June 2011: Say-on-Pay Brings Litigation and a Closer Look at Risk in Compensation
Dodd-Frank and Say-on-Pay: The Legislation and Abuses that Could Come
Of the thirty-six companies that have failed Say-on-Pay, six companies, thus far, have been the recipient of class action lawsuits by its shareholders which all stemmed from failing Say-on-Pay. There are links to the filed suits here. Shareholders now have this new power obtained through the Say-on-Pay legislation. Many, including NFPCCmp;A, wondering if Congress ever intended, or even thought it could be a possibility that the Dodd-Frank Act could be used in such a way…or even some would say abused.
Recently, the issue of the “whistleblower” has also come into light. In a recent webinar put on by Baker & McKenzie, a discussion on Section 922 of the Dodd-Frank act was the focus. This rule inspired by shareholder protection and Wall Street reform essentially acts as an incentive for employees to voluntarily report any violation against securities laws to the SEC. An individual who reports such incidents will be able to receive what has appropriately been named a “bounty” of an amount between 10-30% of the, “Resulting monetary sanctions exceeding $1,000,000.” Although this rule could prove to be more of a headache to the SEC it should act as a reminder for companies to make sure that the controls are in place and effective.
In the Aftermath of Say-on-Pay: Time to Focus on Risk in Compensation
by Kevin Kuschel, Senior Consultant at Longnecker & Associates
The anticipation is over, and Say-on-Pay is here to stay. When the SEC finalized the rules surrounding Say-on-Pay on January 25, 2011, some compensation committees had already begun the process of preparing for the implications of a shareholder vote on executive compensation practices, albeit non-binding. However, many committees had confidence in shareholders to return approving votes and have done little in the way of proactive preparation. As we have now seen with the number of failing companies exceeding twenty-five, and the ensuing lawsuits that many companies are facing as a result of the vote, shareholders are concerned with the compensation of company executives.
Brent Longnecker on Compensation vs. Work-Life Balance
In a recent interview with Kelly Eggers of Fins.com Brent Longnecker spoke on the importance of work-life balance, and finding more value in a position than just what you are being compensated. It is especially a concern for those thinking that accepting a low salary now is setting a precedent for the later years. Mr. Longnecker shares his experiences and concludes that a job is not just a piece of paper that says, “Here is your position and here is your pay.”