ERISA and Global Benefits

SEC Pay Ratio Comment Letter – Paul Hastings Assists American Benefits Council
On March 23rd, the American Benefits Council submitted a comment letter to the SEC in order (1) to reiterate general opposition to the Dodd-Frank Act’s pay ratio disclosure rule; (2) to encourage the SEC to delay the effective date of its pay ratio disclosure rule; and (3) to propose cost-saving alternatives.
Stock Award Web Process Works: Non-compete Enforced
As a general matter, employers “win” when they seek to enforce stock plan terms that have been fairly disclosed -- and accepted -- by award recipients. ADP recently had such a victory, through a 3rd Circuit decision granting a preliminary injunction against two former employees who had joined a competitor in violation of restrictive covenants set forth in their stock awards.
Director Compensation - Equilar Data Highlights "Meaningful Limit" Risk
Last week, Equilar released two findings that public companies should consider when evaluating the compensation their directors receive.
2017 Proxy Season Reminder
In general, say-on-pay frequency votes last took place in 2011 – as you may recall, with the exception of smaller reporting companies (which generally are subject to more relaxed disclosure requirements), the initial rules became effective for an issuer’s first annual meeting occurring on or after January 21, 2011. Since Rule 14a-21(b) requires a say-on-pay frequency vote every six years, many of our public company clients will have to include a frequency vote in their 2017 proxy statement (for smaller reporting companies, the date is pushed out until the 2019 proxy season).
Monitoring Incentive Compensation: Either Create a Tail, or Chase Yours
Last week, the president of the New York Federal Reserve understandably warned banks to continually assess their incentive compensation structures. He said, “If the incentives are wrong and accountability is weak, we will get bad behavior and cultures.” Those responsible for designing incentive compensation structures may be tempted to focus on anticipating perverse employee behaviors – and rooting them out through ever more specific plan precautions. Unfortunately, hindsight is often more valuable when it comes to discovering abuses. In more practical terms, the best answer to providing the “right” incentives likely comes from greater use of performance-based deferred compensation.
Feel The Burn? Equity Compensation Plan Amendment to Increase Withholding is Not a Material Amendment
Many NASDAQ or NYSE listed companies looking for avenues to address depleted share reserves under equity incentive plans without having to seek shareholder approval have a new option
Problematic Pay Practices - as identified by ISS in its 2016 U.S. Policy Update
On at least an annual basis, those who make executive compensation decisions at publicly traded companies should “score” their practices against ISS and other policy guidelines.
Assessing ERISA Risks from ESOPs – 5th Circuit Clobbers Founder of Closely-Held Company
When the owner of a closely-held company sells stock to an employee stock ownership plan (ESOP), there are numerous valuation, fiduciary, and conflict of interest issues that could explode into ERISA liability. Imagine having ESOP participants recover damages equal to 33% of the amount the ESOP paid for the founder’s shares. The 5th Circuit recently upheld such an award. Its decision provides warning signs for companies with ESOPs and owners who sell shares to ESOPs – and for those performing diligence before they buy or invest in companies that sponsor ESOPs.
You Can Bank On Your Incentive Pay - Eventually: Proposed Regulations Would Require Sweeping Changes
Many continue to blame Wall Street incentive pay structures for fueling the 2007 financial crisis through such creations as sub-prime mortgages, Alt-A mortgages, CDOs, Credit Default Swaps and the like. After the collapse of iconic institutions such as Bear Stearns, Lehman Brothers, et al., Congress responded in part by enacting the Dodd-Frank Act in 2010.
If a public company’s 2016 proxy statement will include a proposal for action on a new or amended stock plan, there are several improvements to consider including. Several involve procedures by which to minimize the risk of litigation by award holders. Others involve assuring the ability to make awards that qualify for an exemption from Code Section 162(m)’s limitations. Note that action every five years is usually required, even if a plan has a ten-year term.
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