1 45p compensation and benefits

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Transcript of 1 45p compensation and benefits

  • 1. A-2 Compensation and Benefits Presenters: Richard Garrison-Jefferies LLC Andy Gibson-BDO USA LLP Henry Oehmann-Grant Thornton LLP
  • 2. AGENDA-Part I Dodd Frank Act Update Clawbacks Restricted Stocks Bonus Deductions
  • 3. Latest Status Update (as of September 2013) Provision Explanation Non-Binding Shareholder vote on Executive Pay ("Say-on-Pay") Section 951(a) requires that at least once every three years, public companies must include a resolution in their annual proxy statement providing shareholders with a non-binding approval or say-onpay vote with respect to the compensation of named executive officers. In addition, shareholders must have the right to vote a least once every six years whether such say-on-pay vote must occur every one, two, or three years. IMPLEMENTED The SEC has implemented Section 951. Section 951(b) requires a resolution to the proxy statement, in clear and simple terms, disclosing any agreements with named executive officers concerning compensation relating to an acquisition, merger, consolidation, sale, or other disposition of substantially all of the assets ("change in control") of the company. This disclosure must include the aggregate total compensation and any conditions related to the payment. In addition, shareholders must be provided with a non-binding vote to approve such golden parachute payments, unless previously disclosed and voted on by shareholders under say-on-pay. IMPLEMENTED The SEC has implemented Section 951. Section 951(a) Non-Binding Shareholder vote on Golden Parachutes ("Say-on-Golden Parachutes") Section 951(b) Effective Date Status
  • 4. Provision Effective Date Action Required Applicability Clawback (Section 954) Listing requirements will most likely address the effective date IMPLEMENTED Listed companies Mandatory Say-on-Pay and Golden Parachutes (Section 951) Proxy statements for shareholder meetings occurring after January 21, 2011 IMPLEMENTED All public companies unless exempted by the SEC Compensation Committee Listing requirements to be and Consultant/Advisor effective July 16, 2011 Independence Requirements (Section 952) IMPLEMENTED Listed companies, other than those exempted under the Act or by listing exchanges Disclosure of Chairman/CEO The SEC will most likely Structure (Section 972) address the effective date, which is anticipated to be 2011 proxy season. IMPLEMENTED All public companies Pay vs. Performance (Section The SEC will most likely 953) address the effective date The SEC is required to issue rules for implementation All public companies Disclosure of CEO Pay Ratio On September 2013, the (Section 953) SEC issued proposed regulations. The SEC is required to issue rules for implementation All public companies Enhanced Compensation Structure and Reporting and Prohibitions at Financial Institutions (Section 956) Implementation of final rules Appropriate federal regulators awaiting appropriate federal are required to issue rules for regulators to issue joint implementation guidance. Covered financial institutions
  • 5. Provision Independent Compensation Committees and Advisers Section 952 Executive Pay for Performance Section 953(a) Explanation Effective Date Status Section 952 requires that for any company with equity securities listed on a national securities exchange or a national securities association the compensation committee of the board of directors must be independent. In determining such compensation committee independence, the company shall consider relevant factors, including the source of the member's compensation, including any consulting, advisory, or other fee paid by the company to the member, and whether such member is affiliated with the company. In addition, the company must consider various factors in determining the independence of its compensation consultants including, other services provided, the amount of fees as a percentage of the total amount paid to the adviser, policies and procedures to prevent conflicts of interest, relationships with the committee, and stock ownership in the company. Section 952 requires the SEC to provide rules not later than 360 days after enactment or July 16, 2011. In addition, the SEC is required to conduct a study and review the use and effect of such use of compensation consultants no later than 2 years after enactment that shall be submitted to Congress. The SEC and listing exchange adopted final rules effective July 1, 2013, Congress on study and review of the use of compensation consultants and the effects of such use. Section 953(a) requires the annual proxy statement to disclose in graphical or narrative form, a clear description of the relationship between the executive compensation actually paid and the financial performance of the company, taking into account changes in share value and dividends and other distributions. The company must also disclose the median of the annual total compensation of all of the issuer's employees other than the chief executive officer, the annual total compensation of the chief executive officer, and the ratio of these amounts. The SEC is responsible for issuing such rules, but no effective date is specified. The proxy statement for the annual meeting that occurs one year after enactment (July 22, 2011) requires disclosure as to whether the compensation committee retained or obtained the advice of a compensation consultant and if such work raised a conflict of interest the nature of and how the conflict is being addressed. Pending. The SEC's timeline is to propose new rules from January June 2013 and adopt final rules Jul-Dec 2013. The Burdensome Data Collection Relief Act has been introduced in the House which would eliminate the disclosure ratio
  • 6. Provision Explanation Effective Date Status Executive Compensation Ratios Section 953(b) requires companies to disclose; (1) the median of the annual total compensation of all employees of the company, except the CEO (or any equivalent position); (2) the annual total compensation of the CEO (or any equivalent position); and (3) the ratio of the CEO's compensation to the median compensation of all other employees. Proposed rules issued by SEC on September, 19, 2013. Pending. The SEC's timeline is from Jan Jun and adopt new rules Jul-Dec 2012. Section 953(b) Clawbacks Section 954 Employee and Director Hedging Section 955 The Burdensome Data Collection Relief Act has been introduced in the House which would eliminate the disclosure ratio requirement. Section 954 requires companies to develop and implement policies providing for recovery of any incentive compensation (including stock options) from former and current executives received during the three-year period before an accounting restatement as a result of erroneous financial data. In addition, Section 954 requires clawbacks of any portion of incentive compensation that would not have been awarded based on the corrected data, regardless of an executives' role or involvement in the accounting restatement. IMPLEMENTED Pending. The SEC's timeline is to propose rules from January June 2012 and adopt rules JulDec 2012. Section 955 requires the annual proxy statement to disclose whether employees or members are permitted to purchase financial instruments, including prepaid variable forward contracts, equity swaps, collars, and exchange funds, that are designed to hedge or offset any decrease in the market value of equity securities. IMPLEMENTED Pending. The SEC's timeline is to propose new rules January June 2012 and adopt final rules Jul-Dec 2012. .
  • 7. Provision Explanation Effective Date Status Enhanced Compensation Reporting Section 956 requires certain covered financial institutions to disclose all incentive-based compensation arrangements, in order to determine whether the compensation structure provides an executive officer, employee, director, or principal shareholder with excessive compensation, fees, or benefits or could lead to material financial loss. In addition, Section 956 requires the appropriate federal regulators to prescribe regulations or guidelines related to such enhanced reporting for incentivebased compensation structures. The rules would prohibit any type of incentive-based payment arrangement , or any feature of any such arrangement that encourages inappropriate risks by providing an executive officer, employee, director, or principal shareholder with excessive compensation, benefits, or fees, or that could lead to material financial loss. Pending approval of final rules and joint agency implementation. Draft rules have been promulgated and the SEC will take up in January June 2012 and adopt rules (jointly with others) regarding disclosure of, and prohibitions of certain executive compensation structures and arrangements for financial institutions. The SEC may issue rules allowing shareholders to include their nominees for the board of directors in a company's proxy materials under terms and conditions the SEC determines are in the interests of shareholders and for the protection of investors. In addition, the SEC may exempt certain companies, such as small issuers. Section 971 is effective upon enactment . The SEC has implemented Section 971. Section 956 Proxy Access Section 971
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