Search within this section
Select a section below and enter your search term, or to search all click C&DIs
Favorited Content
Section 117. Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
us SEC - C&DI - Exchange Act Form 8-K
Question 117.01
Question: When is the obligation to report an event specified in Item 5.02(b) of Form 8-K triggered? Must the Form 8-K filed to report an Item 5.02(b) event disclose the effective date of the resignation or other event?
Answer: With respect to any resignation, retirement or refusal to stand for re-election reportable under Item 5.02(b), other than in the corporate governance policy situations addressed in Question 117.15, the Form 8-K reporting obligation is triggered by a notice of a decision to resign, retire or refuse to stand for re-election provided by the director, whether or not such notice is written, and regardless of whether the resignation, retirement or refusal to stand for re-election is conditional or subject to acceptance. The disclosure shall specify the effective date of the resignation or retirement. In the case of a refusal to stand for re-election, the registrant must disclose when the election in question will occur, for example, at the registrant’s next annual meeting. No disclosure is required solely by reason of Item 5.02(b) of discussions or consideration of resignation, retirement or refusal to stand for re-election. Whether communications represent discussion or consideration, on the one hand, or notice of a decision, on the other hand, is a facts and circumstances determination. A registrant should ensure that it has appropriate disclosure controls and procedures in place – for example, a board policy that all directors must provide any such notice directly to the corporate secretary – to determine when a notice of resignation, retirement or refusal has been communicated to the registrant. [June 26, 2008]
Question 117.02
Question: Item 5.02(b) of Form 8-K requires current disclosure when any named executive officer retires, resigns or is terminated from that position. Since status as a named executive officer is determined based on the level of total compensation under Item 402(a)(3) of Regulation S-K, does this mean that disclosure on Form 8-K is triggered when the person is no longer required to be included in the Summary Compensation Table because of the executive officer’s level of total compensation?
Answer: No. Under Instruction 4 to Item 5.02, the term “named executive officer” refers to those executive officers for whom disclosure under Item 402(c) of Regulation S-K was required in the most recent Commission filing. A Form 8-K is triggered under Item 5.02(b) when one of those officers retires, resigns or is terminated from the position that the executive officer is listed as holding in the most recent filing including executive compensation disclosure under Item 402(c) of Regulation S-K. [April 2, 2008]
Question 117.03
Question: A registrant’s principal operating officer has his duties and responsibilities as principal operating officer removed and reassigned to other personnel in the organization; however, the person remains employed by the registrant, and the person’s title remains the same. Is the registrant required to file a Form 8-K under Item 5.02 to report the principal operating officer’s termination?
Answer: Yes. The term “termination” includes situations where an officer identified in Item 5.02 has been demoted or has had his or her duties and responsibilities removed such that he or she no longer functions in the position of that officer. [April 2, 2008]
Question 117.04
Question: If a registrant decides not to nominate a director for re-election at its next annual meeting, is a Form 8-K required?
Answer: No. That situation is not covered under the phrase “is removed.” However, if the director, upon receiving notice from the registrant that it does not intend to nominate him or her for re-election, then resigns his or her position as a director, then a Form 8-K would be required pursuant to Item 5.02. If the director tells the registrant that he or she refuses to stand for re-election, a Form 8-K is required because the director has communicated a “refusal to stand for re-election,” whether or not in response to an offer by the registrant to be nominated. [April 2, 2008]
Question 117.05
Question: If a registrant appoints a new executive officer, it may delay disclosure until it makes a public announcement of the event under the Instruction to Item 5.02(c). If the new executive officer were simultaneously appointed to the board of directors of the registrant, would the registrant have to disclose such appointment pursuant to Item 5.02(d) within four business days following such appointment, even if that date is before the public announcement of the officer’s appointment?
Answer: No. In these circumstances, disclosures under paragraph (d) of Item 5.02 may be delayed to the time of public announcement consistent with Item 5.02(c). Similarly, any disclosure required under paragraph (e) of Item 5.02 may be delayed to the time of public announcement consistent with Item 5.02(c). [April 2, 2008]
Question 117.06
Question: If the registrant does not consider its principal accounting officer an executive officer for purposes of Items 401 or 404 of Regulation S-K, must the registrant make all of the disclosures required by Item 5.02(c)(2) of Form 8-K?
Answer: Yes. All of the information required by Item 5.02(c)(2) regarding specified newly appointed officers, including a registrant’s principal accounting officer, is required to be reported on Form 8-K even if the information was not required to be disclosed in the Form 10-K because the position does not fall within the definition of an executive officer for purposes of Items 401 or 404 of Regulation S-K. [April 2, 2008]
Question 117.07
Question: If a director is elected to the board of directors other than by a vote of security holders at a meeting, but the director’s term will begin on a later date, when is the reporting requirement under Item 5.02(d) of Form 8-K triggered?
Answer: The reporting requirement is triggered as of the date of the director’s election to the board. The Item 5.02(d) Form 8-K should disclose the date on which the director’s term begins. [April 2, 2008]
Question 117.08
Question: The board of directors of the registrant adopts a material equity compensation plan in which named executive officers are eligible to participate. No awards have been made under the plan. Does board adoption of the plan trigger disclosure under Item 5.02(e)? Does the fact that adoption of the plan is subject to shareholder approval affect the timing of disclosure under Item 5.02(e)?
Answer: Adoption by the registrant’s board of directors of a material equity compensation plan in which named executive officers are eligible to participate requires current disclosure pursuant to Item 5.02(e) of Form 8-K. Where the registrant’s board adopts a compensation plan subject to shareholder approval, the obligation to file a Form 8-K pursuant to Item 5.02(e) is triggered upon receipt of shareholder approval of the plan. Similarly, if a reportable plan amendment or stock option grant is adopted subject to shareholder approval, the obligation to file a Form 8-K pursuant to Item 5.02 is triggered upon receipt of shareholder approval of the plan amendment or grant. [April 2, 2008]
Question 117.09
Question: The board of directors of the registrant adopts a material cash bonus plan under which named executive officers participate. No specific performance criteria, performance goals or bonus opportunities have been communicated to plan participants. Does the adoption of such a plan require disclosure pursuant to Item 5.02(e) of Form 8-K?
Answer: Yes. Moreover, if the plan is adopted and is also subject to shareholder approval, the receipt of shareholder approval – and not the plan’s adoption – triggers the obligation to file a Form 8-K pursuant to Item 5.02(e). [April 2, 2008]
Question 117.10
Question: After the adoption of a material cash bonus plan has been disclosed in an Item 5.02(e) Form 8-K, the board of directors sets specific performance goals and business criteria for named executive officers during the performance period. Does this action require disclosure pursuant to Item 5.02(e) of Form 8-K if the specific performance goals and business criteria set for the performance period are materially consistent with the previously disclosed terms of the plan?
Answer: No. In reliance on Instruction 2 to Item 5.02(e), the registrant is not required to file an Item 5.02(e) Form 8-K to report this action if the specific performance goals and business criteria set for the performance period are materially consistent with the previously disclosed terms of the plan, for example if the specific goals and criteria are among the previously disclosed performance goals and business criteria (such as EBITDA, return on equity or other applicable measure) that the plan may apply or has applied. [April 2, 2008]
Question 117.11
Question: A registrant pays out a material cash award pursuant to a cash bonus plan for which disclosure previously was filed consistent with Exchange Act Form 8-K Questions 117.09 and 117.10. Does payment of the award require disclosure pursuant to Item 5.02(e) of Form 8-K?
Answer: Disclosure under Item 5.02(e) depends on the circumstances relating to the payment of the cash award. If the registrant pays out a cash award upon determining that the performance criteria have been satisfied, pursuant to Instruction 2 to Item 5.02(e), a Form 8-K reporting such a payment would not be required under Item 5.02(e) because the payment was materially consistent with the previously disclosed terms of the plan. However, if the registrant exercised discretion to pay the bonus even though the specified performance criteria were not satisfied, a Form 8-K reporting such a payment would be required under Item 5.02(e) because the payment was not materially consistent with the previously disclosed terms of the plan, even if the plan provided for the exercise of such discretion. [April 2, 2008]
Question 117.12
Question: If an Item 5.02(e) Form 8-K is filed to disclose an annual non-equity incentive plan award, does the disclosure have to include the specific target levels?
Answer: The registrant is not required to provide disclosure pursuant to Item 5.02(e) of target levels with respect to specific quantitative or qualitative performance related-factors, or any other factors or criteria involving confidential trade secrets or confidential commercial or financial information, the disclosure of which would result in competitive harm for the registrant. This position is consistent with the treatment of similar information under Instruction 4 to Item 402(b) of Regulation S-K and Instruction 2 to Item 402(e)(1) of Regulation S-K. [April 24, 2009]
Question 117.13
Question: If a previously-disclosed employment agreement provides that the principal executive officer is entitled to receive a cash bonus in an amount determined by the compensation committee in its discretion, would an Item 5.02(e) Form 8-K be required when the committee makes an ad hoc determination of the amount of the principal executive officer’s bonus at the end of the first year that the contract is in effect? Would an Item 5.02(e) Form 8-K be required if the committee makes an ad hoc determination of the amount of the CEO’s bonus at the end of the second year in which the contract is in effect?
Answer: No. In both cases, no Item 5.02(e) Form 8-K would be required to report the discretionary bonus amount. Disclosure regarding material information about the bonus should be included in the registrant’s Compensation Discussion and Analysis and related disclosures under Item 402 of Regulation S-K. [April 2, 2008]
Question 117.14
Question: A registrant intends to terminate an executive compensation plan. Item 5.02(e) requires that material amendments or modifications of compensatory arrangements be disclosed on Form 8-K. Does this item require disclosure of plan terminations?
Answer: Yes. A termination should be disclosed if it constitutes a material amendment or modification of the executive compensation plan. Release No. 33-8732A stated that “[i]nstead of being required to be disclosed based on the general requirements with regard to material definitive agreements in Item 1.01 and Item 1.02 of Form 8-K, employment compensation arrangements will now be covered under Item 5.02 of Form 8-K, as amended.” [April 2, 2008]
Question 117.15
Question: If a company has a corporate governance policy that requires a director to tender her resignation from the board of directors upon the occurrence of an event — such as reaching mandatory retirement age, changing jobs or failing to receive a majority of votes cast for election of directors at the annual meeting of shareholders — when must a company file a Form 8-K under Item 5.02(b)?
Answer: Under these circumstances, in which a director tenders her resignation only because she is required to do so in order to comply with a corporate governance policy, the company must file a Form 8-K under Item 5.02(b) within four business days of the board's decision to accept the director's tender of resignation. If the board does not accept the director's tender of resignation — and thus, the director remains on the board — the company should consider informing shareholders as to whether and to what extent corporate governance policies are being followed and enforced. [June 26, 2008]
Question 117.16
Question: A registrant appoints a new director, triggering the obligation to file a Form 8-K pursuant to Item 5.02(d). The newly appointed director enters into the standard compensatory and other agreements and arrangements that the company provides its non-employee directors (e.g., an equity award, annual cash compensation and an indemnification agreement). Pursuant to Item 5.02(d)(5), must the Form 8-K describe these compensatory and other agreements and arrangements?
Answer: Yes. Item 5.02(d)(5) requires a brief description of the newly appointed director's compensatory and other agreements and arrangements, even if they are consistent with the registrant's previously disclosed standard agreements and arrangements for non-employee directors. In lieu of describing any material plan, contract or arrangement to which the director is a party or in which he or she participates, (but not material amendments or grants or awards or modifications thereto), the registrant may cross-reference the description of such plan, contract or arrangement from the Item 402 disclosure in the company's most recent annual report on Form 10-K or proxy statement. [May 29, 2009]
This is a work of the U.S. Government
Link copied
