaken against public companies over the last several years.

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Generally, perquisites and personal benefits constitute a relatively small portion of a named executive officer’s total compensation. Nonetheless, perquisites and personal benefits can draw significant scrutiny by investors and the media, especially in cases of unusual or outsized perquisites. Therefore,…

SEC May Scale Back Proxy Advisory Firm Regulation

The Financial Times recently reported that the Securities and Exchange Commission (SEC) is expected to eliminate the requirement that proxy advisory firms (PAFs) preview their vote recommendations with companies for feedback, as would be required under a proposed rule regulating PAFs. The SEC has not confirmed this report.

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On November 5, 2019, the SEC issued a proposed rule which would require PAFs to give companies either three or five days (depending on the number of days the proxy is filed in advance of the annual shareholder meeting) to…

Proxy Advisors Issue Policy Guidance on COVID-19

Institutional Shareholder Services (ISS) and Glass Lewis recently issued guidance on the application of their proxy voting policies in light of the COVID-19 pandemic.

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Since we are now in the heart of proxy season, corporate boards and management teams have raised questions regarding whether ISS and Glass Lewis would consider the impact of the COVID-19 pandemic in either their proxy voting policies or the…

Congress Passes $2 Trillion Stimulus Bill that Limits or Reduces Pay for Employees of Certain Companies Receiving Federal Loans or Loan Guarantees

The largest stimulus bill in U.S. history conditions the granting of federal loans and loan guarantees on recipient companies’ agreement to limit (or in some cases reduce) employee compensation for up to a six-year period.

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On March 27, 2020, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (‘‘CARES Act”) which passed both the U.S. Senate and the House of Representatives earlier last week with bipartisan support. The CARES Act…

COVID-19

The Meridian family is cognizant of the extraordinary challenges facing our clients, friends and others in these unprecedented times.

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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…

ISS Issues Final Policy Updates for 2020

On November 11, 2019, Institutional Shareholder Services (ISS) issued final updates to its proxy voting policies for 2020 and on November 21, 2019, ISS issued further guidance in its preliminary FAQs for 2020 compensation policies. The updates represent an incremental change to existing ISS policies and the implementation of phased-in policies related to non-employee director compensation and board gender diversity.

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Final Policy/Process Updates for 2020 ISS has made the following modifications to its U.S. pay-for-performance assessment for 2020: ■ Easing the quantitative concern thresholds under its initial three-part comparative quantitative analysis of CEO pay and company performance, and ■ Using…

SEC Issues Proposed Rules Regulating Proxy Advisory Firms

On November 5, 2019, the Securities and Exchange Commission (“SEC”) issued proposed rules that would impose a new regulatory regime on proxy advisory firms (“PAFs”).

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Since the SEC held its roundtable discussion on the proxy voting process in November 2018, the SEC has indicated that it was poised to issue proposed rules regulating PAFs. The issuance of the proposed rule represents the culmination of a…

Report on Say on Pay and Select Shareholder Proposals For the 2019 Proxy Season

Meridian Compensation Partners, LLC is pleased to provide this periodic report on key voting results for the 2019 proxy season.

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Executive Summary Specifically, this report will cover the following areas: ■   Standard & Poor’s (S&P) 500 Say on Pay (SOP) Vote Results and Analysis, ■   Russell 3000 SOP Vote Results and Analysis, and ■   Analysis of Vote Results on Select…

Council of Institutional Investors (CII) Overhauls its Policy on Executive Compensation

On September 17, 2019, the Council of Institutional Investors (CII) announced an overhaul of its policy on executive compensation, urging public companies to reduce the complexity of their executive compensation plans and set longer service-based periods for time-based equity awards.

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CII is an influential advocacy group for institutional investors. Its membership includes a wide range of asset managers with over $35 trillion in assets under management. To advance the interests of its members and reflect changes in the corporate governance…

Summary of Key Results from ISS 2019 Annual Policy Survey

ISS’s recent Policy Survey previews potential changes in to 2020 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…

Corporate Share Repurchase Programs Draw Increasing Criticism

Since 2009, corporate share repurchase programs have been a ubiquitous feature of many public companies’ capital allocation strategies. Generally, these programs have been applauded by institutional shareholders, while raising little concern by other parties. That dynamic is now changing with share repurchase programs drawing sharp criticism from politicians, state and union pension funds, and others.

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Recently, politicians, the media, academics and governance experts have criticized company stock buyback programs as a mechanism for enriching shareholders and executives through short-term boosts in a company’s stock price, while harming employees and misallocating capital to the detriment of…

SEC Issues Guidance on Proxy Advisory Firms

On August 21, 2019, the Securities and Exchange Commission (“SEC”) issued guidance covering the role that proxy advisory firms play in the proxy voting process and the use of proxy advisory firms by investment advisers.

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Despite reports to the contrary, the guidance (which does not carry the weight of law) does not represent meaningful federal oversight of proxy advisory firms. In fact, Institutional Shareholder Services (ISS) and Glass Lewis already largely comply with the guidance.…

Institutional Shareholder Services Releases its 2019 Policy Survey Questionnaire

Institutional Shareholder Services (ISS) recently issued its 2019 policy survey questionnaire, which generally 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…

Investor Group Seeking Greater Disclosure on Workplace Equity Policies

A group of 99 institutional investors are requesting “that companies increase investors’ accessibility to information related to their workplace equity policies and practices across gender, race, ethnicity, sexual orientation, and other federally protected classes.”

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Through a yet-to-be launched letter campaign, so far, a group of 99 institutional investors representing over $1.6 trillion of assets owned, advised or managed are signatories to an “Investor Statement” calling for public companies to provide enhanced disclosure on workplace…

Illinois’ Proposed Board Diversity Law Stripped of Diversity Mandate

Earlier this month, the Illinois House of Representatives and Senate passed legislation that requires certain public companies to report diversity data and information, but excludes the requirement that these public companies’ board of directors meet racial and gender quotas (which were a part of the initial proposed legislation).

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As we previously reported in our Client Update dated May 22, 2019, the Illinois House of Representatives and Illinois Senate were both considering separate bills that would have required subject corporations’ boards of directors to include at least one female…

House Committee Hearing on Corporate Accountability Bills

On May 15, 2019, the U.S. House of Representatives Committee on Financial Services held a hearing to consider four draft bills that, if enacted, would impose new compensation and human capital disclosure requirements on public companies and additional regulatory oversight of corporate stock buyback programs.

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The Financial Services Committee (FSC) majority staff has developed three legislative proposals that would require public companies to make sweeping disclosures on officer and employee compensation, human capital metrics, and domestic and foreign employees. A fourth legislative proposal is a…