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ISS Issues 2012 Corporate Governance Policy Updates Relating to Compensation

Institutional Shareholder Services Inc. (?Ç£ISS?Ç¥) recently released its 2012 corporate governance policy update which includes changes to the way it evaluates executive pay-for-performance to ensure alignment between compensation and shareholder goals. The new ISS methodology includes measuring both peer group alignment and absolute alignment. Key factors that the ISS will evaluate include a company?ÇÖs one- and three-year total shareholder return (?Ç£TSR?Ç¥) relative to its industry group, and whether the CEO?ÇÖs total compensation is aligned with the company?ÇÖs TSR in both the short and long-term. ISS?ÇÖs 2012 policy can be found here.

Cincinnati Bell Agrees to Say-on-Pay Settlement

Multiple news sources have reported that Cincinnati Bell has agreed to settlement terms in In re Cincinnati Bell, Inc. Derivative Litigation. The complaint in this case alleged that the board of directors breached its fiduciary duties by approving the company?ÇÖs 2010 executive compensation plan after certain shareholders voted against it in an advisory say-on-pay vote. The settlement terms include a variety of corporate governance changes that, among other things, will more clearly communicate the Company?ÇÖs executive compensation practices to its shareholders, and the payment of plaintiff?ÇÖs attorneys’ fees and expenses. A list of the corporate governance changes can be found in Section 2.1 here.

Second Circuit Orders Former Tyco Director to Return $20 Million Payment

The U.S. Court of Appeals for the Second Circuit reversed the decision of the Southern District of New York, and ordered Frank Walsh, a former member of Tyco?ÇÖs board of directors to return a $20 million secret payment he received from Tyco in connection with Tyco?ÇÖs acquisition of CIT Group, Inc. Walsh claimed that the board ratified the payment. The court determined that under Bermuda law, Walsh failed to disclose that he stood to personally benefit from the acquisition?Çöa duty he owed to the shareholders, not the board. Thus, once the breach occurred, only the shareholders, and not the board, could effect a release. (Tyco Int’l Ltd. v. Walsh, 10-4526-cv (2d Cir. Jan. 11, 2012)(Summary Order)).

IRS Clarifies Participant Notice Requirements for Form 8955-SSA

The IRS issued a FAQ on Question 8 on the Form 8955-SSA, regarding the required notice to participants who have terminated employment with vested plan benefits payable in a future year. The question may be answered ?Ç£yes?Ç¥ if the individual statement was timely furnished to participants in other documentation such as benefit statements or distribution forms. A separate statement is not required, and the participant?ÇÖs social security number, codes used to identify previously reported participants, or any information regarding forfeitable benefits on death need not be included. Retirement Plan FAQs Regarding Form 8955-SSA can be found here. The due date for filing the Form 8955-SSA for both the 2009 and 2010 plan years is the later of (1) January 17, 2012 or (2) the due date that generally applies for filing the Form 8955-SSA for 2010.

January 2012