This week we highlight a report by BDO’s Center for Corporate Governance and Financial Reporting on a variety of topics that corporate management and boards of directors should be prepared to address in connection with their 2018 annual meetings. The main issues include the impact of efforts by the current administration regarding taxes and deregulation, as well as corporate accountability and compliance concerns.
This week, we highlight a report by EY Center for Board Matters on the top five priorities for companies in 2018 based on outreach conversations with institutional investors. Investors offer that their top five priorities this year are:
- Board composition, with a particular focus on enhanced diversity
- Board-level expertise that is more aligned with business goals
- Increased attention to climate risk and the environment
- Enhanced attention to talent and human capital management
- Compensation that is more aligned with performance and strategy
Click here to view the full report.
Akin Gump has issued an alert summarizing the provisions of the Tax Cuts and Jobs Act as it relates to executive compensation and employee benefits. We discuss the effect on the Affordable Care Act individual mandate, compensation deduction limits for public companies, retirement plans and other benefit and expense plans companies might utilize.
Click here to read the full alert.
Beginning in 2018, U.S. public companies will generally need to comply with the pay ratio disclosure rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires that each such company disclose the annual total compensation of its CEO, the median of the annual total compensation of all employees of the company other than the CEO and the ratio of these two numbers. In order to provide this information, a company must determine (i) its “median employee” (ii) the annual total compensation of its CEO and (iii) the annual total compensation of its “median employee.” The rule generally provides companies with flexibility in making these determinations. For example, companies may use reasonable estimates in the methodology used to both identify the median employee and calculate the annual total compensation for employees other than the CEO. In addition, companies may evaluate their entire employee population, a statistical sampling of that population or other reasonable methods to identify the median employee. Non-U.S. employees may be excluded from this employee population in situations where non-U.S. employees constitute 5 percent or less of the company’s total employee workforce (the “5 percent exemption”).
This week we highlight two analyses, one by J.P. Morgan and the other by Ernst & Young, reviewing the 2017 proxy season. The reports address board diversity; gender equality; environmental, social and governance (ESG) issues; and the normalization of shareholder activism as high priorities and key trends for many investors and boards.
This week we highlight Willis Towers Watson’s 2017 Proxy Analysis of Executive Compensation. Their analysis is based on 365 S&P 1500 companies with consistent CEOs that filed proxies disclosing 2016 pay by the end of March 2017. The findings conclude that executive pay practices settled in to a new normal in 2016, characterized by modest pay increases, continued emphasis on performance-oriented compensation, and annual and long-term incentive (LTI) plan design features and metrics consistent with those of recent years.
As stated in our May 25, 2017 Executive Compensation, Employee Benefits and ERISA Alert, the Department of Labor’s (DOL’s) new fiduciary rule (“Fiduciary Rule”) became partially applicable on June 9, 2017. Set forth below are a few questions that a typical private fund manager might have in response to the Fiduciary Rule, and our responses thereto.
The Fiduciary Rule, which expands the circumstances under which providers of investment advice may be considered Employee Retirement Income Security Act of 1974 (ERISA) fiduciaries, was initially published in the Federal Register on April 8, 2016, became effective on June 7, 2016, and had an original applicability date of April 10, 2017. On March 2, 2017, in response to a February 3, 2017 presidential memorandum directing the DOL to re-examine the Fiduciary Rule, the DOL published a notice proposing a 60‑day delay in the applicability date of the Fiduciary Rule. On April 7, 2017, the DOL promulgated a final rule delaying the applicability date of the Fiduciary Rule by 60 days from April 10, 2017 to June 9, 2017.