How should the chief executive officer (CEO) respond to the host of internal and external challenges facing their business? In this Forbes article, Michael Peregrine suggests the CEO adopt a mindset rooted in rational confidence in the company’s future and in the leadership’s decision-making.
Most responsible corporate boards took measures to address codes of conduct issues and sexual harassment in the wake of the “MeToo” movement. However, a flurry of recent stories involving misbehaving CEOs suggests otherwise. In this Forbes article, Michael Peregrine says these scandals should be a wake-up message to corporate boards.
The board’s executive compensation committee is the focus point for many of the extraordinary financial, economic and operating challenges currently facing healthcare organizations. Executive compensation increases are impacted by both an inflationary economy and significant revenue downturn. In addition, the US Department of Justice has identified executive compensation as an important conduit through by which corporate compliance incentives and deterrence can be implemented. Furthermore, executive recruitment and retention amidst the “Great Resignation” remains a key compensation concern.
These and similar issues have become important agenda items for the board’s executive compensation Committee. Michael Peregrine is joined by industry experts Tim Cotter and Ralph DeJong for the first in a two-part conversation about the impact of the developments on the compensation committee, including:
On August 25, 2022, the US Securities and Exchange Commission (SEC) adopted final rules imposing new mandatory “pay for performance” disclosures for most public companies (foreign private issuers, emerging growth companies and registered investment companies are excluded). These rules implement Section 953(a) of the Dodd-Frank Act, which provided for the SEC to adopt pay for performance rules requiring disclosure in a “clear manner” of the relationship between executive compensation “actually paid” and the company’s “financial performance” taking into account changes in stock value, dividends and distributions.
The final rules, which are primarily set forth in Item 402(v) of Regulation S-K, impose the following new tabular disclosure for any proxy statement or information statement for which executive compensation under Item 402 is required:
Important aspects of this table include the following:
Public companies will also need to provide a clear description of the relationship between each of the financial performance measures in the table and the executive compensation actually paid to its CEO and, on average, its other named executive officers during the lookback period, as well as the relationship between its TSR and the TSR of its peer group.
In addition, public companies will also need to identify the three to seven financial performance measures (or, in some cases, certain non-financial measures) that it determines are its most important measures.
Smaller reporting companies may avail themselves of scaled-back disclosure under Item 402(v), including a shorter lookback period (three years instead of five years) and no requirement to include a custom peer group, a tabular list or a company-selected measure.
Complying with these rules will require changes to existing forms of proxy disclosure. The extent to which these disclosures impact the amount [...]
Continue Reading
As the Delta variant continues to spread across the United States, companies are once again having to make tough decisions. In this Forbes article, McDermott partner Michael Peregrine says corporate boards should ask their CEOs how they will respond to the pandemic’s latest development.
“At a time when most businesses were aggressively moving forward with long-stalled resiliency measures, they are countered by the equally aggressive Delta variant,” Peregrine writes.
The most significant issues in any employment or severance agreement are going to be personal to that situation, and will be driven in part by special issues and circumstances. For instance, succession planning issues may be incredibly important to the organization when the CEO is 65 years old and there is no clear successor, and may be far less important when the CEO is 45 and there are very able executives ready to assume the CEO role if necessary. With that said, there are certain considerations to keep in mind for all who are drafting these contracts.
McDermott’s Ralph E. DeJong contributes to an article in The Practical Lawyer that identifies and describes what frequently are the most important considerations in an employment or severance agreement between an exempt organization and its CEOs.
Originally published in The Practical Lawyer, December 2019
Subscribe
