Francis H. Byrd, Managing Director & Corporate Governance Advisory Practice Co-Leader
Searching for 2011’s Watchwords
Francis H. Byrd, Co-Leader, Corporate Governance Advisory Practice
This week we are attending the Society of Corporate Secretaries & Governance Professionals’ 64th Annual Conference, in Chicago. Given the timing, we will not be able to discuss any comments made by SEC Chairman Mary Schapiro (SEC Update Address) or her deputy chief of staff, Kayla Gillan (on a panel discussing proxy mechanics with our Ken Altman). We will cover those issues in detail in our next issue (Friday, July 22nd)
With no new news out of Washington, DC on the fate of financial regulatory reform and with Wall Street battling an east coast heatwave, we felt this might be a good time to think about some of 2011 issues that we expect will be addressed by Chairman Schapiro, as well as other speakers and panelist. Below is a list of some of those concerns:
Say on Pay/Executive Compensation
If no major changes are made to the reform package, we can expect that executive compensation as seen through the prism of “Say on Pay” will be a critical issue for companies. The review of pay for risk elements and the appearance of fairness will be the first issue examined. On the heels of that concern will be a discussion of the frequency of shareholder votes on pay. The mechanics of obtaining investor approval will weigh heavily on companies, shareholders and proxy advisory firms.
New Proxy Disclosures on Pay, Risk in Pay and Board Oversight of Risk
The final word is not yet in on the value of the new disclosure regime on compensation and risk. Many investor activists lobbied heavily for these new disclosures and believed they would be helpful in providing transparency for decision-making. Hopefully, Chairman Schapiro will direct some comments on how the SEC has viewed the value of these disclosures to investors.
Disclosures on Director Nominees, Board Leadership and Diversity
It is also not clear whether the new requirements to disclose new and additional information on the background and value of individual directors has added to investor understanding of the roles of specific directors or the oversight ability of the board. What is clear is the fact that in the new proxy access environment, companies and their directors will need to provide enough information to provide investors with comfort and themselves with a solid defense against unwarranted attacks on individual directors by activists seeking a board’s “weakest link.”
Proxy Access and Proxy Mechanics
We take note that the SEC has scheduled an open meeting for Wednesday, July 14th, to discuss and approve a concept release on proxy mechanics http://www.sec.gov/news/openmeetings/2010/
ssamtg071410.htm. It is widely expected that the concept release will address such issues as continuation of the current NOBO/OBO practice and other issues related to proxy voting.
Of equal importance, we are awaiting Congressional approval and a presidential signature on the regulatory reform measure which will signal the final push for proxy access. The shape of access has, according to the unsigned law, been left to the SEC to determine. Chairman Schapiro has indicated that it is the Commission’s intent to have access ready for the 2011 proxy season. Yet many believe that to move forward with proxy access without having fully addressed and remedied the many flaws plaguing the proxy voting system would be at best problematic.
Upcoming Webinar
Reid Pearson and Francis Byrd, co-leaders of The Altman Group’s corporate governance consulting practice, are participating on a webcast discussing Say-on-Pay organized by Sutherland Asbill & Brennan LLP. You may register for the webcast, which is scheduled for Wednesday, July 27th at 1:00 p.m. at events.SignUp4.com/ProxyIssues_SayOnPay
The Webinar will address:
• Recent legislative and regulatory developments in executive compensation as they relate to Say on Pay
• Ways in which companies can position themselves to prepare for shareholder input into executive compensation
• How a company can best prepare for this new and uncharted environment
