After several rounds of public commentary -- and resulting revisions -- yesterday, the SEC adopted revised executive compensation disclosure rules. These new rules are applicable to all public companies --regardless of size [even when the same engage in so-called "going-private" transactions (closing a previous loophole), and then thus retreat to the darkness of no additional public disclosures].
The rules, as amended, now require much clearer table-format disclosures of golden parachute driven projected-payments, and require at least advisory polls of the shareholders -- or, a "say on pay" -- per the final rule's adopting release:
. . . .We are adopting amendments to Item 5 of Schedule 14A, as well as other forms and schedules, to implement and supplement the requirement of Section 14A(b)(1) to provide disclosure of golden parachute compensation arrangements in a clear and simple form. Under the amendments, all companies will be subject to the same golden parachute disclosure requirements. As amended, Schedule 14A will require the disclosure pursuant to Item 402(t) of Regulation S-K with respect to golden parachute compensation arrangements for merger proxies. Though much of the disclosure required by our amendment to Item 5 of Schedule 14A is currently required for all issuers, regardless of size, under our amended rules such disclosure will be required to be included in a tabular format pursuant to Item 402(t) of Regulation S-K, which will include an aggregate total and specific quantification of various compensation elements. All companies, regardless of size, will also be subject to these additional disclosure requirements in connection with other transactions not required by Section 14A(b)(1), including certain tender offers and Rule 13e-3 going-private transactions.
In addition, our amendments will require clear and straightforward disclosure of issuer’s responses to shareholder advisory votes, and of golden parachute compensation arrangements in connection with mergers and similar transactions. We have used design rather than performance standards in connection with the amendments because, based on our past experience, we believe the amendments will be more useful to investors if there are specific disclosure requirements. The amendments are intended to result in more comprehensive and clear disclosure. In addition, the specific disclosure requirements in the amendments will promote consistent and comparable disclosure among all companies. . . . .
Now, to connect the above new rules, to the late 2009 bust-up of Schering-Plough by Merck. . . per this story, we learned in 2009 that Gary Lawson, head of global compensation and HRIT at Schering-Plough,was retiring in late 2009. That was particularly interesting, especially since he was a recent high-ranking alum of Wyatt Wheeler.
Hans Becherer is depicted at left. Regular readers may recall that Wyatt Wheeler was the firm where Ira T. Kay (pictured, at right), Hans Becherer's designated compensation consultant, resided. Cozy.
Of course, Hans Becherer was the Chairman of Schering's Compensation Committee of the Board -- he oversaw CEO Hassan's pay, and bonus opportunities. Very. Cozy. [Finally, per the link, he is personally a named defendant in Cain v. Hassan -- the putative ENHANCE "ERISA Breach of Fiduciary Duties" and shareholders' derivative actions.]
Moral of this story: when public companies don't restrain themselves (especially as to mulitple hundreds of millions of dollars in golden parachute pay to CEOs who so mismanage a company that there is no real alternative, except to solicit, and then accept, a low-ball bust up bid), the SEC will step in and do it for them.
* The increase is due to post-bust up increases in New Merck stock values on the NYSE (from $26, to around $33).