Editor's Note: As noted in last week's Society Alert, the Society Alert is on hiatus this week during the Society's National Conference. In the interim, I am featuring noteworthy, recent Q&A (on an anonymous basis) from our invaluable Society Huddles.
Question: I would like to get a sense of how others have handled obtaining Compensation Committee approval for LTI grants to new hires or newly-promoted employees in between regularly scheduled Compensation Committee meetings. Do you seek written consent from the Committee in the interim period; schedule a telephonic meeting in the interim; just wait for the next regularly scheduled meeting; have some sort of pre-authorized delegated levels of authority for the officers?
This question generated a lot of activity and many excellent answers, including:
- I have had the Compensation Committee delegate some of its authority to the CEO, e.g., annually, the CEO may grant stock options to persons in positions of VP and below or persons hired for those positions up to X number of options. The Committee also provides of pool of options annually from which the CEO grants can be made. The CEO reports quarterly on the grants made. HR has the CEO sign a form each quarter indicating the options granted and provides that information to Finance so that the numbers can be tracked.
- Our Compensation Committee has delegated authority to our CEO to approve off-cycle new hire and promotion equity grants for individuals other than direct reports to the CEO. Additionally we report those off-cycle approvals at the next following Committee meeting.
- At its February meeting each year, our Compensation Committee approves an aggregate dollar amount for long-term incentive awards (the "Cap") and the form of performance share agreement. The Compensation Committee and the Board then approve the awards to the officers over the VP level, and delegate to the CEO and the EVP-HR the ability to grant awards to employees at or below the VP level so long as the aggregate amount of the awards does not exceed the Cap and the approved form of performance share agreement is used. For interim grants for new hires above the VP level, we would either wait for the next regular meeting to grant or hold a special meeting, if so desired by the CEO or the Committee.
- We have a monthly Unanimous Written Consent specifically for this purpose. We didn't want new hires to have to wait until the next quarterly meeting to receive their awards, and we process so many that doing them every month is much more manageable.
- Our Compensation Committee has authorized our CEO to approve equity awards up to a certain value to employees below the elected officer level. For off-cycle awards to elected officers, we first obtain concurrence of the Compensation Committee Chair on the proposed award (and any other compensation changes, if relevant). Then we ask all the Committee members to approve via written consent. In addition, if we expect to have an off-cycle equity award due to the election of an officer, for example, we give the Committee a heads-up at their regular quarterly meeting.
- To facilitate the grant of equity to new hires (which essentially occurs on a monthly basis), our Board formed a Stock Plan Committee that makes grants to new employees other than executive officers/directors. It's a two-member committee, comprised of our CEO and the Chair of the Compensation Committee. We set up an electronic written consent/vote on our board portal, and the Stock Plan Committee logs in to review and approve the roster of grants on-line. It has worked out well.
Access additional resources on our Compensation Committees topical page.
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