Page 771 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

756 The Complete Guide to Executive Compensation

1993 Made extensive changes in the disclosure requirements of executive pay in company proxy state-
ments. This included persons reported, tabular requirements, and compensation committee
report, and a stock performance graph.
Issued clarifications of previous-year disclosure requirements, including who was to be included
as a named executive and the inclusion of the compensation committee’s pay philosophy and the
applicability of Section 162(m).
1994 Six-month advance notice no longer required to have shares withheld to meet income tax
withholding requirements.
1996 Transactions (rather than shareholder approval) will obtain exemption status from Rule 16(b)–3
short-swing profit recovery rules under certain prescribed situations. Eliminated the require-
ments that either the option or its shares be held for at least six months if a qualified transaction,
thereby significantly broadening its 1991 ruling on stock option purchases.
Cash payments measured by the price of company stock are also to be reported on Forms 3
and 4.
Transferable stock options are not in violation of 16(b)–3 rules.
1998 Permitted shareholder vote on repricing of stock options.
Circuit breakers halting declines in stock market were announced: a 10% decline would halt
trading for an hour, a 20% decline would halt trading for two hours, and a 30% decline would
halt trading for the day.
1999 Approved New York Stock Exchange removal of shareholder approval requirement for broadly
based employee stock plans.
2000 Executives are not barred from buying or selling their stock regardless of what information they
possessed if such transactions were formally contemplated before the inside information was
available to the insider.
2001 Rule 155(b) adopted, providing a safe harbor for insurers to switch to a registered public
offering from an abandoned private offering.
2002 Companies are required to disclose the number of securities that will be issued upon time
of exercise, their weighted average exercise price, and the number of shares remaining for
future use under plans approved by shareholders and separately for plans not approved by
shareholders.
CEOs and CFOs are required to attest to the validity of financial filings.
Form 4 must be filed within two business days of a reportable event.
2003 Paper filing of Forms 3, 4, and 5 was eliminated. Instead, they must be filed electronically and
posted on the company website.
Companies listed on the New York Stock Exchange and the NASDAQ must get shareholder
approval before granting stock options or awards. They must also receive similar approval for
any material modifications including repricing of stock options.
2004 Form 8-K to include employment agreement, compensation, pension plans, and other deferred
compensation agreements as well as when directors and officers leave or new ones are elected;
must be filed within four business days of a triggering event.
2005 Clarified FAS 123R, stating that different pricing models can be used for awards with different
characteristics and that good faith estimates and assumptions will not be challenged later.
2006 Required proxy to report total pay (including stock compensation) for named executives, which
must include the chief financial officer. Similar pay reporting required for as many as three
others who are paid more than the lowest paid of the five named. Proxy should also include
pension and other postemployment payments, as well as a pay table for board directors similar
to that for named executives.
Proxy disclosure rules on pay and perquisites were significantly expanded.
Revised instructions for Form 8K requirements for disclosing equity awards to exist-
ing named executives. Executives and directors new in their responsibilities are still subject to
2004 rules.