Mike Kesner is partner and Linda Pappas and Joshua Bright are principals at Pay Governance LLC. This post is based on a Pay Governance memorandum by Mr. Kesner, Ms. Pappas, Mr. Bright, and Ira Kay. Related research from the Program on Corporate Governance includes The Perils and Questionable Promise of ESG-Based Compensation by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here) and Paying for Long-Term Performance by Lucian Bebchuk and Jesse Fried (discussed on the Forum here).
The 2021 proxy season was dominated by COVID-19. Close to half of Standard & Poor (S&P) 500 companies took some type of COVID-19-related action in 2020, including base salary reductions, modifications to incentive plan targets, and the grant of special awards.
Despite the significant upheaval in compensation, financial results, and stock price performance during 2020, shareholders supported 97.3% of Say on Pay votes among Russell 3000 companies through November 30, 2021, with strong average support of 92.2%. Sixty-two companies—or 2.7%—failed Say on Pay, including some large, “name-brand” companies. The reasons for these high-profile failures can be primarily attributed to several factors including the use of positive discretion in determining annual incentive payouts, modifications to in-flight long-term incentive (LTI) awards, grants of “out-sized” stock awards without a compelling rationale, and a disconnect between pay and performance.
Part of the strong showing in shareholder support can be attributed to Institutional Shareholder Services (ISS) recommending a vote for Say on Pay at 88.5% of Russell 3000 companies, which was only down 0.5% compared to the 2020 proxy season. While ISS approved most companies’ Say on Pay proposals, those companies that received an against recommendation from ISS were more likely to fail Say on Pay (24%) compared to prior years (for example, 18.4% in 2020, 18.8% in 2019, and 17.1% in 2018). Thus, ISS influence increased in 2021 and an against recommendation was far more likely to result in a failed Say on Pay vote compared to prior years.
The 2021 compensation year has also been filled with continued uncertainty due to COVID-19, supply chain issues, workforce shortages, and—most recently—inflation fears and the Russia-Ukraine conflict, so what should we expect to see (or not see) during the 2022 proxy year compared to 2021?
Statement by Chair Gensler on Proposal on SPACs, Shell Companies, and Projections
More from: Gary Gensler, U.S. Securities and Exchange Commission
Gary Gensler is Chair of the U.S. Securities and Exchange Commission. This post is based on his recent public statement. The views expressed in the post are those of Chair Gensler, and do not necessarily reflect those of the Securities and Exchange Commission or the Staff.
Today [March 30, 2022], the Commission is considering a proposal to strengthen investor protections in special purpose acquisition companies (SPACs). I am pleased to support this proposal because, if adopted, it would strengthen disclosure, marketing standards, and gatekeeper and issuer obligations by market participants in SPACs, helping ensure that investors in these vehicles get protections similar to those when investing in traditional initial public offerings (IPOs).
Aristotle captured an overarching principle with his famous maxim: Treat like cases alike. [1]
SPACs present an alternative method to go public from traditional IPOs. I don’t just mean the first stage—when the blank-check company goes public (which I call the “SPAC blank-check IPO”). I’m also referring to the second stage, often called the de-SPAC (which I call the “SPAC target IPO”).
Nearly 90 years ago, Congress addressed certain policy issues around companies raising money from the public with respect to information asymmetries, misleading information, and conflicts of interest. [2]
For traditional IPOs, Congress gave the SEC certain tools, which I generally see as falling into three buckets: disclosure; standards for marketing practices; and gatekeeper and issuer obligations. Today’s proposal would help ensure that these tools are applied to SPACs.
First, Congress said, companies raising money from the public should provide full and fair disclosure at the time investors are making their crucial decisions to invest. To address such disclosure, today’s proposal would:
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