One challenge that sometimes happens as part of a company’s drafting process is when the compensation group is working off kilter a little bit from the rest of the drafting team.
The problem arises due to a timing difference. The compensation committee might start earlier in the process and wind up reviewing multiple drafts of that part of the proxy before the rest of the drafting team gets done with its section of the proxy. This can happen due to the more complex nature of the disclosure and because of the timing of the committee meetings.
Because of this timing disconnect, the end product might not quite be in sync. This happened a number of times over this past proxy season when companies were tackling their “pay vs. performance” disclosures for the first time under the SEC’s new rules. There sometimes was a difference in how “performance” was communicated in the proxy summary compared to how it was portrayed in the CD&A.
The key to solving this problem is ensure that the messaging is consistent throughout the proxy, catching this by doing a careful read-through before you hit the “print” button, being particularly sensitive to the compensation disclosures.
