Say-on-Pay

SEC’s New C&DI: How to Describe A Say on Pay Proposal on Your Proxy Card

by Vanessa Schoenthaler on February 13, 2012

The Division of Corporation Finance issued new a Compliance and Disclosure Interpretation (C&DI) today (Exchange Act Rule Question 169.07), addressing how shareholder advisory votes on executive compensation should be presented on proxy cards and voting instruction forms:

Question: On its proxy card and voting instruction form, how should a company describe the advisory vote to approve executive compensation that is required by Exchange Act Rule 14a-21?

Answer: The following are examples of advisory vote descriptions that would be consistent with Rule 14a-21’s requirement for shareholders to be given an advisory vote to approve the compensation paid to a company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K.

To approve the company’s executive compensation

Advisory approval of the company’s executive compensation

Advisory resolution to approve executive compensation

Advisory vote to approve named executive officer compensation

The following is an example of an advisory vote description that would not be consistent with Rule 14a-21 because it is not clear from the description as to what shareholders are being asked to vote on. Shareholders could interpret this example as asking them to vote on whether or not the company should hold an advisory vote on executive compensation, rather than asking shareholders to actually approve, on an advisory basis, the compensation paid to the company’s named executive officers.

To hold an advisory vote on executive compensation

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The Council of Institutional Investors Releases a White Paper Analyzing Failed Say-on-Pay Votes

by Vanessa Schoenthaler on September 28, 2011

Yesterday the Council of Institutional Investors released a white paper, prepared by Farient Advisors LLC, analyzing 37 “failed” say-on-pay votes from annual meetings taking place between January 1 and July 1, 2011, and citing another 37 votes that “passed” but by a margin of 10% or less.

The paper looks to identify “compensation practices where support for change is the greatest”, and to help investors “target initiatives for improved pay practices and provide useful input for structuring their voting policies”. At the same time, it also provides practical insights and recommendations for all companies, but particularly for those that did not achieve strong investor support or with failed say-on-pay votes.

Farient interviewed, 19 CII member organizations, including public employee pension funds, mutual funds and union pension funds, as well as the two largest proxy advisory firms — Institutional Shareholder Services, Inc. and Glass Lewis & Co. — and the proxy solicitation firm Morrow & Co., LLC, to ascertain, among other things, the:

processes by which investors evaluated executive compensation programs and the extent to which they relied on analyses and recommendations from proxy advisory firms; and

factors that motivated investors to vote against executive compensations programs at companies with failed say-on-pay votes.

As to the investors’ evaluation processes, the paper concludes that:

investors were extremely thoughtful in how they assessed executive compensation programs, considering multiple factors and sources, performance over a number of years, and focusing on total shareholder returns;

investors that relied more heavily on proxy advisory firms did so in part because of resource constraints;

resource and staffing constraints were also cited as causing many investors to focus on outlier companies; and

many investors plan to revisit and potentially revise their voting guidelines in the future.

The paper also found that the factors that most frequently contributed to investors voting against executive compensations programs included:

the presence of a disconnect between pay and performance;

poor pay practices;

poor disclosure practices; and

inappropriately high levels of compensation for the company’s size, industry and performance.

The above are only a few of the paper’s key conclusions; the full paper is posted below, it’s a quick and easy read and definitely worth the time.

(Download File)

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Executive Paywatch: A New Site Featuring A CEO Compensation Database and Comparison Tools

by Vanessa Schoenthaler on April 19, 2011

2011 Executive Compensation Earlier today the American Federation of Labor and Congress of Industrial Organizations, better known as the AFL-CIO, the U.S.’s largest federation of labor unions, launched a new website: Executive Paywatch.

The site focuses on the Dodd-Frank Act’s say-on-pay provisions with a particular emphasis on Section 953, which directs the Securities and Exchange Commission to adopt rules requiring disclosure of the:

median annual compensation of all of a company’s employees, except for its chief executive officer;

total annual compensation of the chief executive officer; and

ratio of the median annual compensation of all employees to the total annual compensation of the chief executive officer.

Based on the current Dodd-Frank implementation schedule, the Commission should be proposing rules to address Section 953 some time between August and December 2011 but, as Broc Romanek notes over at The Corporate Counsel, there’s no deadline for implementing Section 953 and the release of proposed rules has already been pushed back once.

Executive Paywatch features a database that includes compensation information for the chief executives of Russell 3,000 companies.

It also includes comparisons of CEO compensation to minimum wage workers, median workers and President Obama, and even allows you to fill out a form to compare your own compensation package (trust me, it’s a pitiful sight, even if you are very well paid).

Executive Paywatch also compares the compensation of chief executives from 299 of the S&P 500′s largest companies, as disclosed in the companies’ most recent proxy materials and compiled by salary.com, with the median salary of workers like nurses, teachers and fire fighters as disclosed in the Bureau of Labor Statistics’ Occupational Employment Statistics estimates.

Source: AFL-CIO analysis of pay data from 299 companies, provided by salary.com

Even though all of this information is publicly available, it’s still utterly jaw dropping when laid out like this.

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An Update on Shareholder Advisory Votes in Graphs

by Vanessa Schoenthaler on February 24, 2011

As of February 22, 2011 250 non-TARP participating companies have filed preliminary or definitive proxy materials containing shareholder advisory votes on executive compensation (Say on Pay) and shareholder advisory votes on the frequency of Say on Pay votes (Say on Frequency). The following is a brief update on the initial filings and results:

Also as of February 22, 2011, 87 companies have disclosed the results of their initial Say on Pay vote and 88 have disclosed the results of their initial Say on Frequency vote (one smaller reporting company voluntarily complied with the Say on Frequency vote, but not the Say on Pay vote, accounting for the difference in the number of reported results). Of the companies that have disclosed results, 86% have considered their Say on Pay vote successful if approved by a majority of shareholders and 68% have considered the Say on Frequency choice that has received a plurality of votes to be the Say on Frequency choice of their shareholders.

Shareholder Advisory Vote on Executive Compensation

Of the companies have disclosed the results of their initial Say on Frequency vote 68% have reported that their shareholders have voted to approve either the same Say on Frequency choice as recommended by their board of directors or, where their board of directors has not made a recommendation, an annual, biennial or triennial choice. The remaining 32% have reported that their shareholders have voted to approve an annual Say on Frequency choice as opposed to the biennial or triennial choice recommended by their board of directors.

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The Anatomy of a Shareholder Vote Calculation

by Vanessa Schoenthaler on February 11, 2011

(Note: I’ve since updated this post here)

Counting up the votes from a shareholder meeting is not as easy as one might think.

First off, there are four different sources that dictate how the votes are tabulated: the federal securities laws, the corporate laws of the state in which a company is organized, the rules of the national securities exchanges and a company’s charter documents.

On top of that there are five different categories of votes to consider: votes for and against a proposal, which are self-explanatory, broker non-votes, abstentions and withheld votes (more on these latter three in a second).

Then there’s a quorum requirement to be met, and, finally, the approval threshold for each proposal has to be considered, which can range from a plurality of the votes cast to a super majority of the votes present and entitled to vote, and anything in between.

Broker Non-Votes

A broker non-vote occurs when a broker has not received voting instructions from the beneficial owner of shares held in street name and the broker does not have, or declines to exercise, discretionary authority to vote the shares. Brokers only have discretionary authority to vote uninstructed shares on routine matters, such as the ratification of a company’s auditing firm.

Under the laws of most states broker non-votes are considered present at a meeting, and, as such, are included in the calculation of whether a quorum exists, however, they are not considered entitled to vote, and so have no effect on the outcome of a proposal.

The Dodd-Frank Changes to Broker Non-Votes

Following enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, national securities exchanges were required to adopt rules prohibiting members from voting uninstructed shares on matters related to the election of directors, executive compensation and other significant matters as determined by the rules of the Securities and Exchange Commission.

In September 2010, the Commission approved amendments to New York Stock Exchange Rule 452, and corresponding Section 402.08 of the Listed Company Manual, and Nasdaq Stock Market Rule 2251, to implement the Dodd-Frank Act’s requirements. At present, the Commission anticipates proposing rules to define “other significant matters” sometime between April and July of 2011.

Among other things, the NYSE and Nasdaq Dodd-Frank-imposed rule changes have added uncontested director elections (formerly considered a routine matter), shareholder advisory votes on executive compensation and shareholder advisory votes on the frequency of advisory votes on executive compensation to the category of non-routine matters.

It is also worth noting that these rule changes relate to NYSE and Nasdaq member firms, not to the companies whose securities are listed on the NYSE or Nasdaq markets, so the changes effect all companies, even those with securities quoted in over the counter markets like the OTC Bulletin Board and the reporting tiers of the OTC Pink Markets.

Abstentions

An abstention occurs when a shareholder affirmatively chooses not to vote on a proposal.

Under the laws of most states abstentions are considered present and entitled to vote at a meeting, and, as such, are included in the calculation of whether a quorum exists. However, abstentions are not generally considered votes cast, meaning that where a proposal requires the approval of “a majority of the votes cast” abstentions will have no effect, but, where a proposal requires the approval of “a majority of the votes present” or “a majority of the votes present and entitled to vote” abstentions will have the same effect as votes cast against the proposal.

Withheld Votes

A withheld vote is a category of vote that has come about as a result of the Commission’s proxy rules.

Securities Exchange Act Rule 14a-4 requires that a proxy for the election of directors include an option for shareholders to withhold authority to vote for a director nominee. The rule does not, however, require that a proxy include an option for shareholders to vote against a director nominee, unless the laws of the state in which the company is organized give effect to such a vote (most don’t).

Under the laws of most states directors are elected by a plurality vote, meaning that the director nominee receiving the highest number of votes, regardless of the number of votes withheld, is elected (i.e., a director nominee can receive 1 for vote, while 999 votes are withheld, and still be elected). As a consequence, over the last half dozen or so years, companies have started to amend their charter documents and implement governance policies to give effect to withheld votes. For example, one approach has been to require a director to tender their resignation, which may or may not be accepted, if they receive a greater number of withheld votes than for votes. Another approach has been to simply adopt a majority voting standard for the election of directors.

Tallying it All Up

Has the quorum requirement been satisfied?

Before any business can be transacted at a shareholder meeting there must be a quorum present.

By default most states define a quorum as the presence of a majority of the shares entitled to vote in person or by proxy. A company can modify the default requirement in its charter documents, subject to certain limitations imposed by state law (e.g., in Delaware a quorum cannot be less than one-third of the shares entitled to vote) and by the rules of the exchange on which the company’s securities are listed (e.g., Nasdaq requires a quorum of at least 33.33% of a company’s outstanding common voting stock; NYSE generally requires a quorum of not less than a majority of a company’s outstanding shares).Once it is established that a quorum exists, the approval thresholds applicable to each proposal have to be considered and the related votes tabulated and counted. Let’s look at this in the context of the shareholder advisory vote on executive compensation and the shareholder advisory vote on the frequency of advisory votes on executive compensation. Remember these are non-routine matters for which brokers do not have discretionary voting authority, so shares represented by broker non-votes count as present for purposes of establishing a quorum but not as shares entitled to vote on the proposals.

What approval threshold is applicable to the shareholder advisory vote on executive compensation?

There is no approval threshold required for the shareholder advisory vote on executive compensation. As of this writing, of the companies that have reported results for their advisory votes on executive compensation, most have considered the proposal approved if it received the affirmative vote of a majority of the shares present and entitled to vote, with abstentions having the same effect as a vote cast against the proposal, though in three instances companies have specified that both abstentions and broker non-votes have the same effect as votes cast against the proposal.

Most of the remaining companies have considered the proposal approved if it received the affirmative vote of a majority of the votes cast, with abstentions having no effect.In a few cases companies have not disclosed an approval threshold at all, though in each a majority of the shares present and entitled to vote did approve the proposal.

What approval threshold is applicable to the shareholder advisory vote on the frequency of advisory votes on executive compensation?

There is no approval threshold required for the shareholder advisory vote on the frequency of advisory votes on executive compensation. However, if a company wishes to exclude certain shareholder proposals that seek advisory votes on executive compensation or that relate to the frequency of advisory votes on executive compensation, then its shareholders must approve a single frequency choice by a majority of the votes cast, with abstentions having no effect, and the company must adopt a policy that is consistent with that shareholder choice.

As of this writing, of the companies that have reported results for their advisory votes on the frequency of votes on executive compensation, most have considered the frequency receiving a plurality of the votes cast as the frequency approved by shareholders. Though, there have been a handful of companies that have considered the frequency receiving a majority of the votes cast as the frequency approved by shareholders. If companies in this latter group then adopt policies that are consistent with their shareholders’ vote, they may exclude future shareholder proposals related to advisory votes on executive compensation or the frequency of advisory votes on executive compensation.

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Shareholder Advisory Votes on Executive Compensation: What’s in the Final Rules

by Vanessa Schoenthaler on January 26, 2011

Yesterday, in an open meeting, the Securities and Exchange Commission voted by a margin 3-2 to adopt final rules and amendments to implement Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which addresses shareholder advisory votes on executive compensation (“Say on Pay”), the frequency of shareholder advisory votes on executive compensation (“Say on Frequency”) and shareholder advisory votes on golden parachute compensation (“Say on Golden Parachute”). Chairman Schapiro and Commissioners Walter and Aguilar voted in favor of adopting the rules and amendments, and Commissioners Casey and Paredes voted against adopting them.

The Effective Date

The new rules and amendments take effect on April 4, 2011, however, the Dodd-Frank Act requires that any company holding a shareholder meeting on or after January 21, 2011 include in their proxy solicitation materials separate Say on Pay and Say on Frequency votes.

One notable departure from the rules and amendments as initially proposed is the temporary exemption for smaller reporting companies from Say on Pay and Say on Frequency votes until their first annual or other shareholder meeting occurring on or after January 21, 2013.

The following is a summary of the most widely applicable provisions of the new rules and amendments:

Say on Pay Votes

New Exchange Act Rule 14a-21(a) requires that a company hold a separate Say on Pay vote in its first annual or other shareholder meeting occurring on or after January 21, 2011 (or, in the case of a smaller reporting company, on or after January 21, 2013) and, thereafter, at least once every three calendar years. A Say on Pay vote is only required with respect to an annual or other shareholder meeting at which proxies will be solicited for the election of directors.

The Say on Pay vote must relate to all executive compensation disclosed pursuant to Item 402 of Regulation S-K, however, compensation policies and practices related to risk management and risk-taking incentives, as required to be disclosed by Item 402, are only subject to the Say on Pay vote to the extent they are a material part of a company’s compensation policies or decisions for named executive officers, as opposed to compensation policies or decisions for all employees generally.

In the instructions to new Rule 14a-21(a) the Commission gives the following example of a Say on Pay resolution that would satisfy the requirements of Exchange Act Section 14A(a)(1) and Rule 14a-21(a):

RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.

This is a non-exclusive example (and in the case of a smaller reporting company would have to be revised to reflect applicable scaled disclosure requirements, rather than a Compensation Disclosure and Analysis (“CD&A”)). Rule 14a-21(a) does not require a company to use any specific language or form of shareholder resolution.

Also of note, any disclosure of director compensation as required by Item 402 of Regulation S-K is not subject to the Say on Pay vote.

Supplemental Disclosure

In the adopting release, the Commission notes that Rule 14a-21 does not change the scaled disclosure requirements applicable to smaller reporting companies, but that such companies may wish to include additional disclosure in connection with a Say on Pay vote to facilitate shareholder understanding of their compensation arrangements.

The Commission notes that, while not required, the Rule also does not preclude a company from soliciting shareholder approval on specific Say on Pay votes, such as separate votes on cash and other components of compensation.

Say on Frequency Votes

New Exchange Act Rule 14a-21(b) requires that a company hold a separate Say on Frequency vote for the first annual or other shareholder meeting occurring on or after January 21, 2011 (or, in the case of a smaller reporting company, on or after January 21, 2013) and, thereafter, not less than once every six calendar years, to determine whether a Say on Pay vote should be held annually, biennially or triennially. A Say on Frequency vote is only required with respect to an annual or other shareholder meeting at which proxies will be solicited for the election of directors.

Amended Exchange Act Rule 14a-4 requires that proxy cards reflect Say on Frequency choices of 1, 2 or 3 years, or abstain. A company can vote uninstructed proxies in accordance with management’s recommendation if it follows the existing Rule 14a-4 requirements to include a recommendation for Say on Frequency votes in its proxy materials, permits abstentions and includes language regarding how uninstructed shares will be voted in bold typeface on its proxy cards.

Say on Golden Parachute Votes

New Exchange Act Rule 14a-21(c) requires that a company hold a separate Say on Golden Parachute vote in connection with the solicitation of proxies for approval of an acquisition, merger, consolidation or proposed sale or other disposition of all or substantially all of the company’s assets. Rule 14a-21(c) also offers an exemption from the Say on Golden Parachute vote if a company’s golden parachute compensation has already been disclosed in connection with its annual executive compensation disclosures and has been subject to a prior Say on Pay vote, but only to the extent that the golden parachute compensation arrangements do not change after the Say on Pay vote (other than changes that reflect price movements in a company’s securities or that result in an overall reduction in the value of the total golden parachute compensation).

New Proxy Disclosure Requirements

For Say on Pay and Say on Frequency Votes

New Item 24 has been added to Schedule 14A to require that a company disclose in its proxy solicitation materials that it is providing separate Say on Pay and Say on Frequency votes and explain the general effect of the votes, such as whether they are binding, the current frequency of the Say on Pay vote as determined by the board following the most recent Say on Frequency vote and when the next scheduled Say on Pay vote will occur.

Amendments to Item 402(b) of Regulation S-K require that a company address in its CD&A whether and, if so, how, its compensation policies and decisions have taken into account the results of the most recent Say on Pay vote. A smaller reporting company, which is subject to scaled disclosure requirements under Item 402, rather a CD&A, does not have to make a similar disclosure.

Amendments to Exchange Act Rule 14a-6 add Say on Pay and Say on Frequency votes to the list of items that do not trigger the need to file preliminary proxy materials with the Commission.

For Say on Golden Parachute Votes

New Item 402(t) of Regulation S-K requires that a company disclose golden parachute compensation arrangements, whether written or unwritten, in both tabular and narrative formats. The new golden parachute compensation table requires quantitative disclosure of individual elements of compensation as well as footnote disclosure regarding amounts of compensation attributable to “single-trigger” and “double-trigger” arrangements.

Golden Parachute Compensation Table

Exclusion of Say on Pay and Say on Frequency Shareholder Proposals

An amendment to Exchange Act Rule 14a-8 permits a company to exclude shareholder proposals that would provide for or seek future Say on Pay or Say on Frequency votes if, in the company’s most recent Say on Frequency vote one of the choices (an annual, biennial or triennial frequency) received a majority vote and the company has adopted a policy that is consistent with that choice. Abstentions would not count in the determination of whether a particular Say on Frequency choice has received a majority of votes cast. If, however, no Say on Frequency choice receives a majority of votes cast, then even if a company adopts a policy that is consistent with the choice having received a plurality of votes, it may not be able to exclude shareholder proposals that relate to Say on Pay and Say on Frequency votes.

Disclosing the Results

Amendments to Item 5.07 of Form 8-K require that a company report the results of its Say on Pay and Say on Frequency vote within four business days of the date on which its shareholder meeting ended. New subsection (d) to Item 5.07 also requires that a company file an amended Form 8-K within 150 days of the date on which its shareholder meeting ended (but in no event later than 60 days before the deadline for submission of shareholder proposals for its next annual meeting) to disclose its decision regarding how frequently to conduct future Say on Pay votes. A company that fails to file a timely report under Section 5.07 will lose its Form S-3 eligibility.

Smaller Reporting Companies

The new rules temporarily exempt smaller reporting companies from holding Say on Pay and Say on Frequency votes until their first annual or other shareholder meeting occurring on or after January 21, 2013. This temporary exemption does not, however, extend to Say on Golden Parachute votes.

Newly Public Companies

A newly public company is required to include separate resolutions for Say on Pay and Say on Frequency votes in the proxy statement for its first annual shareholder meeting after its initial public offering.

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The SEC Proposes New Rules on Conflict Minerals … Do You Know What’s In Your Supply Chain?

by Vanessa Schoenthaler on December 16, 2010

Yesterday the Securities and Exchange Commission proposed a series of new rules to implement provisions of the Dodd-Frank Act addressing:

conflict minerals;

mine safety; and

payments made to governments in connection with resource extraction.

The proposed rules on conflict minerals would add a new Section 13(p) to the Securities Exchange Act of 1934, applicable to all reporting companies (including, as proposed, smaller reporting companies and foreign private issuers) for whom “conflict minerals are ‘necessary to the functionality or production of a product manufactured’ or contracted to be manufactured” by the company.

Conflict minerals include:

columbite-tantalite, or coltan (from which tantalum is extracted);

cassiterite (from which tin is extracted);

gold;

wolframite (from which tungsten is extracted); and

any derivatives of the above or any other minerals or derivatives designated by the Secretary of State.

If a company falls within this new category of issuer, it would be required to make a reasonable country of origin inquiry to determine whether the conflict minerals it uses originate from the Democratic Republic of the Congo or any country sharing an internationally recognized border with the D.R. Congo (which, at this time, includes: Angola, Tanzania,Rwanda, Uganda, The Republic of Congo, The Central African Republic, The Sudan, Burundi and Zambia).

If a company finds that its conflict minerals did not originate from the D.R. Congo or a bordering country, it would be required to disclosure that determination, and the reasonable country of origin inquiry used to make the determination, in its annual report and on its website.

If, however, a company finds that its conflict minerals did originate from the D.R. Congo or a bordering country, or if it is unable to find that they did not, then the company would be required to disclose that determination in its annual report, prepare and furnish as an exhibit to its annual report a Conflict Minerals Report and make the Conflict Minerals Report available on its website.

A company’s Conflict Mineral Report would be required to include a description of the:

due diligence undertaken on the source and chain of custody of the company’s conflict minerals;

products that are not “D.R. Congo conflict free”;

country of origin of the conflict minerals,

facilities used to process the conflict minerals; and

efforts used to determine the mine or location of origin of the conflict minerals.

The company would also be required to obtain an independent audit of the Conflict Minerals Report, to certify the audit report and to furnish a copy of the audit report with its Conflict Minerals Report.

The Commission’s release defines a number of terms used throughout proposed rule, including: “manufacture” and “contract to manufacture”. Comments are due by January 31, 2011.

Summit on the Illegal Exploitation of Natural Resources

Coincidentally (unless yesterday was international conflict minerals day and no one told me), Mail and Globe is reporting that the International Conference on the Great Lakes Region held a Special Summit on the Illegal Exploitation of Natural Resources yesterday, where leaders from 11 African nations signed a pledge to take steps to implement a regional certification system to track conflict minerals from their location of origin to the facilities where they are processed.

Do You Know What’s In Your Supply Chain?

These proposed rules have the potential to affect a large number of companies (the Commission estimates approximately 6,000 issuers will be affected in some way). Take a look at this report published by The Enough Project (an affiliate project of the Center for American Progress), leaving your political predilections aside for a moment, over the course of two years the group surveyed 21 of the largest electronic companies regarding the conflict status of their supply chains and found none of them to be conflict-free. If Apple and Intel have conflict minerals in their supply chains, what’s in yours?

Source: Enough!, Conflict Minerals Company Ranking

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How to Search for Proxy Filings in the SEC’s EDGAR Database

by Vanessa Schoenthaler on December 14, 2010

EDGAR, the Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval system, is used for the automated collection and indexing of filings that are required to be made with the Commission. The EDGAR database provides a portal to those filings, allowing access to certain information on a real-time basis (e.g., current and periodic reports on Forms 8-K, 10-Q and 10-K) and other information on a delayed basis (e.g., comment and response letters, which are generally available 45 days after the Commission has completed it review process).

There are a number of subscriptions services that offer EDGAR search capabilities, all of which provide features not otherwise available through the EDGAR database. However, if you’re not running highly customized queries or doing sophisticated comparative analyses the EDGAR database probably has everything you need.^*

Let’s take a look at how it works …

Right now the first proxy statements that contain proposals addressing shareholder advisory votes on executive compensation (“Say on Pay“) and the frequency of future advisory votes on executive compensation (“Say When on Pay“) are being filed with the Commission. Let’s say you’d like to review one of those proxy statements, but you don’t know which companies are filing them.

Where do you begin? Well, there are a couple of different ways you can go about it:

Starting from the Commission’s homepage (sec.gov), under the Filings & Forms heading, select the Search for Company Filings link:

This will bring you to a list of EDGAR’s main search options:

If you knew the name of the company you were looking for the first option (to search by Company name, ticker, etc.) would be the obvious choice, but since we’ve assumed that you don’t, let’s look at some of your alternative options.

You could select the second link, Most recent filings, and enter the form you’re looking for in the Form Type field. The form type for a definitive proxy statement is DEF 14A, if you wanted to, you could also look at preliminary proxy statements on form type PRE 14A. If you don’t know the form type that you’re looking for you can click on the Form Type link to download a copy of the Commission’s Index of Forms.

While this search method would provide a list of the most recently filed definitive proxy statements, it’s less than ideal for our hypothetical because there’s no way to know whether any of the proxies include proposals addressing shareholder advisory votes unless you review each one.

Going back to EDGAR’s main search options and skipping down to the Custom searches heading you could select the Daily filings link and run a search similar to the one described above, except this form allows you to limit your search to any day within the previous five business days. Of course, you also have the same problem as above; you’d have to go through each proxy statement until you found one that includes a proposal addressing shareholder advisory votes.

This brings us to Full-Text Search, the most efficient way to conduct our proxy search. Again going back to EDGAR’s main search options, if you select the third link from the top, Full text (past four years), you’ll be brought to a simple text search box that allows you to search the full text of all EDGAR filings, including exhibits, for the past four years. If you then select the link for the Advanced Search Page you can perform the same search using additional features, such as form type and date range.

Using the Advanced Search Page, if you were to search for the phrase “advisory vote” in all definitive proxy statements, on form DEF 14A, filed between October 1, 2010 and today (December 14, 2010), you would find 16 results:

If you select the first link for Costco Wholesale Corporation’s definitive proxy statement and scroll down to the Notice of Annual Meeting of Shareholder and you’ll find that Costco’s proxy statement contains proposals addressing both shareholder advisory votes on executive compensation and the frequency of future advisory votes on executive compensation.

It’s that simple. Unless you’re looking for a specific filing by a specific company, the advanced Full-Text Search option is going to be the most useful way for you to search the EDGAR database.

And, if you get stumped along the way, the Filings & Forms section of Commission’s website contains a number of useful tutorials and other resources.

_________________________

^*There are limitations which may affect both the EDGAR database and subscription services, for example:

If you’re looking for filings made before 1996, you may not find them. Companies were first required to submit filings through EDGAR between 1993 and May 6, 1996, before that all filings were submitted to the Commission in paper form.

There are specific forms that have only recently been filed through EDGAR (e.g., Forms 3, 4 and 5 were filed through EDGAR on a voluntary basis prior to June 30, 2003 and Form D was strictly a paper filing prior to March 16, 2009).

Annual reports to shareholders (the glossy versions) are generally not required to be filed through EDGAR, though companies may do so voluntarily.

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The SEC Proposes New Rules for Shareholder Advisory Votes on Say-on-Pay and Golden Parachutes

by Vanessa Schoenthaler on October 19, 2010

Yesterday the Securities and Exchange Commission proposed a new set of rule amendments designed to implement the say-on-pay and golden parachutes provisions of Section 951 of the Dodd-Frank Act.

The proposed rules would require companies subject to the Commission’s proxy rules (which includes U.S. issuers, non-U.S. issuers that do not qualify as foreign private issuers and foreign private issuers that voluntarily subject themselves to the Commission’s proxy rules) to provide their shareholders:

at the first annual or other shareholder meeting taking place on or after January 21, 2011, and at least once every three years thereafter, with a separate advisory vote on the compensation of those executive officers for whom compensation disclosure is required in the company’s proxy solicitation materials;

at the first annual or other shareholder meeting taking place on or after January 21, 2011, and at least once every six years thereafter, with a separate advisory vote on the frequency of the advisory vote on executive compensation, to determine whether it should take place every year, every other year or every three years; and

in any proxy or consent solicitation materials to approve a merger, acquisition or similar transaction, with a separate advisory vote on golden parachute compensation for executive officers, with disclosure in both tabular and narrative formats.

Importantly: the initial shareholder advisory vote on executive compensation and the initial shareholder advisory vote on the frequency of the vote on executive compensation must be included in a company’s proxy statement for the first annual or other shareholder meeting taking place on or after January 21, 2011, regardless of the Commission’s adoption of the proposed implementing rules.

Therefore any proxy solicitation materials, whether preliminary or definitive, for a shareholder meeting taking place on or after January 21, 2011, even if filed prior to that date, must include separate resolutions for shareholders to vote on executive compensation and the frequency of future executive compensation votes.

This is not the case for the advisory vote on golden parachutes; shareholder resolutions for shareholders to vote on golden parachutes are not required to be included in a merger or acquisition proxy statement until after the Commission adopts implementing rules.

The Commission made clear its view that a proxy card for any shareholder advisory vote on the frequency of executive compensation votes should only provide a shareholder with four choices: (1) that the shareholder advisory vote on executive compensation should occur every year; (2) that the shareholder advisory vote on executive compensation should occur every two years; (3) that the shareholder advisory vote on executive compensation should occur every three years; or (4) that the shareholder is abstaining from voting on the matter.

The Commission also pointed out that under the amended exchange rules, for issuers listed on a national securities exchange, broker discretionary voting of uninstructed shares would not be permitted for shareholder advisory votes on executive compensation and shareholder advisory votes on the frequency of votes on executive compensation

On the first read-through, other notable proposals in the Commission’s release include recommendations that:

shareholder advisory votes on executive compensation and shareholder advisory votes on the frequency of votes on executive compensation not trigger the required filing of a preliminary proxy statement;

smaller reporting companies not be exempt from the proposed shareholder advisory votes or additional disclosure requirements (but without altering existing scaled disclosure requirements related to compensation disclosure) ; and

registration statements containing disclosure relating to mergers and similar transactions, going-private transactions and tender-offers include both tabular and narrative disclosure regarding golden parachute compensation for executive officers.

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Reading The SEC’s Tea Leaves: A Preview of Possible Staff Disclosure Comments

by Vanessa Schoenthaler on October 12, 2010

With an onslaught of Dodd-Frank activity looming, the third quarter earnings season officially underway and the year-end fast approaching, wouldn’t it be nice to have some indication of what the Securities and Exchange Commission will focus on when reviewing upcoming year-end filings? Well there’s certainly no shortage of options, but the Commission’s Chief Accountant, Wayne Carnall, may have just given us a clue, at least with respect to financial disclosures.

As reported in CFO.com, Carnall, in a recent accounting-industry speech, named several areas that are of particular interest to the Commission and likely to be the focus of future staff comment letters.^* Among them, Carnall pointed to disclosure regarding short-term liquidity. No surprises there; just last month the Commission proposed a new set of rule amendments that would require companies to provide greater quantitative and qualitative disclosure of short-term borrowing during a reporting period.

Carnall also indicated that the Commission will increase its focus on the credentials and experience of those preparing and auditing the financial statements of companies with operations in developing countries. For example the Commission has recently issued comments such as:

We note that your operations are in [a developing county] but your audit report was signed by an audit firm based in [the United States]. In this regard, please describe for us how the U.S. auditor performed the audit of [your foreign] operations. In your response, please tell us whether another foreign audit firm assisted in the audit. If so, please tell us the name of the other firm, whether the other firm is registered with the PCAOB, and the extent to which audit work was performed by the other firm.

Other named areas of Commission focus included disclosure regarding the calculation of contingent liabilities, non-cash charges involving impairment to goodwill and deferred tax assets, and the consistency and accuracy of non-GAAP disclosure.

What about non-financial disclosures? Carnall didn’t touch on any, but Director Meredith Cross, in recent testimony before the House Committee on Financial Services, indicated:

Executive compensation disclosure review remains a focal point of the Division’s review program and the staff continues to comment on ways that companies can enhance their disclosure.

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^*Of course the Commission disclaims responsibility for the public statements of its employees, so Carnall’s predictions may not actually reflect future Commission policy.

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Say-on-Pay

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Reading The SEC’s Tea Leaves: A Preview of Possible Staff Disclosure Comments

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