Instead of requiring an annual “say on pay” vote, rules implemented pursuant to the Dodd‑Frank Act require that an advisory vote on executive compensation occur at least once every three years. To further complicate matters, at least once every six years stockholders must also be given an opportunity to vote separately on whether the “say on pay” vote should occur every year, every other year or every three years.
The first “say on frequency” vote was required in 2011, so companies that held such a vote will need to hold separate “say on frequency” votes at their 2017 annual stockholders’ meetings. Most companies have decided to hold annual “say on pay” votes, which is consistent with the recommendations of most proxy advisory firms, but the fact that a company holds an annual “say on pay” vote does not excuse it from the requirement to seek stockholders’ views on the appropriate frequency.
Because the “say on frequency” vote is merely advisory, the board must subsequently determine how often the company will actually conduct a “say on pay” vote. The board’s final determination on frequency must be reported on a Form 8-K, either the one filed within four days after the meeting to report the results of the meeting or a later amendment to that report filed within 150 days after the meeting.
This reporting requirement was the subject of numerous SEC comments following the first “say on frequency” proposals in 2011, often because the targeted companies forgot to file the required amendment to disclose their boards’ final decision on frequency.
Public companies should be sure to determine whether they need to include the “say on frequency” proposal in their proxy statements and to satisfy the related disclosure requirement. If you choose to include the frequency decision in the initial Form 8‑K, we advise that you include a heading or other clear indication that this disclosure is being made so the SEC staff does not mistakenly interpret the lack of a subsequent amendment as a failure to make the required disclosure.