The Conference Board Governance Center Blog

Aug
29
2013

Disclosure Lessons from the 2013 Proxy Season

By Jim Barrall, Partner, Latham & Watkins LLP

Ever since 2006 when the SEC adopted its CD&A and other enhanced executive compensation disclosure rules, proxy disclosures have evolved annually in response to changing pay plan designs, changing pay and governance practices, formal and informal pronouncements by the SEC staff, and pressures from the proxy advisory firms. This evolution has been fairly consistent and gradual, with notable flurries of new disclosures in 2008 after the SEC staff issued comment letters to hundreds of companies requesting more robust disclosure of performance goals, in 2010 in response to SEC rules and comments requiring disclosure of possible business risks resulting from pay plans, and in 2012 in response to ISS’s new voting policy on pay-for-performance.

The 2013 proxy season brought several kinds of changes to compensation proxy disclosure practices. First,  in response to the new Dodd-Frank Act rule requiring companies to disclose whether their compensation consultant’s work raised any conflicts of interest (and, if so, how they were addressed), many companies disclosed more information regarding compensation consultant independence and conflicts of interest. While we saw no disclosures of any such conflicts (not surprisingly), many companies affirmatively stated that no such conflict existed. Second, continuing the strong trend from the 2012 proxy season and foreshadowing what we expect to see in 2014, many more companies provided more disclosure about the alignment of their pay with the company’s performance, with many companies providing more information regarding peer group determinations and changes, as well as utilizing supplemental disclosures of “realized” or “realizable” pay to measure such alignment. Third, some companies responded to the waves of filed and threatened lawsuits regarding the sufficiency of say-on-pay and equity plan authorization vote proxy disclosures, as well as on IRC Section 162(m) and other compensation matters.

The Conference Board has just published a Director Notes authored by my Latham colleagues (Dave Della Rocca, Carol Samaan, Julie Crisp, Michelle Khoury) and me, “Disclosure Lessons from the 2013 Proxy Season,” (Complimentary registration required) which discusses and provides examples of what we have seen in 2013 proxies. We have intentionally not named the companies whose proxies we excerpted or listed the companies which provided similar disclosures, in order to protect the innocent from the aggressive shareholder plaintiffs’ bar, about which I have posted prior blogs and much has been written.

About the Guest Blogger:

James D. C. Barrall, Partner, Latham & Watkins LLP

James D. C. Barrall, Partner, Latham & Watkins LLP

James D. C. Barrall is a partner in the Los Angeles office of Latham & Watkins LLP and is the Global Co-Chair of the firm’s Benefits and Compensation Practice. Mr. Barrall specializes in executive compensation, corporate governance, employee benefits, and compensation related disclosure and regulatory matters.

Mr. Barrall is a frequent author, contributing editor, and lecturer on executive compensation, corporate governance, disclosure, and other regulatory matters. He is a co-author of the chapter on extensions of credit to directors and officers in the American Bar Association’s Practitioner’s Guide to the Sarbanes-Oxley Act.

Mr. Barrall has lectured at the UCLA Law School, the UCLA Anderson School of Management, and the Aresty Institute of Executive Education at the Wharton School, University of Pennsylvania. Mr. Barrall is a member of the Board of Advisors of the UCLA School of Law and the Lowell Milken Institute for Business Law and Policy.



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