Jonathan Joseph to Present “Dodd-Frank Executive Compensation and Corporate Governance” Webinar for CalBar
SAN FRANCISCO, CA – August 12, 2010. Joseph Law Corporation announced today that its Managing Partner, Jonathan D. Joseph, will present “Dodd-Frank’s Corporate Governance and Executive Compensation Requirements For Public Companies: Why Planning Now For 2011 is Essential” via a live 60 minute webinar on August 18, 2010. The Calbar’s description of Mr. Joseph’s webinar presentation states:
“The Dodd-Frank Wall Street Reform and Consumer Protection Act or “Dodd-Frank” was enacted on July 21, 2010. Commencing in 2011, a non-binding shareholder “Say on Pay” vote to approve executive compensation may be the most profound executive pay provision in Dodd-Frank. Each public company must also ask its shareholders whether future Say on Pay votes should take place every one, two or three years (Say When on Pay). When mergers or other acquisitions are submitted to shareholders, public companies will also be required to submit golden parachutes to shareholders for approval (Say on Golden Parachutes). Other notable provisions require enhanced independence for board compensation committees and their advisers and claw backs of erroneously awarded executive compensation as well as new descriptions of pay versus performance and internal pay equity metrics. Dodd-Frank also explicitly authorized the SEC to adopt “proxy access,” a procedure where shareholder submitted board nominees will be included in the company’s proxy solicitation materials. Say on Pay, Say When on Pay and Say on Golden Parachutes are far from meaningless. These new corporate governance requirements will impact as many as 10,000 companies. Learn What is Required, What Isn’t Clear and Pragmatic Steps to Consider Now from a corporate securities practitioner with more than three decades of experience. This webinar is appropriate for inside and outside corporate legal advisers, board members, Board and Compensation Committee Chairman, CEOs, CFOs and investor relations personnel.”
The 60 minute webinar will be presented by Jonathan Joseph live online at 1:00 pm on August 18, 2010 via the CalBar’s website and will be retained in the Calbar’s CLE online archives ensuring that the program will be available in the future to interested persons including California lawyers seeking participatory continuing legal education credit. The archived webinar will be available after August 18 at www.calbar.org/online-cle and then clicking on “Tele-Seminars and Webinars”.
Jonathan Joseph is the Managing Partner of Joseph Law Corporation. His practice is devoted largely to complex banking, corporate, mergers and acquisitions, venture capital and bank regulatory matters. Mr. Joseph is a current member of the Financial Institutions Committee of the State Bar of California’s Business Law Section. He has been a frequent lecturer and writer on subjects relating to banking, financial institutions, corporate and securities law, mergers and acquisitions and venture capital. Mr. Joseph is also a member of the New York and DC Bar.
For more information contact Jonathan Joseph at firstname.lastname@example.org or 415 817 9200.
This press release is provided as a general informational service to clients and friends of Joseph Law Corporation. It should not be construed as, and does not constitute, legal advice on any specific matter, nor does this message create an attorney-client relationship. These materials may be considered Attorney Advertising in some states. Please note that prior results discussed in the material do not guarantee similar outcomes.
By Jonathan D. Joseph*
President Obama is expected to sign the Dodd-Frank Bill in July. Upon signing, a mandatory shareholder vote requirement related to executive compensation known as “Say on Pay” will become applicable to about 10,000 public companies. During the 2010 proxy season, just over 600 public companies included “say on pay” votes in their proxy statements, but only three failed to obtain “say on pay” approval from their shareholders.
One of the three companies whose shareholders rejected executive pay practices in 2010 was Keycorp, an Ohio based regional bank holding company. At its recent annual meeting, 55 percent of the Keycorp shareholders voted against the company’s executive pay practices and it became the first (and only) U.S. banking organization to have a majority of shareholders reject its compensation practices. The other two U.S. issuers that received “no on pay” votes in 2010 were Motorola and Occidental Petroleum.
Why did Keycorp become the only U.S. banking organization to generate majority opposition to its pay practices while its regional bank peer group and all of the largest U.S. banking organizations did not receive such a rebuke? Prudent senior management teams and public company directors should try to understand the answer to this question well in advance of the 2011 proxy season. Independent compensation committees and management teams that reasonably address existing “red flags” this year should have little trouble obtaining majority say on pay approvals in 2011.
Did Major Proxy Advisory Services Rebel Against Keycorp in 2010?
Published reports suggest that the large dissent appears to have been motivated by a disconnect between large CEO pay increases and KeyCorp’s lagging financial performance. In deed, Keycorp posted losses of $1.34 billion and $1.47 billion for 2009 and 2008, respectively. This suggestion, while undoubtedly accurate, glosses over some critical blunders by Keycorp’s compensation committee related to executive pay disclosures and 2009 compensation decisions. Numerous other banking organizations posted losses and other regional bank peers increased executive compensation in 2009 (e.g., Fifth Third Bancorp, Regions Financial and PNC Financial), but all received overwhelming “say on pay” approvals.
It is important to note that “say on pay” votes are nonbinding advisory votes and that the boards of public companies are under no fiduciary obligation to follow or consider the votes. However, shareholder rejection of executive compensation practices sends a strong message to management and directors to revisit and revise problematic pay policies since compensation committee members and other directors that don’t respond adequately may be on the hot seat the following year. Additionally, unlike prior years, the Dodd-Frank Bill prohibits discretionary broker voting, also known as broker non-votes, in connection with executive compensation proposals. This will set the bar higher for say on pay votes in future years.
The 2009 base salary of KeyCorp’s CEO rose to $1.6 million from $1 million, according to SEC disclosures, and the compensation committee increased his annual base salary by $2.3 million in September 2009. Overall, the CEO’s pay package was reported to be worth about $5.1 million in 2009 compared to $4.5 million in 2008. His restricted stock and option awards were $3.4 million as of the date they were granted, up from $3.3 million in 2008. The CEO, who has been an employee for 37 years, also had an accumulated supplemental pension benefit totaling more than $21 million.
It isn’t easy to tease out the factors that motivate shareholders to disapprove compensation practices. Increasingly, however, a number of proxy advisory services such as Institutional Shareholder Services (ISS), Glass, Lewis & Co. (Glass Lewis) and Proxy Governance, Inc. (PGI) influence the outcome of many public company proposals – including say on pay. Thus, boards and executives should be especially mindful of the proxy voting policies of the major shareholder advisory services on management say on pay proposals. Keycorp’s shares are mostly held by institutional holders – recent figures indicate about 83%. Since the final no vote tally equaled 55 percent, well over half of Keycorp’s institutional investors must have voted against the proposal.
It is reasonable to conclude that the major reason many of Keycorp’s institutional investors dissented was because one or more of the major proxy advisory services recommended against Keycorp’s say on pay proposal.
Problematic Pay Practices Trigger No on Pay Votes
The likelihood that shareholder advisory services, large institutional shareholders and other sophisticated shareholders will vote against management say on pay proposals is directly related to the level of problematic pay practices that are identified for a company. No single problematic practice or red flag will necessarily cause a significant vote shift, but when the compensation problems accumulate, the likelihood of a shareholder revolt or proxy advisory dissent recommendation increases exponentially.
Keycorp’s 2010 proxy statement revealed numerous red flags including, among others, the following: (i) Keycorp did not achieve the 2009 overall profitability or credit quality performance measures that had been set by the compensation committee; (ii) in September 2009, the CEO was awarded a $2.3 million annualized base salary increase, which upped his 2009 base by over $600,000 in the fourth quarter and locked in a significant base compensation increase for the subsequent year; (iii) the CEO and three other named executive officers received “time-lapse” option grants that were significantly larger than any other option grants in recent company history and which contained no performance vesting criteria; (iv) the comp committee only considered peer group benchmarks for total pay rather than separately benchmarking each significant compensatory element; (v) the comp committee didn’t freeze the company’s supplemental pension plans until January 2010, allowing the CEOs accumulated retirement benefit to increase during 2009 by almost $3 million to over $21 million; (vi) the compensation committee lowered its executive stock ownership requirements from 2008 levels; and (vii) the compensation discussion and analysis (CD&A) was vague, confusing and failed to adequately offer the “why” as to many of the company’s compensation decisions.
The above described pay practices, while not exhaustive, are indicative of the types of factors that can be catalysts for careful scrutiny and dissent by investors. Practices that are inconsistent with a performance-based compensation philosophy, poorly designed incentives that promote excessive risk-taking or that don’t encourage long-term value creation and conflicts of interest should be frowned upon as they could contribute to a rejection of a company’s executive compensation by shareholders. More than ever, compensation committees will need to take a fresh look at executive compensation with the assistance, whenever appropriate, of independent consultants and legal advisers.
Say On Pay Outcomes in 2011 Will Be Determined Based on 2010 Decisions
Compensation disclosures in the 2011 annual meeting proxy statements of all public companies will be based on compensation practices and decisions made in 2010. To achieve a successful say on pay vote in 2011, it is important for boards and management to understand that the “say on pay” proposal will be based on a resolution that asks shareholders to approve the 2010 compensation of executive officers as set forth in the proxy statement. This means that potential problematic pay practices and concerns of key shareholders (and proxy advisory services) should be identified as soon as possible so that appropriate mitigation procedures and policies can thoughtfully be implemented in advance of the next annual meeting. Companies should not underestimate the fact that broker non-votes will not be permissible in connection with executive compensation proposals commencing in 2011.
For more information contact:
Jonathan D. Joseph at 415.817.9200, ext 9 or Jonathan Cohen at 415.817.9200, ext 8.
*Jonathan D. Joseph is the founder and Chief Executive Officer of Joseph Law Corporation, San Francisco, CA. His practice is devoted largely to complex corporate, banking, securities, venture capital and bank regulatory matters. The firm also has an executive compensation, labor and employment and litigation practice. Mr. Joseph has been a frequent lecturer and writer on subjects relating to banking, financial institutions, corporate and securities law, mergers and acquisitions and venture capital. Mr. Joseph is a member of the California, New York and DC Bar.
This communication is provided as a general informational service to clients and friends of Joseph Law Corporation. It should not be construed as, and does not constitute, legal advice on any specific matter, nor does this message create an attorney-client relationship. These materials may be considered Attorney Advertising in some states. Please note that prior results discussed herein do not guarantee similar outcomes. © 2010 Joseph Law Corporation. All Rights Reserved.
Joseph Law Corporation Adds Litigation and Employment Law Specialties with Addition of Jonathan M. Cohen
San Francisco, CA — April 27, 2010. Joseph Law Corporation announced today that it has expanded its complex litigation and employment law expertise through the addition of Jonathan M. Cohen as Of Counsel to the firm.
“We are extremely pleased that Jonathan Cohen is teaming up with Joseph Law Corporation. With his extensive state and federal court litigation expertise as well as his experience providing pre-dispute advice in the areas of complex commercial transactions, executive compensation and employment law, we have rounded out our ability to offer complete legal solutions to public companies and private businesses,” said Jonathan Joseph, the firm’s chief executive officer.
Jonathan Cohen brings many years of trial experience to Joseph Law Corporation. He concentrates his practice on complex litigation as well as pre-dispute counseling. His practice includes executive compensation negotiations and employment law, including wrongful termination litigation, harassment, retaliation and discrimination. His trial experience includes class actions, complex commercial disputes, insurance coverage, real estate, product liability, securities, commodities and derivative litigation. He has represented clients in state and federal court in addition to domestic and international arbitrations and mediations. Prior to joining the Joseph Law Corporation, Mr. Cohen was a partner in the San Francisco office of Winston & Strawn LLP. Jon Joseph and Jonathan Cohen initially met eight years ago when they were partners in the San Francisco office of K & L Gates (previously known as Kirkpatrick & Lockhart Nicholson Graham LLP).
Joseph Law Corporation is an AV® rated firm based in California that emphasizes complex banking, corporate, regulatory, securities and transactional matters for financial institutions, entrepreneurs, businesses, investors and venture capital firms. Joseph Law is known for sophisticated expertise, extraordinary commitment to clients, relationship-based services, and a range of specialized capabilities typically found only in the largest American law firms.