The SEC Incentive-Based Compensation Clawback Rule is now effective

On January 27, 2023, the SEC’s new Executive Compensation Clawback Rules became effective. The rules require listed companies to: (1) develop and implement a policy to recover erroneously awarded incentive-based compensation received by current or former executive officers; and (2) satisfy related disclosure obligations. With new rules, come new risks. At a minimum, companies will have to closely examine the new rules and establish protocol to ensure adequate compliance and disclosure. READ MORE

Proxy Advisory Firms Issue 2023 Voting Guidelines

As companies begin preparing for the 2023 proxy season, we note that Institutional Shareholder Services Inc. (ISS) and Glass Lewis, the leading providers of corporate governance solutions and proxy advisory services, issued updated benchmark policies (proxy voting guidelines), which can be found here and here, respectively. The updated proxy voting guidelines generally focus on board accountability and oversight considerations and address topics such as climate accountability, board diversity, shareholder rights, corporate governance standards, executive compensation and social issues. What follows is a summary of the proxy voting guidelines published by ISS and Glass Lewis for the 2023 proxy season. READ MORE

Linking Executive Pay to Sustainability Goals

Global businesses have reached a sustainability inflection point. Stakeholder expectations and heightened investor scrutiny are putting organizations under pressure to articulate their societal roles more clearly, prioritize environmental and social objectives within their business strategies, and demonstrate progress to stakeholders. We also know that employees are prioritizing their employment decisions based on an organization’s purpose, culture, ESG goals, and diversity, equity and inclusion (DEI) priorities. Yet for the most part, corporations have been neglecting a powerful lever for advancing their sustainability agendas: executive compensation. READ MORE

Will Salary Transparency Laws Change Employee Compensation?

As the employment market continues to shift, a worker push for transparency is making headway. About a quarter of U.S. workers now live in states, counties, or cities where employers are legally required to share pay ranges. In some areas, including New York City and the states of Colorado, California, and Washington, employers must list the salary range in job postings. Other localities’ laws oblige companies to share salary ranges upon request, during the interview process, or when extending a job offer. READ MORE

Intel Slashes CEO Pay by 25% as Part of Companywide Cuts

Intel Corp., struggling with a rapid drop in revenue and earnings, is cutting management pay across the company to cope with a shaky economy and preserve cash for an ambitious turnaround plan. 

Chief Executive Officer Pat Gelsinger is taking a 25% cut to his base salary, the chipmaker said Tuesday. His executive leadership team will see their pay packets decreased by 15%. Senior managers will take a 10% reduction, and the compensation for mid-level managers will be cut by 5%. READ MORE

Private-Sector Wage and Salary Increases Slightly Slow in 4th Quarter

Employee compensation growth has slightly cooled again, according to new data released today, suggesting wage growth may have peaked since its record jump in mid-2022.

Labor compensation costs in the U.S. for private sector workers—including pay and benefits—increased 5.1 percent year-over-year from a 4.4 percent increase a year earlier, the U.S. Bureau of Labor Statistics (BLS) reported Jan. 31 in its quarterly Employment Cost Index (ECI). That's slowed from the third quarter index, released in October, which found that wage growth grew 5.2 percent year-over-year, and from 5.5 percent year-over-year growth from the second quarter of 2022.

Overall, compensation costs for civilian workers climbed 1 percent in the third quarter. READ MORE

SEC Enforcement Activity Destabilizes Corporate Governance Related to Executive Incentive Compensation

Recent pronouncements and enforcement activity by the U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC) reflect a singular agency focus on the importance of clawing back incentive compensation after instances of executive misconduct, even if how these agencies compel companies to do so may have unintended consequences.  READ MORE

ESG investing statistics 2023

ESG investing involves investing in companies or funds based on how well they perform on environmental, social and corporate governance measures. ESG investing has grown in popularity in recent years due to the influence of factors such as climate change and social justice on investors, according to the CFA Institute.

The practice began in the 1960s and has gained traction in the investing world since.

Here’s what each area of ESG means: READ MORE

How Do Some Executives Pay Taxes? By Selling Stock With Insider Information, Study Suggests

Insider trading — or trading stocks using non-public knowledge to gain an advantage — is supposed to be a big no-no for investors. It’s something Securities and Exchange rules make it clear, as will any competent securities lawyer. When non-public but material knowledge of what is happening in a company make significant profits, that happens on the backs of ordinary stock owners who don’t have the same information. For each winner in a trade there’s going to be a loser.

How frequently does it happen? Well, 78 members of Congress apparently violated a law that the legislative branch itself helped create to prevent potentially shady stock trading by politicians, according to a report by Business Insider. Excuses included “ignorance of the law, clerical errors, and mistakes by an accountant.” READ MORE

SEC Settlement With McDonald's and Ex-CEO Signals Potential Expansion of Executive Compensation Disclosure Requirements

On January 9, the Securities and Exchange Commission (SEC) announced that it had reached a settlement with McDonald's and its former CEO, Stephen Easterbrook, for charges stemming from McDonald's 2019 termination of Easterbrook for violating company policy by engaging in "an inappropriate personal relationship" with a McDonald's employee. McDonald's was charged with failing to disclose material information to investors regarding Easterbrook's termination in what the dissenting commissioners called a "case of first impression." As a consequence of its cooperative and substantial assistance to the SEC staff, however, McDonald's ultimately avoided the imposition of monetary penalties. READ MORE

Will Salary Transparency Laws Change Employee Compensation?

As the employment market continues to shift, a worker push for transparency is making headway. About a quarter of U.S. workers now live in states, counties, or cities where employers are legally required to share pay ranges. In some areas, including New York City and the states of Colorado, California, and Washington, employers must list the salary range in job postings. Other localities’ laws oblige companies to share salary ranges upon request, during the interview process, or when extending a job offer. READ MORE

Employers slowed their increases of workers’ wages last quarter

Employers continued to raise wages during the fourth quarter to attract workers and hold on to existing staff, though the pace of the increases slowed from the previous quarter.

While workers won’t be happy that the pay boosts still aren’t keeping up with inflation, the deceleration will likely please the Federal Reserve, which meets this week to determine how much more to hike interest rates. READ MORE

FTC’s blanket non-compete ban is solving the wrong problem

Opinions continue to pile up on the FTC’s recent aggressive proposal to ban the use of non-competes for all employees in almost any circumstance. Those in favor seem to be arguing that it is needed to prevent harm to rank-and-file workers while ignoring the fact that for many companies, especially large corporations, non-compete agreements are an important part of executive compensation. READ MORE