2015 Alerts

2015.Sept.25  Aircraft Perq Litigation Dismissed vs Nordstrom
A Washington district court has dismissed Burbrink v. Campbell, which alleged false and misleading proxy statements had undervalued the Nordstrom family's use of private aircraft.  The company succeeded in establishing that independent directors had overseen the arrangements, and submitted an expert report substantiating its valuations.  Executive usage of corporate aircraft remains a sensitive, complex practice.  

2015.Sept.24  Director Compensation - What to Limit to Defuse Litigation?
In its well-publicized Citrix decision earlier this year, Delaware's Chancery Court comprehensively reviewed past shareholder derivative litigation alleging excessive compensation for directors.  In the wake of that decision, Calma v Templeton (4/30/2015), it has become common for public companies to consider receiving shareholder approval of some director compensation limit when they seek approval for new or amended stock plans. Should approval relate to total compensation, or focus on equity awards? The safest course involves . . . 

2015.Sept.20  Section 409A Corrections to Employment Agreements - Time for an Ounce of Protection in 2015
First the bad news: when it comes to 409A violations, the most common sources are employment agreements and releases.  Now the good news: a 2015 IRS Chief Council Memo supports the correction of defective severance provisions if that occurs . . . see 409A diagnostic guide

2015.Sept.12   Performance Awards - Don't Underestimate the Impact of a Change in Control
How does a change in corporate control (CIC) affect cash bonuses and equity awards that have performance-based vesting?  It is not problematic that corporate practices tend to differ widely.  Of concern, however, are imprecise plan provisions, or an unexpected triggering of golden parachute problems -- or both.  In terms of what to do . . .

2015.Sept.07   Perquisites Remain Toxic . . . Settlement of SEC Enforcement Action
From investor reactions to public disclosures to SEC enforcement aimed at inadequate disclosures, executive perquisites continue to nag companies that make broad use of company-provided aircraft, housing, legal or tax services, club memberships, and other perquisites. In settling SEC charges that involved nearly $500,000 of unreported executive benefits, not only did MusclePharm agree to pay a $700,000 fine and to use an SEC-approved independent monitor for its governance and audit practices, but the head of its audit committee had to pay a $30,000 fine and two other executives had to pay $180,000 in fines.  These fines reflect the recently-announced policies of the Department of Justice and the SEC to aimed at imposing personal liability on those responsible for corporate misconduct.  . . .  

2015.Aug.10  SEC Finalizes "Flexible" Pay Ratio Disclosure Rules
See this Paul Hastings Alert for a comprehensive summary.

2015.April.29  SEC Proposes Pay-for-Performance Disclosure Rules
See: Pay for Performance Home Page / SEC Release with Rule Proposal; SEC Press Release and Fact Sheet 

  • Paul Hastings Law Commentary: "SEC Proposal will Keep Executive Compensation Hot" 2015.April.18  "Are Companies Setting Challenging Target Incentive Goals?"
  • The answer from Pay Governance is "yes" based on its well-considered study of S&P 500 companies that "used EPS or Net Income as a metric for their annual incentive plan AND issued guidance on EPS for 2012 and 2013."

2015.Feb.26  Being Smart about CD&A Presentations 
Over the past several years, public companies have seen their proxy statement disclosure of executive compensation evolve from an exercise in thoroughness to a challenge about how best to convince shareholders that sound decisions effectuate a pay-for-performance regimen. The highest premiums attach to (1) starting with effective summaries, (2) including visual support, and (3) being proactive to defuse red flag items within the summary compensation table.  For some thought provoking ideas, see "Innovations in CD&A Design: A Proxy Disclosure Analysis" - a joint report from Equilar and RR Donnelley.

2015.Feb.10  SEC No-Fault Clawback Succeeds in Settlement (vs. Saba Executives).  This SEC announcement of clawbacks totaling about $500,000 from two executives, who were not charged with wrongdoing, warns that . . .

2015.Feb.08  New Clawback Survey and 2015 Accounting Twist
For detailed information about the design of clawbacks, see this PwC survey drawn from proxy statement disclosures by 100 large public companies. Of more immediate concern than the survey results is the discussion under "Accounting Considerations" that appears on page 5, because  . . . continued at Clawback Surveys. See generally Clawbacks - Homepage.

2015.Jan.19  $400+ Million Settlement in “Non-Poaching” Case Highlights Antitrust Risks to Employers
Media outlets reported last week that Google, Apple and two other defendants have agreed to settle the case which alleges that they agreed not to “poach” employees from one another.  Initial reports suggested that the settlement is in excess of $400 million with the exact amount to be publicly disclosed in a court filing shortly. The settlement demonstrates the risk of antitrust class action cases in which successful plaintiffs can not only obtain treble damages, but each defendant can be held individually liable for the damages caused by the entire conspiracy.  News of this settlement is a reminder for employers to . . . continued at Recruiting of Executives.

2015.Jan.13  Director Compensation 2015 . . . Mercer and FW Cook Surveys
"Longstanding trends continued in 2013" according to a Mercer survey reporting that director compensation increased by 5% in 2013, driven by increased retainers and equity awards (and balanced by reduced committee meeting fees).  Continued at . . . Director Compensation Surveys. See also: Director Compensation Litigation because this remains a high-risk area.

2015.Jan.06  Non-qualified Plans and Late FICA Withholding – Retirees Win Round 1 of Class Action.  On January 6th, a Michigan district court granted summary judgment to retirees who paid increased FICA taxes on their deferred compensation and SERP benefits because of Henkel Corp.’s failure to withhold FICA when the payments were earned (rather than later when they were paid). Employers should take note because the court granted class action status -- and found for the retiree class – for three main reasons that are worth self-inspection.