Companies Split Over CEO Pay Package Reforms

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Photo: AP

Some 49 per cent of companies are split on how often they should put its executive compensation programs to a nonbinding say-on-pay shareholder vote, according to a new poll conducted by consulting firm, Towers Watson.

Among 135 public companies that were surveyed in mid- December, 51 per cent expect to hold annual say-on-pay votes, while the remainder 39 per cent prefer triennial votes and 10 per cent every two years, said the global firm.

Moreover, with respect to executive compensation, the poll points out that only 8% of companies have a system in place for developing the right action plans in response to potential shareholder concerns.

James Kroll, Towers Watson senior consultant said companies are faced with struggles in understanding the implications of say-on-pay votes, and ‘many are taking a wait-and-see approach to measuring success.’

Also in the survey findings, 48 per cent of respondents indicated that they are in the process of tweaking their executive pay-setting process in preparation of the approaching proxy season. The adjustments will include: in-depth explanations of compensation programs in SEC filings, some modifications in severance programs and perquisites that have a high visibility.

According to the Dodd-Frank Wall Street Reform and Consumer Protection Act that went into effect last year, companies are required to conduct say-on-pay at least every three years but are allowed to decided on whether it will hold annual, biennial or triennial votes, said New York- based Towers Watson. Furthermore, the act calls for companies to put the say-on-pay frequency question to a non-binding shareholder vote at least every six years.

‘While many companies have been taking steps to make their executive pay programs more shareholder-friendly in recent years, relatively few have been thinking beyond their first say-on-pay votes to how they will analyse and address shareholders’ input going forward,’ Kroll adds. ‘This new era will require companies to step up their ongoing communication with shareholders …while listening and responding to shareholder concerns. This is not a one-shot deal. It will be a continuous process.’

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