Shareholder activism continued to thrive in the 2014 proxy season, spurring corporate action as well as renewed engagement between issuers and investors. While the total number of shareholder proposals declined in 2014, lively activity continued with calls for independent chairs as well as burgeoning growth for social issues. And while few in number, change-in-control payout proposals were notably successful for the first time this year, while equity retention proposals continued to have a weak showing. In addition, support for proxy access proposals also grew at a rate greater than any other type of proposal.
Posts Tagged ‘Executive Compensation’
On October 15, 2014, Institutional Shareholder Services (“ISS”) released proposed amendments to its proxy voting policies for the 2015 proxy season. ISS is seeking comments by 6:00 p.m. EDT on October 29, 2014.  ISS has stated that it expects to release its final 2015 policies on or around November 7, 2014. The policies as revised will apply to meetings held on or after February 1, 2015.
As issues around cost transparency and best practices in equity-based compensation have evolved in recent years, ISS proposes updates to its Equity Plans policy in order to provide for a more nuanced consideration of equity plan proposals. As an alternative to applying a series of standalone tests (focused on cost and certain egregious practices) to determine when a proposal warrants an “Against” recommendation, the proposed approach will incorporate a model that takes into account multiple factors, both positive and negative, related to plan features and historical grant practices.
Feedback from clients and corporate issuers in recent years, beginning with the 2011-2012 ISS policy cycle, indicates strong support for the proposed approach, which incorporates the following key goals:
In 2011, CFA Institute released the Compensation Discussion and Analysis (CD&A) Template as a tool to help companies produce a more succinct and informative CD&A that served the needs of both companies and investors. At the time there were complaints from both issuers and investors that the typical CD&A was seen by too many issuers as a compliance document that was too lengthy and too opaque to serve as the communication tool investors desired.
In the intervening years disclosures in the CD&A have improved a great deal, due in part to increased engagement between issuers and investors, a better understanding of disclosure best practices by issuers, and more willingness by some issuers to experiment with more creative ways of telling their stories.
As a result of the Dodd-Frank Act of 2010, public firms must periodically hold advisory shareholder votes on executive compensation (“say on pay”). One of the main goals of the say-on-pay mandate is to increase shareholder scrutiny of executive pay, and thus alleviate perceived governance problems when boards decide on executive compensation. In our paper, Does Shareholder Scrutiny Affect Executive Compensation? Evidence from Say-on-Pay Voting, which was recently made publicly available on SSRN, we examine how firms change the structure and level of executive compensation depending on whether the firm will face a say-on-pay vote or not.
One of the world largest fiduciary asset managers, APG recently issued remuneration guidelines that will be applied to its portfolio of European listed companies. APG believes that the innovation in the new guidelines is twofold. First in that they are based on its practical experience of company engagements and therefore reflect an integrated investment and governance outlook. More specifically, the guidelines place a clear emphasis on value creation. By issuing the guidelines APG is aiming to make its ongoing discussions with companies around pay more effective, thus freeing up time for it to focus on other important corporate governance areas such as board structure, succession and nominations.
In 2013, CEOs in S&P 500 firms were paid, on average, over 200 times the average worker’s salary in their firms. To avoid or minimize public outrage, managers have a substantial incentive to obscure and try to legitimize their excessive compensation. One way of doing so is to have “independent” compensation consultants recommend higher pay to the board. However, prior literature has not been able to find significant evidence that hiring consultants leads to higher pay, partly because the information is only available after 2006 and most studies on this topic examine one or two years after 2006.
Proxy Voting Analytics (2010-2014), a report recently released by The Conference Board in collaboration with FactSet, reviews the last five years of shareholder activism and proxy voting at Russell 3000 and S&P 500 companies.
Data analyzed in the report includes:
…continue reading: The Recent Evolution of Shareholder Activism
Stock options have been a part of executive pay at major U.S. corporations for approximately 100 years. They have had an important role for approximately 70 years, starting in the 1950s. They have gone through periods of extraordinary popularity (e.g., the 1990s) and have been less popular during periods when the stock markets were in the doldrums. They survived the change in accounting rules (2006) that now require them to be a charge against earnings. This post examines this history and takes a look at where options are today. 
It is time for calendar year-end public companies to focus on the upcoming 2015 proxy and annual reporting season. This post discusses the following key issues for companies to consider in their preparations:
- Pending Dodd-Frank Regulation
- Say-on-Pay and Compensation Disclosure Considerations
- Shareholder Proposals
- Proxy Access
- Compensation Committee Independence Determinations
- Compensation Adviser Independence Assessment
- Compensation Consultant Conflict of Interest Disclosure
- NYSE Quorum Requirement Change
- Director and Officer Questionnaires
- Proxy Advisory Firm and Investment Adviser Matters
- Conflict Minerals
- Management’s Discussion and Analysis
- Proxy Bundling
- Foreign Issuer Preliminary Proxy Statement Relief
- Technology and the Proxy Season