Can you believe it? 2017 proxy season is fast upon us! It’s never too soon to start preparing your director and officer (D&O) questionnaires and ensure your firm is meeting all of its disclosure requirements.
Earlier this year, Nasdaq adopted a rule requiring disclosure of director “golden leash” compensation requirements. The rule requires Nasdaq-listed companies to disclose the material terms of all agreements or arrangements between any director or nominee for director on the company’s board and any person or entity other than the company relating to compensation or other payment in connection with that person’s candidacy or service as a director. “Golden leash” arrangements typically involve compensation of a director by a shareholder or shareholder group when certain corporate metrics or stock performance milestones are met.
By requiring disclosure, Nasdaq hopes to ease concerns that these types of arrangements lead to conflict of interest, prevent fiduciary duties from being met, and emphasize short-term wins rather than long-term value creation. The rule stands out from other similar disclosure requirements as it requires annual disclosure of any third-party arrangement, regardless of when compensation is given. Other rules only address disclosure of compensation paid during the last completed fiscal year.
This information must be shared publicly either on a company’s website or in its proxy statement. Nasdaq-listed companies should consider revising your D&O questionnaires to ensure all necessary information is captured from your board and many law firms are suggesting NYSE-listed issuers consider the change, just to err on the side of caution.
*This article was originally published on the Diligent blog.