SEC Proposes to Amend Form N-PX

The SEC also proposed a new rule (Rule 14Ad-1) and form amendments under the Securities Exchange Act of 1934 (Exchange Act) that would require an institutional investment manager subject to Section 13(f) of the Exchange Act to report annually on Form N-PX how it voted proxies relating to executive compensation matters (i.e., “say-on-pay”), as required by Section 14A of the Exchange Act. READ MORE

Enhanced Authority Could Strengthen Oversight of Executive Bonuses Awarded Before a Bankruptcy Filing

Some companies made headlines in 2020 for paying their executives large bonuses while undergoing Chapter 11 bankruptcy. While the Bankruptcy Code restricts executive retention bonuses during bankruptcy, our review of FY 2020 data showed that some debtors may be working around the Code's restrictions by paying these bonuses prior to filing.

We recommended that Congress amend the Code to bring pre-bankruptcy bonuses under court oversight and specify factors the court should consider before approving them. READ MORE

CEO pay ratio tax bill may gain new life in Congress as revenue stream

Corporate executive compensation, in particular the pay ratio compared with rank-and-file employees, has resurfaced as a U.S. Senate Democratic revenue initiative.

A group of progressive Democratic senators, led by Bernie Sanders of Vermont and Elizabeth Warren of Massachusetts, introduced the Tax Excessive CEO Pay Act in March. A similar proposal has been submitted in the U.S. House. READ MORE

Unvested partnership interests as compensation

This may be a good time to revisit the use of unvested partnership interests as compensation because these situations can come up and the applicable authority is perhaps not widely known. The author recently reviewed two matters of this kind. The present discussion focuses on a company's hiring of a new CEO, where the consultations with the tax adviser about the executive's compensation package addressed a number of issues concerning the use of an unvested capital interest in a limited liability company (LLC) taxed as a partnership. READ MORE

Should Employers Tie Executive Compensation to DE&I Goals?

It is now widely accepted that achieving high levels of diversity, equity and inclusion (DE&I) can create a competitive advantage and drive individual and organizational performance. However, organizations seeking to advance in these areas face a strategic alignment challenge: how to embed DE&I priorities into the heart of a company’s business strategy. READ MORE

For Public Companies, The Time To Update Executive Compensation Practices Is Now

At long last, the Department of the Treasury and Internal Revenue Service published final regulations to explain how changes to Internal Revenue Code Section 162(m) under the Tax Cuts and Jobs Act of 2017 (TCJA) affect the deductibility (or lack thereof) of compensation in excess of $1 million paid to covered employees. We have blogged about these changes and made recommendations to public companies in the past about how to manage these changes. For the most part, the final regulations did not change any prior guidance. We will not repeat these prior summaries here. Instead, we will highlight the items that we expect will result in the biggest changes or challenges to public companies and the administration of their executive compensation plans. READ MORE

ESG Targets Gain Foothold in Exec Comp Plans

If stakeholders judge companies based on meeting environmental, social, and governance (ESG) goals, it’s natural to tie executive compensation to those goals. After all, environmentally friendly companies may one day attract more and cheaper capital and achieve higher valuations.

But there’s a long way to go before most compensation committees find the optimal way to incorporate ESG into pay packages. Nevertheless, a March study by the London Business School and Pricewaterhouse Coopers found that 45% of large U.K. companies have introduced ESG metrics into executive compensation plans. Not only that, but one-in-four U.K. companies have added ESG metrics to long-term incentive programs. READ MORE

American CEOs make 351 times more than workers. In 1965 it was 15 to one

Last week, the Economic Policy Institute, a nonpartisan thinktank, released a report on the increasing pay gap between chief executives and workers. This research tells a familiar story with updated figures. When taking into account stocks, which now make up more than 80% of the average CEO’s compensation package, the report found that chief-executive pay has risen by an astounding 1,322% since 1978. That’s more than six times more than the top 0.1% of wage earners and more than 73 times higher than the growth of the typical worker’s pay, which grew by only 18% in the same time period. Most remarkable, however, is the 18.9% increase in CEO compensation between 2019 and 2020 alone. READ MORE