United States: 2016 Proxy Season – Quick Reference Guide

The year is coming to an end and the 2016 proxy season is on the horizon. This quick reference guide identifies considerations based on themes from 2015, offers recommendations and resources for the upcoming season, and discusses expected future changes in disclosure rules that public companies will want to keep on their radar as proxy preparations begin.

Tips from the 2015 Proxy Season

  • Does your company have a board evaluation process? Consider disclosing the evaluation process to show how the board identifies and addresses gaps in skills and viewpoints, as well as how the board approaches issues around tenure, diversity and succession. Investors also want to know how the specific experience and expertise of directors helps them oversee corporate risks and provide meaningful insight and guidance to management.
  • Keep in mind that there is an increasing likelihood that investors and the SEC will be looking for information concerning boards' oversight of cyber risks. You can review SEC guidance on cybersecurity disclosure here.
  • Prepare for and consider how to respond to shareholder proposals, including proxy access proposals. In October, the SEC Staff issued a legal bulletin clarifying when a company may exclude a shareholder proposal on the basis that the proposal "directly conflicts" with a management proposal along with commentary on the ordinary business exclusion. The Staff will not conclude that a shareholder proposal directly conflicts with a management proposal if a reasonable shareholder could logically vote for both proposals. As a result, it will be difficult to successfully exclude a shareholder proxy access proposal by offering alternative proxy access parameters. Exclusions based on the substantially implemented basis might become the next battleground.
  • Start shareholder engagement early. Make public how shareholders can communicate and engage with your company and/or board. Consider the guidelines provided in the SDX Protocol to establish a framework for shareholder-director engagements. Be proactive about identifying your company's vulnerabilities to prepare for investor discussions.

Recommendations and Resources for 2016

  • ISS and Glass Lewis have issued their annual policy guidelines for 2016. ISS also released a summary of its 2015-2016 ISS Global Policy Survey. Both advisory firms clarified a number of their policies, and ISS issued a FAQ on its equity plan scorecard. Policy changes for 2016 include:

    • Director "overboarding":

      • Starting for annual meetings on or after February 1, 2017, ISS will recommend against non CEO directors sitting on more than five public company boards (as opposed to its current policy of more than six boards, which will remain in place for 2016). ISS will continue its policy of recommending against CEO directors on more than two "outside" boards.
      • Starting in 2017, Glass Lewis will recommend against CEO directors who sit on more than two "outside" boards and against non-CEO directors who serve on more than five public company boards. For 2016, Glass Lewis may note these levels as a concern, but will only recommend against directors under its current policy of more than three boards for CEO directors and more than six boards for non-CEO directors.
    • Unilateral bylaw and charter changes: Recognizing that investors may have different expectations for established public companies versus those that are newly public, ISS will separate its methodology for reviewing unilateral bylaw and charter changes, evaluating newly IPO'd companies on a case-by-case basis.
    • Exclusive forum provisions: For newly IPO'd companies, Glass Lewis will review exclusive forum provisions alongside other bylaw terms such as supermajority vote requirements and classified boards when determining whether to make a negative voting recommendation, as opposed to automatically doing so when a company adopts an exclusive forum provision without shareholder approval outside of a spin-off, merger or IPO.
    • Proxy access: ISS is clarifying its evaluation framework for proxy access candidates. An FAQ is expected this month with additional information on how it will evaluate proxy access provisions.
    • Compensation practices of Externally Managed Issuers (EMIs): ISS will consider it a problematic pay practice for EMIs to fail to provide sufficient disclosure for shareholders to evaluate named executive officer compensation.
  • Determine whether your company needs to seek shareholder approval of its stock incentive plan for additional shares or material changes to the plan. Also, do not overlook whether reapproval of the plan under which your company grants 162(m) performance awards is needed. If the last time shareholders voted to approve your company's 162(m) plan was 2011 or earlier, the plan should be disclosed and reapproved in 2016. Also, see here for Section 162(m) clarifications released earlier this year regarding the individual share maximums for options and SARs and the settlement of RSUs after the IPO grandfather period, as well as recent guidance on the potential inclusion of principal financial officers as covered persons for smaller reporting companies.
  • If your company is adopting a stock incentive plan or revising an existing plan, consider including a director-specific "ceiling" (or other meaningful limits) on director compensation in order to obtain shareholder approval in light of recent litigation over director compensation (such as this case with respect to grants to directors at Citrix).
  • Review the independence of your board's compensation committee advisors under NYSE and Nasdaq listing standards.
  • Check your company's Director & Officer questionnaire to make sure it is up to date. Reminder: The SEC has offered new guidance this year on the definition of "spouse" to be inclusive of same-sex marriages. Consider this in drafting the questionnaire.
  • Start thinking about how to present the executive summary of your company's Compensation Discussion & Analysis (CD&A). How can the company craft a compelling communication that is more visually appealing? Keep in mind that an executive summary can be an important tool to communicate with shareholders about what matters to your company. Keep it specific to have the biggest impact.
  • Review this year's Joint Committee on Employee Benefits (JCEB) Q&A with the SEC Staff here, which touches on topics including reporting equity awards for retirement-eligible executive officers and whether former compensation committee members should be named in the Compensation Committee Report.
  • Find the recent SEC Staff Compliance and Disclosure Interpretations (C&DIs) discussing unbundling of proposals to shareholders under Rule 14a 4(a)(3) here.
  • Don't forget about the change in the confidential treatment request process announced by the SEC Division of Corporate Finance in 2014. If the Division grants a request for confidential treatment without comment, it will no longer notify the applicant. It will, however, continue to post orders granting confidential treatment through EDGAR.
  • Remember to submit your company's "glossy" annual report to the SEC. Note that the SEC Staff is no longer uploading glossies to EDGAR.
  • The SEC continues to expand the use of eXtensible Business Reporting Language (XBRL) technology in its new rule making. Visit the XBRL portal for useful links that will help you become more familiar with this technology and help ensure your company's submission is compliant.

Looking Ahead

  • "Pay versus performance" and "pay ratio" coming soon:

    • Keep an eye out for the final "pay versus performance" rules, which could be implemented as early as 2016 if final rules are published by the end of the year. New Item 402(v) is expected to require disclosure of the relationship between executive compensation and cumulative total shareholder return in both narrative and tabular formats.
    • Plan ahead for "pay ratio" disclosure, which will require companies to disclose the ratio of the compensation of their principal executive officer (PEO) to the compensation of their median employee.1 Note that this disclosure will be required in 2018, so prepare to collect the appropriate information for fiscal year 2017.
  • Did your company hold a say-on-pay frequency vote in 2011? If so, it will need to conduct a say-on-pay frequency vote in 2017 to comply with the say-on-pay rule.
  • Clawback rules are still in the proposal stage and are not expected to be finalized before 2016 but they may be in effect in the coming year. Under the proposed rules, which apply to all public companies (including Emerging Growth Companies & Foreign Private Issuers), exchanges are directed to establish listing standards that require issuers to:

    • adopt and comply with policies to recover certain incentive-based compensation of executive officers from up to a period of three years in the event of a financial restatement; and
    • disclose those recovery policies.
  • Note that while the SEC adopted proposed hedging disclosure rules earlier this year, the rules have not yet been finalized. The proposed rules require disclosure of whether employees or members of the board of directors are permitted to engage in transactions to hedge or offset any decrease in the market value of equity securities granted to or held by them.
  • In July, the SEC issued a concept release on potential expansions of audit committee disclosures and solicited public comments.
  • Note that other disclosure rules may also be getting a makeover in the coming years, with pushes to modernize disclosure requirements and make reporting more efficient.

    • As part of the SEC's disclosure effectiveness project, the Division of Corporation Finance is reviewing Regulation S K and Regulation S X and considering ways to improve reporting for both companies and investors. The review is first focusing on Forms 10 K, 10 Q and 8 K. View public comments received on this project.
    • In addition, Congress has issued, through the F.A.S.T. Act, a mandate for the SEC to, among other things, make specific and detailed recommendations on modernizing and simplifying Regulation S K requirements to reduce the costs and burdens on companies, while still providing all material information.
  • Last week the SEC proposed rules on resource extraction payments disclosure. Initial comments are due by January 25, 2016, and reply comments, which may respond only to issues raised in the initial comment period, are due by February 16, 2016.


1. All employees, including non-U.S. (subject to limited exceptions), part-time, seasonal and temporary employees must be included in determining the median employee. The median employee can be identified using any "reasonable" method and the median employee must be determined at least once every three years. A company can choose any date within the last three months of its fiscal year to determine the median employee. The ratio may be expressed as a ratio where the median employee's compensation is 1 or narratively as a multiple of the PEO's compensation (e.g., "1 to 350" or "the PEO's compensation is 350 times the median employee's compensation").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.