Corporate Governance and Executive Compensation Practices

With the Labor Day holiday now in the rear view mirror, we wanted to remind companies whose shares are listed on the NYSE/Nasdaq stock exchanges that the deadline for implementing a so-called “Clawback Policy” is fast approaching. As we reported in our November 3, 2022 blog, “Another Seven Year Wait is Over! SEC Finalizes Regulations on Clawback of Incentive Compensation for Restated Financial Statements”), the Securities and Exchange Commission (the “SEC”) published final regulations (Release No. 34-96159) (the “Final Rules”) requiring specified publicly-held companies to adopt, disclose and maintain a policy to recover incentive compensation which was previously paid to specified company employees based on financial statements that were subsequently restated by the company such that the overpaid incentive compensation needs to be repaid back to the company by the covered employees. Continue Reading Stock Exchange Deadline Approaches for Adopting SEC Compliant Clawback Policy

As we recently noted (see our Corporate & Securities Law blog from October 26, 2022, “SEC Adopts New Executive Compensation Clawback and Disclosure Rule”), in accordance with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”), the Securities and Exchange Commission (the “SEC”) issued a press release and published final regulations (Release No. 34-96159) (the “Final Rules”) regarding so-called “Clawback Policies”. Continue Reading Another Seven Year Wait is Over! SEC Finalizes Regulations on Clawback of Incentive Compensation for Restated Financial Statements

As we previously commented more than seven years ago (see our blog from May 4, 2015, “Finally! SEC Proposes New Pay for Performance Disclosure Regulations”), on April 29, 2015, in accordance with Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”), the Securities and Exchange Commission (the “SEC”) issued a press release and published proposed regulations (Release No. 34-74835) (the “Proposed Rules”) to require specified publicly-held companies to disclose the relationship between their financial performance and the compensation that is actually paid to their named executive officers (”NEOs”).Continue Reading The Seven Year Wait is Over! SEC Finalizes New Pay Versus Performance Disclosure Regulations

In In re Investors Bancorp, Inc. Stockholder Litigation, No. 169, 2017, 2017 WL 6374741 (Del. Dec. 13, 2017), the Delaware Supreme Court limited the ability of directors to assert the stockholder ratification defense when facing a challenge to their implementation of equity incentive plans (“EIP”). When properly invoked, the stockholder ratification defense entitles directors to have a court review their conduct under the more deferential business judgment rule standard, rather than the more stringent “entire fairness” standard. The Delaware Supreme Court held that where stockholders approve an EIP containing general parameters that afford directors discretion to determine specific awards, and their exercise of discretion is properly challenged as a breach of fiduciary duty due to alleged self-dealing, a board must prove that its actions were entirely fair to the corporation and its stockholders. This ruling has the important effect of shifting the burden from complainant stockholders to defending directors and subjects their awards of grants to stricter scrutiny.
Continue Reading Delaware Supreme Court Imposes New Limits on Stockholder Ratification Defense In Connection With Equity Incentive Plans

On Friday, December 15, 2017, Congress put forth a final version of the Tax Cuts and Jobs Act, which would signify the largest piece of tax legislation in over thirty years if signed into law. Early in the morning on December 20, the Senate voted to pass the bill, and the House later approved it on the same day. The bill is on its way to President Trump’s desk, and most expect the bill to be signed into law when he receives the package just in time for Christmas. So what does this mean from an executive compensation standpoint?
Continue Reading The President Receives an Early Christmas Present: Congress Approves Landmark Tax Bill – What Will this Mean for Executive Compensation?

As an update to our previous blog post entitled, Senate Stays Up Late to Approve Tax Bill, dated December 5, 2017, the Senate and the House appear to have come to an agreement on the final version of the tax bill that will be voted on by Congress. While nothing official has been stated or released regarding the final bill, word from the latest news outlets revolves mostly around changes to corporate and individual tax rates. One interesting thing to note is that the current agreement would allegedly repeal the corporate alternative minimum tax, which was reflected in the Senate’s final version of their bill. For a review of the differences regarding executive compensation matters between the Senate and House versions of the bills, please refer to our original blog posts entitled  Thanksgiving Tax Frenzy – New Tax Bill Proposes Executive Compensation Changes That Could Derail Deferred Compensation and Stock Options on November 14 and Startups Have Much To Be Thankful For – Senate Amendments to New Tax Bill Remove Deferred Compensation and Stock Options from Endangered Species List on November 16. 
Continue Reading Congressional Republicans Reach a Deal on Tax Bill

Early in the morning on Saturday, December 2, 2017 (it was nearly 2 AM Eastern!), the Senate voted 51-49, drawn mostly along party lines, to pass its version of the tax reform bill described in our previous blog posts Thanksgiving Tax Frenzy – New Tax Bill Proposes Executive Compensation Changes That Could Derail Deferred Compensation and Stock Options on November 14 and Startups Have Much To Be Thankful For – Senate Amendments to New Tax Bill Remove Deferred Compensation and Stock Options from Endangered Species List on November 16. Members of the Senate had only a few hours to review what was deemed to be the final version of the Senate’s bill (which, interestingly, had edits hand-written in the margins), before the vote was held. Should the Tax Cuts and Jobs Act become law, it would represent the largest reform of the Internal Revenue Code since 1986.
Continue Reading Senate Stays Up Late to Approve Tax Bill

As discussed in our November 14, 2017 blog post, Thanksgiving Tax Frenzy – New Tax Bill Proposes Executive Compensation Changes That Could Derail Deferred Compensation and Stock Options, the evolution of the Tax Cuts and Jobs Act bill in both the House and the Senate is very fluid. No sooner had we posted the previous entry when the Senate had modified its Chairman’s Mark on November 14, 2017. Start-ups and other entities granting executive compensation will have much to be thankful for because of this latest markup. This update reflects the state of the tax bills through November 15, 2017.
Continue Reading Startups Have Much To Be Thankful For – Senate Amendments to New Tax Bill Remove Deferred Compensation and Stock Options from Endangered Species List

Congress has been in a frenzy to try and get new tax legislation passed by Thanksgiving, and members of the House and Senate would presumably rather be enjoying a feast rather than drafting and analyzing additional tax provisions when Turkey day rolls around. This blog addresses the executive compensation related provisions in the proposed new tax legislation which is likely to be voted on in the very near future.
Continue Reading Thanksgiving Tax Frenzy – New Tax Bill Proposes Executive Compensation Changes That Could Derail Deferred Compensation and Stock Options

On April 30, 2015, the Court of Chancery of the State of Delaware rendered an important case decision in a procedural matter dealing with the equity compensation  of non-employee members of a company’s board of directors (see Calma v. Templeton, Delaware Court of Chancery C.A. No. 9579-CB) (“Calma”).  As we discuss in this blog, companies may wish to evaluate their equity compensation plans and ascertain whether their process regarding non-employee director equity awards needs any adjustments in light of Calma.
Continue Reading Back To The Future – Should Stock Incentive Plans Impose Grant Limits on Non-Employee Director Awards?

On April 29, 2015, in accordance with Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”), the Securities and Exchange Commission (the “SEC”) issued a press release and published proposed regulations (Release No. 34-74835) (the “Proposed Rules”) to require certain publicly-held companies to disclose the relationship between their financial performance and the compensation that is actually paid to their named executive officers.
Continue Reading Finally! SEC Proposes New Pay for Performance Disclosure Regulations