Companies trading on the biggest US stock markets must get shareholder approval before granting stock options and other equity compensation under rules cleared by the Securities and Exchange Commission (SEC).
The SEC in Washington approved changes to listing standards for 6,200 companies selling stock on the New York Stock Exchange and NASDAQ Stock Market.
The SEC had asked US exchanges to toughen standards after investors complained that option grants contributed to accounting abuses at Enron Corp and WorldCom Inc by creating incentives for executives to exaggerate profits.
"These rule changes are an important step by our nation's principal markets," SEC chairman William Donaldson said in a press release. "They have responded to the commission's call for an increased shareholder voice in the equity compensation practices of listed companies."
The new rules also require companies to get shareholder approval before changing the exercise price of existing option grants, which set a price for buying shares in the future.
Companies often lower the strike price on options when a stock's decline has made the options worthless.
Option grants became a popular form of executive compensation during the bull market of the 1990s. They came under attack during the market's three years of declines.
"Shareholder approval of equity plans is common sense and should be required, because ultimately shareholders are the ones paying for it," said Ann Yerger, deputy director of the Council of Institutional Investors, which represents funds managing a total of more than US$2 trillion.
The new listing standards replace a pilot program administered by the NYSE that allowed companies to avoid a shareholder vote when equity compensation programs were made "broad-based" by including lower-level employees in the stock and option grants.
That exemption had created a ``loophole companies used to escape shareholder scrutiny,'' said Richard Ferlauto, director of pension investment policy for the American Federation of State, County and Municipal Employees, an association of labor unions with pension assets of more than US$1 trillion.
Under the NYSE's new listing standards, brokers that hold securities on behalf of customers wouldn't be allowed to vote on equity-compensation plans without instructions from the owners of those shares. Some companies fought that provision, saying it would make it hard for them to get a quorum of shareholder voters since brokers have custody of most customer shares.
The brokers "always vote for management," Yerger said in support of the new rule on broker voting.
"It's stuffing the ballot box." NYSE Chief Executive Dick Grasso said the rules will help rebuild investor confidence.
"Empowering America's 85 million investors by giving them greater voice in matters such as equity compensation is a critical element in increasing their confidence in the public companies they own and the equities markets in general," Grasso said in a press release.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is