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A Say-on-Frequency Reminder

    Client Alerts
  • December 08, 2016

The proxy rules require that public companies submit a proposal to their shareholders every six years regarding how often they should have say-on-pay votes, known as “say-on-frequency”. Most companies held their first say-on-frequency vote in 2011, which means that it will be time for another vote in 2017. (“Smaller reporting companies” were not required to hold their first say-on-frequency vote until 2013, which means that they won’t have to do it again until 2019. Also, there are special rules for “emerging growth companies.”)

Note that:

  • Say-on-frequency must be a separate ballot item due to the SEC’s proxy unbundling rule (see this Doug’s Note);
  • Shareholders may choose to vote on executive compensation every year, every two years, every three years or choose to abstain; and
  • The proxy statement must briefly explain the general effect of this vote, such as whether it is non-binding, the company’s current say-on-pay vote frequency, the timing of the next scheduled say-on-pay vote and any other relevant information.

Note also that Item 5.07 of Form 8-K requires companies to amend their initial post-meeting Item 5.07 Form 8-K (which reports voting results) no later than 150 calendar days after the end of the shareholder meeting at which the vote was taken in order to “disclose the company’s decision in light of such vote as to how frequently the company will include a shareholder vote on the compensation of executives in its proxy materials….”

Rather than later amending the initial post-meeting Item 5.07 Form 8-K, many companies choose to include the required disclosure in the initial Form 8-K. In that case, no subsequent amendment is required.

Whether a company follows this one-step approach may depend on whether its board of directors is prepared to reach a decision regarding the say-on-frequency vote within the four-business-day timeframe for filing the initial Form 8-K. That may be depend, in part, on whether the results of the new say-on-frequency differ from the current frequency, in which case the board may want to first enlist the advice of its compensation consultant and other professionals before making a decision.