The Staff expects the text of the Compensation Committee Report to conform to the language set forth in Item 407(e)(5)(i)(A) of Schedule 14A and (B), with only minor modifications for plain English or to reflect circumstances unique to the company (for instance, reference to a committee that serves the role of a compensation committee under a different title). Accordingly, the Compensation Committee Report should state as follows: “The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis that is required by the SEC rules with the Company’s management. Based on such review and discussions, the Compensation Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement.” As noted above, smaller reporting companies and emerging growth companies are not required to provide a Compensation Committee Report because they are not required to include CD&A. Stockholder Approval of Equity Plans and Approval of Material Amendments to Equity Plans Subject to certain limited exceptions, the NYSE and Nasdaq require stockholder approval of new equity plans and material amendments to existing equity plans.27 Whenever a company seeks stockholder approval of an equity plan or an amendment of an equity plan, it must comply with the disclosure requirements of Item 10 of Schedule 14A. Item 10 requires the following: ■ Narrative Description: a narrative description of the material features of the plan, identifying each class of persons who will be eligible to participate in the plan, the approximate number of persons in such class and the basis of such participation. If the action proposed is only an amendment to an existing plan (e.g., adding shares available for future issuance under a plan or adding a new class of participants), the Item 10 disclosure still must include a complete description of any material features of the plan, as well as the material differences from the existing plan. PRACTICE POINT: The requirement to identify the approximate number of persons in each class of eligible persons (e.g., employees, directors and consultants) should not be overlooked, as plaintiff’s law firms often review equity plan proposals for non-compliance with the SEC rules, and this is one item that they have been known to cite if the required information is not included in the proxy statement. 27 See Section 303A.08 of the NYSE Listed Company Manual and Nasdaq Listing Rule 5635(c). In addition, the Code also requires stockholder approval within 12 months before or after board approval of a plan in order for awards to be eligible for treatment as incentive stock options. 2024 Guide to REIT Executive Compensation | 54
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