Many public companies will be required to include a "say on frequency" proposal at their 2023 annual meeting of stockholders. Since 2010, the Dodd-Frank Act has mandated that public companies submit, no less frequently than once every six calendar years, for a nonbinding shareholder vote, the question of whether a "say on pay vote" should be held every year, every two years, or every three years ("say on frequency"). Public companies (with certain exceptions) were first required to hold a say on frequency vote in 2011, and most held a second say on frequency vote in 2017 (which results in the next required vote being held in 2023).
In preparing this year's proxy materials, all public companies should confirm the year of their last say on frequency vote to determine whether they are required to include a say on frequency proposal in this year's proxy materials.1 When presenting a say on frequency proposal, a company's proxy materials must give stockholders the option to vote for one-, two-, or three-year periods between say on pay votes, and should disclose (i) the current say on pay frequency, (ii) that the proposal is advisory in nature and nonbinding, and (iii) that the company is required to conduct a say on frequency vote every six years. Although the board of directors is not required to make a recommendation as to say on frequency, most companies have provided stockholders with a recommendation on this matter.
Within four days following the annual meeting of the stockholders, companies must disclose on a Form 8-K the voting results of the say on frequency vote. The Form 8-K (or a later filed amendment to the 8-K) must also include the company's decision in light of such say on frequency vote as to how frequently the company will hold a say on pay vote. If the company does not report its decision in the initial Form 8-K, the 8-K amendment disclosing the decision must be filed by the earlier of 150 days after the annual meeting date and 60 days before the next deadline for submission of stockholder proposals under Rule 14a-8. Missing this deadline could affect a company's WKSI status and ability to use Form S-3 registration statements. In 2011 and 2017, a significant number of companies overlooked this disclosure requirement and were forced to seek a waiver from the SEC in order to maintain S-3 eligibility. While the SEC has routinely granted waivers in the past, it is not clear that they will continue to do so, since this is the third time that this disclosure has been required for most public companies.
Footnote
1 Most public companies are required to include the say on frequency at least every six years, even if they conduct annual say on pay votes, have never changed the frequency of say on pay votes, or do not intend to change the frequency with which they seek to conduct their say on pay votes. Emerging growth companies are not required to conduct say on pay or say on frequency votes but are required to initiate say on pay and say on frequency when they cease to be an emerging growth company.
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