Executive Compensation—It Just Won’t Go Away
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2013-11-03
Over the last several years executive compensation has been an issue that has received a lot of attention from Wall Street, union pension funds, activists, and others. The Dodd-Frank Say-on-Pay mandate was put in place and early on there was surprising push back from shareholders. There were results that have been tracked about the impact of Say-on-Pay and the support from shareholders over several years that are as follows:
Based on the recent Towers Watson Research of approximately 13,050, roughly 3,000 companies show their positive results on Say-on-Pay in 2013 are up to 90% from 89% in 2012. The percentage of those companies receiving negative ISS board recommendations drop from 13 to 11 percent.
It is clear that company disclosures are better focused on explaining executive compensation generally. This is a result of a conclusion reached by Ning Chiu of Davis Polk, LLP. Companies are also more sensitive about those issues that will raise questions and possibly trigger negative proxy advisory firm recommendations. Clearly, the large companies are responding to shareholder Say-on-Pay concerns and are being advised by their outside counsels on the proper manner of preparing detailed compensation disclosure in their proxy statements. Further, we believe that many of these companies are reaching out to their large institutional investors and having a dialogue with them concerning compensation, getting feedback, and responding appropriately—so progress has been made.