Equity Grant Disclosure Insights

What’s Inside

This report offers exclusive insights into how early filers are navigating the SEC’s new disclosure mandates for equity grant awards. Our expert analysis highlights emerging trends and best practices, equipping your team with the knowledge to refine your approach this proxy season.

Key Highlights

• Timing of Equity Grants: Explore how early filers are addressing disclosure requirements related to timing policies, including grant practices around material nonpublic information (MNPI).
• Clarity and Transparency: See examples of how companies are enhancing disclosure language to align with regulatory expectations while maintaining simplicity.
• Trends to Watch: Gain a preview of the most common strategies companies are employing to comply with the new rules.

Why This Matters

Early movers in disclosure often set the tone for the broader market. By understanding their approaches, you can benchmark your own practices and make informed decisions as filing deadlines approach.

This report is the first in DragonGC’s exclusive Proxy Season Series, designed to keep you informed with timely updates and actionable insights throughout the season.

Option Grants Close in Time

The first part below shows DragonGC’s Topic Page on Equity Grants Close in Time extracted from our platform, which aggregates the pertinent primary souces with live links. The remainder of the report shows the results delivered by our DragonFind research tool, using GenAI.

Summary of Disclosure Requirements

• Companies must provide both narrative and tabular disclosures regarding the timing of any awards of stock options, stock appreciation rights (“SARs”), and similar option-like instruments issued in proximity to disclosures of material non-public information (“MNPI”).
• Required 10-K item that can be incorporated from the AGM proxy statement.
• Narrative disclosure must be tagged using XBRL.
• Applies during any period beginning four business days before filing of a Form 10-Q or Form 10-K, or the filing or furnishing of a Form 8-K that discloses MNPI (except for Form 8-K disclosing a material new option award grant under Item 5.02(e)), and ending one business day after the filing or furnishing of such a report.
• Applies for filings for the first full fiscal period that begins on or after April 1, 2023.
• SAB 120 applies to “spring-loaded” equity awards.

In response, some companies are adopting fixed grant timing policies or require that grants be made effective only during open trading windows. Some companies are also timing vesting and settlement of their equity awards to occur during open trading windows

S-K Item 402(x)

Disclosure of the registrant’s policies and practices related to the grant of certain equity awards close in time to the release of material nonpublic information.

17 CFR 229.402(x) 

• 402(x)(1) – Required narrative disclosure 
• 402(x)(2) – Required tabular disclosure 
• 402(x)(3) – XBRL required

87 FR 80362 (Dec. 29, 2022) 

• Introduction 
• Grants close in time
• Effective dates

Final and Proposed Releases

• Final release 33-11138 (Dec. 14, 2022) 
• SEC press release 2022-222 
• SEC fact sheet 
• SEC summary
• SEC webpage 
• Proposal release 33-11013 (Jan. 13, 2022) 
• SEC press release 2021-256 
• SEC fact sheet 
• Comment letters

Accounting Sources

• FASB ASC Topic 718 – Stock compensation
• SEC SAB 120 (Nov. 24, 2021) – Addresses how companies should recognize and disclose the cost of providing “spring-loaded” equity awards to executives under ASC 718.
• PWC Viewpoint 
• PWC: Stock-based compensation 
• Deloitte: Spring-loaded awards

Commentary

• Skadden handbook – Page 98
• Debevoise (Dec. 20, 2024) – Page 4
• DLA Piper (Nov. 11, 2024) – Page 2
• Covington (Sep. 25, 2024)

Disclosure Insights on Early Filers

The major dimensions on which these companies differ in their Item 402(x)(1) disclosures regarding the timing of equity awards relative to material nonpublic information (MNPI) are:

1. Grant Timing Policy

• Predefined Fixed Schedule – Many companies issue equity awards on a pre-scheduled, fixed annual or quarterly basis, ensuring that grants do not align with MNPI disclosures. – Example: Deere & Co. grants LTI equity awards on a set annual schedule after earnings but before the 10-K filing.
• After Earnings Releases – Some companies explicitly wait until earnings are released before granting equity to avoid any perception of MNPI-driven grants. – Example: Helmerich & Payne, Inc. grants stock awards after the fiscal year-end and 10-K filing.
• Trading Window-Based Grants – Companies tie grants to open trading windows (periods when insiders can trade company stock under insider trading policies). – Example: TE Connectivity grants awards during the first fiscal quarter’s trading window.
• Ad-Hoc or Discretionary Grants – A few companies allow off-cycle or special grants for promotions, new hires, or retention. – Example: Visa Inc. allows off-cycle grants, but they must follow specific timing restrictions.

2. Treatment of Stock Options vs. Other Equity Awards

• Active Stock Option Issuers – Some companies continue to grant stock options, often tying them to strict timing policies. – Example: Berry Global grants stock options but ensures exercise prices reflect fair market value on the grant date.
• No Longer Granting Stock Options – Several companies no longer grant stock options as part of their executive compensation. – Example: Post Holdings, Inc. has not granted stock options for over five years.
• Alternative Equity Awards (RSUs, PSUs, SARs) – Many companies use RSUs (Restricted Stock Units) and PSUs (Performance Share Units) rather than options. – Example: AECOM primarily grants RSUs instead of options.

3. Formal vs. Informal Equity Grant Policies

• Formal Written Policies – Some companies have a clearly codified Equity Grant Policy that governs the process. – Example: Johnson Controls has an explicit Equity Award Grant Policy to prevent market timing.
• No Formal Policy but Consistent Practices – Many companies do not have a formal written policy but follow structured practices. – Example: AECOM does not have a written policy but follows consistent practices for grant timing.
• No Policy or No Option Grants – A few companies do not have a policy because they do not grant stock options or similar awards. – Example: Radius Recycling does not grant stock options and, therefore, has no specific policy.

4. Handling of Material Nonpublic Information (MNPI)

• Explicit Prohibition on Timing Grants Based on MNPI – Most companies explicitly state they do not time grants to coincide with MNPI releases. – Example: Hormel Foods ensures equity is granted on fixed dates well after earnings.
• Prohibiting Grants During Blackout Periods – Some companies ensure that grants do not occur during blackout periods around earnings releases. – Example: Central Garden & Pet does not allow stock option grants during blackout periods.
• Management Required to Notify Committee of MNPI – A few companies have policies where management must disclose MNPI if it exists before a grant. – Example: TE Connectivity requires management to inform the MDCC (Management Development & Compensation Committee) if MNPI is about to be released.

5. Flexibility for Off-Cycle Grants

• Strictly Annual Grants – Some companies only grant equity awards annually on a predetermined date. – Example: Walgreens Boots Alliance grants annual director equity awards on November 1 each year.
• Occasional Off-Cycle Grants – Some allow discretionary equity awards for new hires, promotions, or retention. – Example: Atkore Inc. allows off-cycle equity awards for retention or acquisitions.
• Delegated Authority for Special Grants – A few companies allow CEOs or committees to approve special grants under specific guidelines. – Example: Visa Inc. grants authority to the CEO for awards outside the normal cycle.

6. Use of Performance-Based Equity Awards

• Performance-Vesting RSUs (PSUs) Based on Financial Metrics – Some companies link awards to performance metrics like revenue, Adjusted ROE (Return on Equity), or TSR (Total Shareholder Return). – Example: Raymond James Financial ties PSUs to Adjusted ROE and relative TSR.
• Time-Based Vesting RSUs – Some companies only use time-vesting RSUs without a direct financial performance metric. – Example: Hillenbrand, Inc. grants time-based RSUs that vest ratably over three years.

Key Takeaways

Latest 40 S&P 500 + Fortune 1000 Early Filers

1. Applied Materials, Inc.

• Policies explicitly state that equity awards are not granted in anticipation of material nonpublic information.
• Does not time the release of material nonpublic information to coincide with equity awards.

2. Helmerich & Payne, Inc. 

• Grants stock awards after fiscal year-end and after filing the 10-K.
• Ensures timing aligns with executive performance reviews and final fiscal year results.
• No options granted since 2018, and disclosure timing does not affect awards.

3. Johnson Controls International plc 

• Maintains a predetermined schedule for granting equity awards.
• Avoids timing grants with material nonpublic information disclosures.
• Allows exceptions for business needs or other considerations.

4. Warner Music Group Corp.

• Annual equity awards are made at a consistent time each year.
• Does not grant equity awards when material nonpublic information is available.

5. AECOM 

• No formal written policy, but does not seek to time grants with material nonpublic information.
• Most awards are RSUs and follow a consistent practice.

6. TE Connectivity plc 

• Annual equity awards are granted in open trading windows during the first fiscal quarter.
• Requires management to notify the board of material nonpublic information near equity grant dates.
• Exercise prices equal the closing market price on the grant date.

7. Nordson Corporation 

• Grants equity on a predetermined schedule set three years in advance.
• Does not grant equity awards during periods of significant earnings announcements.

8. Hologic, Inc.

• Awards are granted during open trading windows post-earnings release.
• Prohibits granting options close to material filings, such as 10-Qs or 10-Ks, and avoids using or timing disclosures of material nonpublic information to affect compensation.

9. BrightView Holdings, Inc. 

• No formal policy but ensures awards are not timed with material nonpublic information releases.
• Did not grant any stock options in fiscal 2024.

10. Tetra Tech, Inc.

• Does not grant stock options or similar awards and has no formal policy.
• No intentions to grant such awards in the future.

11. Apple Inc. 

• Grants equity awards on the first day of the applicable fiscal year.
• Does not grant stock options.
• Does not take material nonpublic information into account for timing of awards.

12. Deere & Co. 

• Grants LTI equity awards on a predetermined schedule.
• Ensures grant date occurs after earnings release but before 10-K filing.
• Does not time disclosure of material nonpublic information to affect awards.

13. Raymond James Financial 

• Performance RSU vesting is based on Adjusted ROE with a relative TSR adjustment.
• No mention of timing in relation to material nonpublic information.

14. Hillenbrand, Inc. 

• Grants time-based RSUs that vest in equal installments over three years.
• No explicit discussion of timing with material nonpublic information.

15. Berry Global Group, Inc. 

• Grants stock options based on fair market value at the time of the award, with a structured four-year vesting schedule.
• Equity awards are typically granted shortly after the fiscal year-end results, based on a consistent value determined as a multiple of base salary
• Does not use material nonpublic information to determine grant amounts or exercise prices, nor time the release of material nonpublic information to affect the value of awards.

16. PTC Inc.

• Grants made on predetermined dates.
• Annual grants occur in November after earnings release.
• Does not take material nonpublic information into account for timing.

17. Central Garden & Pet Company

• No options granted since early 2023.
• Does not grant equity in anticipation of material nonpublic information.
• Blackout periods prohibit granting during sensitive periods.

18. Atmos Energy Corporation 

• Annual awards granted in May.
• Does not take material nonpublic information into account.
• No stock options granted in fiscal 2024.

19. UGI Corporation 

• Annual grants occur in the last calendar quarter, effective the following January.
• No mention of using material nonpublic information for timing.

20. Becton, Dickinson and Company

• Policy prohibits backdating and grant timing manipulation.
• Ensures grants occur outside blackout periods.
• No stock options granted in sensitive periods.

21. The Scotts Miracle-Gro Company 

• Equity grants occur two to three days after earnings release.
• Some grants made earlier in the fiscal year for select employees.
• No timing manipulation for material nonpublic information.

22. Valvoline Inc. 

• Awards granted in November.
• Grants do not align with material nonpublic information disclosures.

23. Spire Inc. 

• Grants made two days after year-end and quarterly earnings calls.
• Avoids issuing equity during sensitive disclosure periods.

24. Hormel Foods Corporation

• Grants made on fixed dates, including December and February, with additional grants scheduled for special cases (e.g., hiring or promotions).
• No options granted during high-risk periods or coordinated with material nonpublic information; does not backdate or grant equity retroactively.

25. Accenture plc

• Annual grants approved in October, effective January 1.
• Does not time grants based on material nonpublic information.

26. Radius Recycling, Inc. 

• No options or similar awards granted.
• No policy in place due to absence of such awards.

27. Atkore Inc.

• Grants primarily made in the first fiscal quarter, with additional grants for special circumstances such as new hires, promotions, acquisitions, or retention purposes.
• Does not grant awards while in possession of material nonpublic information, unless the potential impact of disclosure has been considered and an affirmative decision is made to proceed.

28. Emerson Electric, Inc.

• Approves equity awards annually at October or November Committee meetings, with additional grants as needed.
• Does not take material nonpublic information into account when determining the timing or terms of equity awards.
• Does not grant equity awards during the blackout period surrounding material disclosures (four business days before and one business day after the filing of Forms 10-Q, 10-K, or material 8-Ks).

29. D.R. Horton, Inc.

• Grants RSUs to executive officers with a three- to five-year vesting schedule, aligning executive interests with long-term stockholder value.
• RSUs help retain experienced executives who have demonstrated strong performance in the homebuilding industry.
• Does not grant or time awards based on material nonpublic information.

30. Intuit Inc.

• Equity awards are granted on predetermined dates.
• Annual grants occur before fiscal year-end.
• Does not time grants based on material nonpublic information.

31. Commercial Metals Company 

• Does not currently grant stock options, stock appreciation rights, or similar instruments.
• Will establish a policy on the timing of stock options relative to material nonpublic information if such awards are granted in the future

32. Walgreens Boots Alliance, Inc. 

• Annual grants occur on November 1 for directors.
• No discussion of timing related to material nonpublic information.

33. Jabil Inc. 

• Grants equity awards annually at the October Compensation Committee meeting, with additional grants made for special circumstances such as hiring or promotions.
• Time-based RSU awards vest over three years.
• Does not time the disclosure of material nonpublic information to influence executive compensation.

34. Energizer Holdings, Inc. 

• Grants equity awards in the first fiscal quarter.
• Does not time awards with material nonpublic information.

35. MSC Industrial Direct Co., Inc.

• Has not granted options since 2020.
• Will adopt a policy if options are reintroduced.

36. Acuity Brands, Inc.

• Grants are approved annually or based on business needs.
• No timing of grants in relation to material nonpublic information.

37. Post Holdings, Inc. 

• Has not granted stock options for over five years.
• Will consider best practices if options are reintroduced.

38. Visa Inc. 

• Grants annual equity awards in the quarter following fiscal year-end.
• No awards are granted in anticipation of material nonpublic information.
• Off-cycle grants are made on a fixed schedule.

39. Woodward, Inc. 

• Grants equity awards during open trading windows.
• Does not time grants with material nonpublic information.

40. Plexus Corp.

• PSU grants are made in the second fiscal quarter.
• RSUs are generally granted annually but can be issued for special situations.
• Does not time grants based on material nonpublic information.

Conclusion

As companies adapt to the SEC’s new Item 402(x) disclosure requirements, early filers are setting the precedent for transparency, consistency, and compliance. Our analysis highlights key trends in equity grant timing policies, the evolving role of disclosure language, and the impact of regulatory expectations on corporate governance. By understanding these emerging practices, companies can refine their own strategies and ensure alignment with best practices ahead of proxy season. DragonGC remains committed to equipping users with the tools and insights needed to navigate complex regulatory landscapes. As disclosure requirements continue to evolve, staying informed will be essential to maintaining investor confidence and regulatory compliance.