Total Rewards Action Recording: The Role of Proxy Advisors and the New SEC Reporting Requirements - 12/10/20

On i4cp’s December 10th Action Call for the Total Rewards community, call leader Mark Englizian interviewed Brit Wittman, Vice President of Total Rewards at Applied Materials.

Wittman describes his employer as a tech company that manufactures equipment used to make semiconductors. Customers include Intel, TSMC, Samsung, and others. Because the pandemic has driven greater use of technologies that rely on its products, such as Zoom, Applied Materials has not suffered some of the cutbacks that have plagued other industries. About two thirds of the company’s approximately 24,000 global employees are working remotely during the health crisis. Wittman is responsible for compensation, benefits, design, communications executive compensation, and other aspects of TR leadership.

Among Ideas Shared Today:

1. Understanding proxy advisors
   • Wittman defined proxy advisors as organizations that advise investors. Those buying their advice are large institutional investors, such as Fidelity, State Street, Capital Research, Vanguard, etc.
   • Institutional investors that buy large blocks of stock in companies are responsible for voting anything in the proxy, which may include a few or many proposals on things like governance issues, compensation, and more.
   • While large investors have staff to review proposals included in proxies, they buy advice from advisors. The largest advisor is ISS, or Institutional Shareholder Services, and can greatly influence the vote on any item in a proxy. The second largest advisor is Glass Lewis. Other advisory firms are much smaller.
2. Proxy solicitors
   • Proxy solicitors differ from proxy advisors in that they only perform an administrative function of sending out proxies – collecting votes.
   • Wittman explains that call attendees can talk with their proxy solicitors to gain insights into which institutional investors are major company shareholders and proxy advisors’ influence of them.
   • He also advises that talking with major shareholders is a growing part of his work and a way to assess what those shareholders think independently of their proxy advisors.
3. New SEC human capital reporting requirements
   • Part of the conversation on the call centered on the new rules from the Securities and Exchange Commission, issued in November 2020, that require public companies traded on U.S. exchanges to disclose human capital measures/information.
   • A poll of call attendees found that the largest portion (50%) reported that they were on a team charged with deciphering what the new SEC rules meant for their organizations. Just over one in four (27%) said they’d heard of the new rules, but needed more education about them, and 18% said they were unfamiliar with the new rules. Five percent reported personal accountability for ensuring that their companies met the requirements.
   • While the SEC has asked for disclosure of human capital metrics, Wittman says, they haven’t specified what those are and many companies are seeking direction.
   • i4cp has prepared a brief on the SEC ruling to provide guidance for members, and suggests as a starting point the proposed International Standards Organization (ISO) 30414 Human Capital reporting standards.

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Access the recording of today’s full Total Rewards Action Call here

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