I. History
II. SEC Rules and Regulations
a. Exchange Act Rule 14a-21 20-5
b. Item 402(t) of Regulation S-K 20-7
c. Exchange Act Rule 14a-8(i)(10) Note 20-11
d. Item 24 of Schedule 14A 20-11
SEC Staff Guidance
a. Compliance and Disclosure Interpretations 20-12
1. Companies Phasing into Smaller Reporting Company Status 20-12
2. Companies Phasing Out of Smaller Reporting Company Status 20-12
3. Phrasing of Say-on-Frequency Vote 20-13
4. Phrasing of Say-on-Pay Vote 20-13
5. Which Officers to Include in Say-on-Golden Parachute Disclosure 20-14
6. How to Report Say-on-Frequency Results 20-15
IV. How the Rule Works
a. Generally 20-16
- Dodd-Frank Section 951 20-16
- Exclusion of Shareholder Proposals 20-16
- Broker Discretionary Voting 20-16
- Exclusion From the Requirement to File a Preliminary Proxy Statement 20-16
- Smaller Reporting Companies 20-16
- Interaction with EESA Requirements 20-17
b. Say-on-Pay Vote 20-17
- Say-on-Pay Vote 20-17
- When Required 20-17
- What Is Covered by the Resolution? 20-17
- What Is Not Covered by the Resolution? 20-17
- Wording of the Resolution 20-18
- Additional Disclosure Item for the Proxy Statement 20-19
- Additional CD&A Disclosure 20-19
- Diminishing Role of Supporting Statement 20-19
- Separate Say-on-Pay Resolution & Other Pay Disclosures 20-20
- Form 8-K Disclosure 20-20
- Voting Standard 20-20
c. Say-on-Frequency Vote 20-21
- Say-on-Frequency Vote 20-21
- Four Choices 20-21
- Most Companies Select “Annual” 20-22
- Factors to Consider When Making Choice 20-21
- Wording of the Resolution 20-23
- Additional Disclosure Item in the Proxy Statement 20-23
- Form 8-K Disclosure 20-23
- Can Disclose Results in 10-Q/10-K in Limited Circumstances 20-24
- Disclosing Frequency Votes Simultaneously With Say-on-Pay Vote Common (But Not Required) 20-24
- Broker Non-Votes 20-24
- Compliance Tips 20-25
- Can Voluntarily Hold Frequency Votes More Often 20-25
- Smaller Reporting Companies “Off-Cycle” Compared to Other Companies 20-25
- EGCs Don’t Need Frequency Vote 20-26
- EGCs Who Lose EGC Status Need to Conduct Frequency Vote Before Say-on-Pay Vote 20-26
d. Say-on-Golden Parachutes 20-26
- Say-on-Golden Parachutes 20-26
- What Disclosure is Required? 20-26
- Application of the Say-on-Golden Parachute Exception 20-28
- Whose Compensation Must be Disclosed? 20-28
- Additional Forms Requiring Golden Parachute Compensation Disclosure 20-28
- Increased Focus on Say-on-Golden Parachutes 20-28
- ISS Review 20-29
V. Common Questions and Our Analysis
a. Say-on-Pay Vote 20-29
1. Do NEOs Have an “Interest” in Say-on-Pay Vote? 20-29
2. Say-on-Pay Requirements for Wholly-Owned Subsidiary of Reporting Company 20-29
3. Say-on-Pay & NYSE Notice 20-30
4. Use of Non-GAAP Measures in Say-on-Pay Proposal 20-30
5. Impact of Say-on-Pay Rules on Previously-Approved Shareholder Say-on-Pay Resolution 20-31
6. Say-on-Pay for Canadian Companies 20-31
7. Placement of Say-on-Pay & Say-on-Frequency Proposals in Proxy Statement 20-32
8. Pay Ratio Doesn’t Have To Accompany Say-On-Pay 20-32
9. Dual Classes of Voting Stock 20-33
10. Disclosing Consideration of Say-on-Pay Vote Results 20-33
b. Say-on-Frequency 20-34
1. Proxy Card for Say-on-Frequency Proposal 20-34
2. Form of Say-on-Frequency Proposal 20-34
3. Disclosure of Voting Standard for Say-on-Frequency Proposal 20-35
4. Disclosure of Anticipated Company Response to Say-on-Frequency Vote 20-37
5. Disclosure of Current Frequency & Next Say-on-Pay Vote 20-37
6. Interplay of Say-on-Frequency Vote Standard & Bylaw Requirements 20-38
7. Say-on-Frequency Proposal Without Management Recommendation 20-38
8. Impact on 10-K of Omitting Required Say-on-Frequency Proposal 20-39
9. Say-on-Frequency & Regulation FD 20-39
c. Golden Parachute Vote 20-39
1. Trends for When to Hold the Golden Parachute Vote 20-39
2. Equity Issuance May Not Trigger Golden Parachute Vote 20-40
VI. Practice Pointers
a. Ten Tips for Preparing Say-on-Pay Disclosure 20-41
1. Executive Summaries—You Don’t Get a Second Chance to Make a First Impression 20-41
2. Compensation-Related Risk Disclosure 20-43
3. “Pay-for-Performance:” It’s Still the Bottom Line 20-44
4. Good Practice Creates Good Disclosure 20-45
5. Continue to Describe Your Program Components—But Briefly 20-46
6. Scale Back Your Process Discussions: Going Forward, Less is More 20-47
7. Don’t Hide Your Perks in a Say-on-Pay World 20-47
8. Be Sure to Explain Your Post-Employment Compensation 20-48
9. Golden Parachutes & “Walk-Away” Numbers 20-48
10. A Bonus Tip: Recommending a Choice for the Frequency on Say-on-Pay Vote 20-50
b. Say-on-Golden Parachutes 20-51
VII. Sample Disclosure
a. Say-on-Pay 20-53
