Questions and Discussion
*Cindys slide
Note: Stockholder proposals can be excluded on procedural
grounds this year as no stockholder will meet requirement on one
year of holdings
Note: this year we have more time as a new public company has 90
days to file 10-K, due to our size, well only have 60 days in
future*Cindys slide
Note: Stockholder proposals can be excluded on procedural
grounds this year as no stockholder will meet requirement on one
year of holdings
Note: this year we have more time as a new public company has 90
days to file 10-K, due to our size, well only have 60 days in
future**Cindys slide
On January 25, 2011, the SEC issued final rules for implementing
the say on pay requirements of the Dodd-Frank Act (see Shareholder
Approval of Executive Compensation and Golden Parachute
Compensation, SEC Release No. 34-63768 (January 25, 2011)).
Under these rules, companies must- Conduct stockholder advisory
votes at least once every three years to approve the compensation
of their named executive officers as disclosed in the proxy
statement under Item 402 of Regulation S-K, including the
Compensation Discussion and Analysis, the compensation tables and
other narrative executive compensation disclosure.
- Allow stockholders to vote, at least once every six years, on
how frequently to conduct the stockholder advisory vote on
executive compensation. The say on when vote is also a non-binding
stockholder advisory vote. The stockholders must be given the
following choices on when to hold the say on when vote:
every year; once every other year; once every three years; or
abstain from the vote.
The SEC did not mandate a specific form of resolution in the
final rules, although new Rule 14a-21(a) provides a non-exclusive
example of a resolution. In addition, the SEC staff has offered
suggested language to describe say on pay proposals on proxy cards
and voting instruction forms and provided an example of language
that would not be appropriate (see Question 169.07, SEC Compliance
and Disclosure Interpretations: Exchange Act Rules). For more
information on the say on pay resolution, see Standard Clause,
Stockholder Resolutions: Say on Pay.
Under these rules, the say on when vote is essentially a straw
poll. The SEC did not even prescribe a standard to determine
whether a particular frequency was adopted by stockholders. Like
other non-binding advisory votes, the company is not required to
follow stockholder opinion. However, the company must be prepared
to defend its actions to stockholders afterwards. In addition, the
rules encourage companies to adopt the frequency chosen by a
majority of the stockholders by permitting companies that do so to
exclude future stockholder proposals on say on when
voting.*Stephanies Slide-- Failures tended to be a result of
disconnect between pay and performance/often in relation to decline
in SH return-- Time-based equity awards rather than
performance-based awards-- Performance metrics not disclosed well
or too easily achieved -- Failure to disclosure efforts to respond
to low prior votes*Stephanies Slide*Cindys slide, Stephanie can
cover outcomes if desired*Stephanies Slide*Cindys Slide
A stockholder proposal is a recommendation or requirement that a
company or its board of directors take a particular action, which
is submitted by a stockholder for consideration at the company's
stockholders' meeting. Rule 14a-8 under the Exchange Act provides a
process for stockholders to submit proposals for inclusion in
company proxy materials under certain circumstances. Rule 14a-8 is
applicable to reporting companies with a class of securities
registered under Section 12 of the Exchange Act.
Under Rule 14a-8, a company must include a stockholder proposal
and related supporting statement in its proxy statement and list
the stockholder proposal on its proxy card to be voted on with the
company's proposals if: The stockholder complies with specified
eligibility and procedural requirements. The proposal is not
excludable under one or more of the 13 substantive exclusions under
Rule 14a-8(i).
If the company determines that it is not in the best interests
of the company to include the stockholder proposal in its proxy
materials, it can take any of the following actions: Seek no-action
relief from the SEC staff that would allow the company to exclude
the proposal without the threat of staff recommendation of an
enforcement action. The request for no-action relief must be based
on a procedural deficiency or a substantive exclusion under Rule
14a-8. Take legal action in court to exclude the proposal.
Negotiate with the proponent to withdraw the proposal.*Cindys
slide*Stephanies Slide
-- even though we dont have independent chair, these proposals
getting low support (31%); possibly indicating stockholders still
defer to boards on structure of leadership-- Board declassification
receiving 78% support (Lucian Bebcheck/Harvard Project responsible
for most proposals)*Stephanies Slide
-- Board declassification receiving 78% support (Lucian
Bebcheck/Harvard Project responsible for most proposals)
-- Majority voting is next project from Harvard
-- Exclusive Forum adopted by Board - June 2013 - Chancellor
Strines decision upholding the validity of board-adopted exclusive
forum bylaw provisions at Chevron and FedEx- mildly (ISS) or firmly
(Glass-Lewis) negative.*Stephanies Slide
*Stephanies Slide
-- ISS doesnt have a formal policy, but in Provident ISS is
recommending voting against director nominees-- Likely January
theyll have an update**Cindys slide
have dialogue to try to know what stockholder proposals are
coming (less common); try to predict from prior years submissions
what will be resubmittedtry to speak to every proponent;
institutional are surprised when company doesnt reach out- dialogue
is becoming the norm, so if you dont reach out they might be
surprised- amount of dialogue tailored to each proposal (i.e.
someone who proposes year after year, very limited
discussion)Retail investors tend to submit the largest amount of
proposals; some do reach out, but many find that the dialogue
discussion is more difficult and theres less of an interest
Relying on retaining outside guidance from experts is helpful in
making sure were within market and knowing what stockholder
investments
Director(i.e. Exec Comp messaging may be better from independent
compensation committee)
*Cindys slide*
