Will Rule 14a-8 Amendments Slow Down “Pay Gap” Proposals?
According to the investors on our recent webcast, “Pay Equity: What Compensation Committees Need to Know,” pay equity is going to continue to be a hot topic. But an Orrick blog points out that proposals to disclose workforce “pay gap” data may eventually be hampered by the SEC’s recent amendments to Rule 14a-8. Here’s an excerpt:
The amendments to Rule 14a-8 may impact future pay gap shareholder proposals in several ways. First, beginning in 2022, activist shareholders will be unable to reintroduce proposals that fail to attain the requisite support at a previous shareholder meeting. Critically, shareholder proposals have received less than 10% of voters’ support at several companies’ annual shareholder meetings, including Alphabet, Facebook, J.P. Morgan, and Wells Fargo. The amended Rule 14a-8(i)(12) may have less impact at companies where such proposals have failed by a narrower margin.
Relatedly, activist shareholders may shift their calculus given the preclusive impact of multiple failed pay gap proposals in successive years. They may, for example, shift their focus to different industries, or to other companies in the financial and technology industries that have not yet received a pay gap shareholder proposal. Smaller activist shareholder groups may be dissuaded from filing pay gap shareholder proposals altogether given the increased ownership thresholds under Rule 14a-8(b).
Finally, given the rule restricting shareholder proposals to one per “each person,” activist shareholders will soon be prohibited from filing multiple proposals with the same company in a single year. What this means for the future of pay gap shareholder proposals is unclear, although some activist shareholders may find such proposals less attractive than other proposals in light of their extremely low success rate to date.
-Liz Dunshee, CompensationStandards.com December 2, 2020
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