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
I’m surprised the CD&I included VIFs. SEC Rule 14a-4(a)(3) states the proxy “shall identify clearly and impartially each separate matter intended to be acted upon, whether or not related to or conditioned on the approval of other matters, and whether proposed by the registrant or by security holders.”
However, Broadridge claims they don’t have to follow the rules required for proxies because they use a Voter Information Form (VIF), not a legal proxy. Broadridge can apparently reference a shareholder proposal however they want, or perhaps it would be more accurate to say however the issuer wants.