On September 5, 2024, Institutional Shareholder Services (ISS) released its 2024 Proxy Season Review: United States – Executive Compensation. The below chart summarizes our observations of the 2024 data and key takeaways as we look to the 2025 proxy season. While these trends are positive for issuers overall, they underscore that issuers, their boards, compensation committees, and management should continue to take an active role in compensation programs, disclosure, and shareholder engagement practices.
Executive Compensation
Another Batch of SEC Staff Guidance on Rule 10b5-1 Amendments
On August 25, 2023, the staff of the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (the “SEC") issued five new Compliance and Disclosure Interpretations (“C&DIs") regarding the SEC’s recent Exchange Act Rule 10b5-1 amendments. The new C&DIs address how to calculate the required cooling-off period; how 401(k) plans interact with the Rule 10b5-1 affirmative defense in certain circumstances; when the Rule 10b5-1 check box on Form 4 applies; and when disclosure of plan adoption and termination is required.
NYSE and Nasdaq Allow More Time for Companies to Adopt Rule 10D-1 Clawback Policies: What to Do Now
This week, both the New York Stock Exchange (“NYSE”) and The Nasdaq Stock Market (“Nasdaq”, and together with NYSE, the “Exchanges”) filed amendments with the Securities and Exchange Commission (“SEC”) to provide a delayed effective date for the Exchanges’ proposed listing standards requiring listed companies to adopt clawback policies, as mandated by Rule 10D-1 under the Securities and Exchange Act of 1934.
New SEC Staff Guidance on Rule 10b5-1 Amendments and Summary of Compliance Dates
On May 25, 2023, the staff of the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (the “SEC") issued three new Compliance and Disclosure Interpretations (“C&DIs") on the SEC’s recent Rule 10b5-1 amendments. The new C&DIs re-affirm prior statements made by Staff members regarding effective dates for required new disclosures and the operation of the cooling-off period when entering into back-to-back trading plans. We summarize below the C&DI and the compliance dates for new rules relating to Rule 10b5-1, Section 16 and share repurchases.
SEC Proposes Changes to Rule 144, Form 144, Form 4 and Form 5
On December 22, 2020, the Securities and Exchange Commission (the “SEC") proposed and published for comment amendments to Rule 144, Form 144, Form 4, Form 5 and Rule 101 of Regulation S-T. These amendments primarily seek to (a) mitigate the risk of unregistered distributions in connection with sales of market-adjustable securities under the current Rule 144 safe harbor by revising the holding period for such securities to begin upon the conversion or exchange of such securities, and (b) update and streamline Form 144 by mandating electronic filing and eliminating the Form 144 filing requirement with respect to non-reporting issuers. Comments on the proposed rules will be due 60 days after publication of the proposal in the Federal Register and may be submitted electronically using the SEC’s internet comment form (http://www.sec.gov/rules/submitcomments.htm) or by mail to the following address: Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number S7-24-20.
S&P 500 Pay Ratio Disclosures: Emerging Trends
As the 2018 proxy season is now gaining full speed, the first group of the required CEO-to-median employee pay ratio disclosures have made their eagerly-awaited debut. Gibson Dunn has been tracking all required pay ratio disclosures by S&P 500 and Fortune 100 companies and, while still early, there are a number of key observations and emerging trends from the filings to date.
ISS Releases Surveys for 2018 Policy Updates
On August 3, 2017, the proxy advisory firm Institutional Shareholder Services (“ISS”) launched its annual policy survey. Each year, ISS solicits comments in connection with the review of its proxy voting policies. ISS then uses the data to inform its voting policy review. At the end of this process, ISS will announce its updated proxy voting policies applicable to 2018 shareholder meetings.
SEC Corp Fin Staff Releases Guidance on CEO Pay Ratio Disclosure
| On October 18, the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) released five Compliance and Disclosure Interpretations (“C&DIs”) addressing new Item 402(u) of Regulation S-K regarding CEO pay ratio disclosure. |
ISS Releases Survey for 2017 Policy Updates
Institutional Shareholder Services (“ISS”) today launched its annual global policy survey. Each year, ISS solicits comments in connection with the review of its proxy voting policies. At the end of this process, in November 2016, ISS will announce its updated proxy voting policies applicable to 2017 shareholders’ meetings. ISS will publish the results from the policy survey and use them to inform its voting policy review. The survey includes questions on several governance and compensation matters relevant to U.S. companies, as follows:
Schedule 13G “Passive” Investor Status – When Being A Little Active Is Still Passive!
On Thursday, July 14, 2016, the Staff in the Division of Corporation Finance posted a new C&DI on Section 13(d) that provides stockholders (and issuers) with some helpful insights, and perhaps greater clarity, on when significant stockholders can engage in a dialogue with management and still remain on Schedule 13G. As many practitioners know, Schedule 13G (the “short form” for reporting beneficial ownership of equity positions of 5% or more) often requires an affirmative certification from the reporting person(s) that the securities were not acquired, and are not held, with the purpose or effect of changing or influencing control of the issuer. This is commonly referred to as the “passive” investor certification which is set forth at the end of Schedule 13G, directly above the signature line.