Disclosure of anti-hedging and pledging policies, clawback policies and share ownership guidelines were at an all-time high in 2015, according to a recent Frederic W. Cook governance report. The study, which focused on the 250 largest U.S. companies in the S&P 500 that filed proxies by March 31, 2015, found that 73% of companies now disclose both anti-hedging and anti-pledging policies, while an additional 18% disclose only an anti-hedging policy. Additional findings included:
- The vast majority (90%) of companies disclosed clawback policies in 2015; however, many companies will need to revise their clawback policies once the Dodd-Frank clawback rule is finalized in order to comply with the requirements of the rule.
- Only 15% of companies cover former executives in their clawback policy
- 46% of companies disclosed that the enforcement of clawbacks is subject to compensation committee discretion
- 39% of companies only require a clawback in the event of fraud/misconduct on the part of the executive in question, while an additional 10% are triggered by fraud/misconduct by any executive; no-fault clawback policies are currently only found at 38% of companies
- Only 30% of companies disclosed a lookback period for clawbacks (three years was the most prevalent)
- Almost all (95%) companies disclosed stock ownership guidelines in 2015
- Most (86%) define guidelines as a multiple of base salary, with 6x base for the CEO now the clear frontrunner (NEOs were most commonly in the 3-3.9x range)
- Inclusion of unvested options (1%), unvested PSUs (9%) and vested options (10%) was relatively uncommon, while 38% of companies did include unvested RSUs
- Almost half (47%) of companies disclosed a retention requirement in addition to ownership guidelines, most commonly requiring executives to retain 50-100% of net shares until ownership guidelines are met.