FW Cook’s review of the first 40 proxies filed as of October 4th that included the newly required hedging disclosure reveals these and other noteworthy statistics and trends:
- Policies are the norm - All 40 companies have policies that restrict hedging notwithstanding the absence of any legal requirement to do so.
- Who is covered? - Policies commonly cover directors and all employees, as depicted here:
- What is covered? - 58% disclose policies that prohibit both hedging and non-hedging derivative transactions, whereas 43% of policies prohibit only hedging transactions.
- Location of disclosure - 60% of proxies included the hedging disclosure only in the CD&A; 15% were only in the Governance section; and the balance included the disclosure in both the CD&A and Governance sections.
- Disclosure content – All companies included a summary in lieu of the hedging policy, although two also included a link to their full policy.
The report suggests a number of factors companies may wish to consider in determining how broadly to apply a policy, including consideration of which employees are subject to stock ownership guidelines, which employees have the ability to significantly impact company performance, the ease and means of enforceability, the size and nature of the employee population, and employee perceptions.
See also these posts from Cooley and The Securities Edge, and additional information & resources on our Hedging & Pledging page. This post first appeared in the weekly Society Alert!