In the gray days of winter (at least for many of us), there is often one bright spot. The compensation committee meeting to approve annual incentive payouts for the prior fiscal year (as required by Section 162(m)). At the same meeting, many committees also set the performance goals for the current year (also per 162(m)). But then the question comes up: Must all of the fun and good feelings be spoiled by a required appearance of dreary old Mr. Form 8-K just four days later?

The answer is, as most of you know, “it depends.” We lawyers just love to say “it depends,” but seriously...

  1. Annual bonus awards/targets set in 2017, for payout in 2018 (or later), do not need be disclosed if they are consistent with awards/targets in prior years. For example, if the company disclosed in a prior year that the CEO’s target annual incentive was 100% of her base salary, based on achievement of certain total shareholder return metrics, and the target and metrics for the 2017 fiscal year are not materially different from prior years, there should be no need for an 8-K filing.
  2. Annual bonuses paid in 2017 for 2016 performance do not need be disclosed if they are consistent with awards reported in a prior year. For example, if the company disclosed the target and metrics for the 2016 fiscal year in early 2016 when the awards were made (or years ago, per #1 above), the company should not need to file an 8-K disclosing that it just made a 105% of base salary payout based on those targets and metrics. However, if the committee were to decide to pay an annual bonus despite that fact that the metrics were not achieved in 2016, that payout, if material, generally should be disclosed in an 8-K filing.

Similar questions arise for stock grants made by committee in spring 2017—and the answers are essentially the same.

Instruction #2 to Item 5.02(e) of 8-K states: Grants or awards (or modifications thereto) made pursuant to a plan, contract or arrangement (whether involving cash or equity), that are materially consistent with the previously disclosed terms of such plan, contract or arrangement, need not be disclosed under this Item 5.02(e), provided the registrant has previously disclosed such terms and the grant, award or modification is disclosed when Item 402 of Regulation S-K (17 CFR 229.402) requires such disclosure.