At the very end of last week, two significant events occurred which could have major repercussions for compensation professionals. First, the shareholders of Chesapeake Energy Corporation overwhelmingly rejected the company's shareholder say on pay resolution – by an 80% vote, one of the highest rejection rates to date. Perhaps more significantly, however, the shareholders also voiced their displeasure with compensation (among other) issues by voting against two sitting directors at a level of nearly 75%. This blog has discussed the many reasons why the shareholder say on pay vote is critical for companies, but this result points out one we generally only have discussed in private: The substantial risk that shareholders will move on from voting against the SSOP resolution to voting against compensation committee members and other directors. If your company does not have an effective strategy for maximizing the likelihood of achieving a favorable vote in SSOP, you may have trouble getting qualified directors to serve on your compensation committee – or at all.
The second significant development only applies to executive compensation at financial institutions. However, unlike some parts of Dodd-Frank (e.g., Section 956), it applies to all financial institutions, regardless of their size – and that is the surprise. Last week, the Board of Governors of the Federal Reserve System (the "Fed"), the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) jointly issued proposed rules that would require all financial institutions to comply with the complicated and severe bank capital standards known as "Basel III." Among the immediate results of failing to comply with the Basel III standards would be new limitations on compensation applicable to executive officers of the institution. I will attempt to elaborate on these incredibly complex rules for the benefit of our many financial institution readers in a subsequent blog.
On June 11, 1942, the United States and the Soviet Union signed a lend lease agreement to aid the Soviet war effort in World War II. Most of these supplies were transported through the North Sea (and, weather/ice flows permitting, the Norwegian and Barents Seas) from Great Britain, which led to a number of great naval attacks and battles. At the outbreak of war, Stalin had allied with Nazi Germany. However, in 1942 (as we all know) Hitler invaded his the Soviet Union, which soon switched sides. The Soviets were woefully unprepared for war and relied heavily on American supplies through D-Day.