Posts Tagged ‘Say on Pay’

Just Realize It’s Simply One More Tool in Your Toolbox

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Can you hear them? Scratching away, or these days more likely pecking away at keyboards. The auditors are at it, it’s coming up on proxy time! They are working furiously, not exactly 24/7 but close to it to balance the books for some 10,000 publicly traded companies in the US. Unfortunately, not even Grahall can do this in its sleep! Journalists, activist investors, and regulators are poised to dissect the proxy statements that will start to be released in just a few weeks.

Today’s proxy bears little resemblance to that of 5 or 10 years ago, as there have been lots of changes in the way executives are compensated and the way that compensation is reported. As Grahall’s Garry Rogers says: “Nearly every aspect of compensation, with the exception of Code Section 162(m), has been revisited in the past several years. Stock options have been marginalized as a primary compensation tool because of changes in expensing and concerns about risk. In their place, the prevalence of restricted stock and performance shares is on the rise.”
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Filed under: Expert Perspective - Rewards



What You Need to Know NOW about Say on Pay Advisory Votes

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Expert Perspective By Grahall’s OmniMedia Editorial Board

In her February 17, 2011 article in Forbes  (Proxy Season Again? Creating a Compensation Discussion and Analysis That Really Speaks to Shareholders) Robin Ferracone asks: as you “…hunker down to write drafts of the  Compensation Discussion & Analysis (CD&A), will it be business as usual… or will it be time to start over?” 

Not only is it time to start over, but we may be in the verge of a paradigm shift where boards and their committees will begin to engage shareholder AND stakeholders in discussions with the purpose of explaining and defending executive compensation structures and results. 
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Filed under: Expert Perspective - Rewards, Regulatory Updates



The Say on Pay Paradigm Shift: What You Need to Know NOW!

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Expert Perspective by Grahall’s OmniMedia Editorial Board

In his most recent client alert, “Say On Pay Ushering in Paradigm Shirt? What You Need to Know NOWGrahall’s Garry Rogers discusses trends appearing in the first two months of early filing companies regarding Say on Pay requirements and frequency.  And those trends are potentially significant. Rogers says: “… we may be heading for nothing less than a total transformation of the process by which executive compensation is both determined and implemented.”


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Filed under: Expert Perspective - Rewards, Regulatory Updates



Boards’ New Mantra: Communicate

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Expert Perspective by Grahall’s OmniMedia Editorial Board

Joann Lublin wrote a very interesting article for the Wall Street Journal recently, titled Season of Shareholder Angst: U.S. businesses are bracing for a noisy proxy-voting season this year, although we think the anxiety may be felt more fiercely by board members than by shareholders.  In her article, Ms. Lublin covers a variety of topics weighing heavily on the minds of boards and shareholders alike, including say on pay, political contributions, succession planning, board elections and environmental concerns. 

Say on pay has been in the headlines for years. It was a campaign issue in the 2008 presidential elections and we have been discussing this subject in our blogs for that long as well.  The Dodd Frank Act mandated that all public filers hold “say on pay” votes in 2011, so this proxy season has companies scrambling to make recommendations to shareholders on the frequency of these votes. 
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Filed under: Expert Perspective - Organization Development, Expert Perspective - Rewards



Say on Pay Voting Periods – Size Does Matter

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Expert Perspective from Grahall’s OmniMedia Editorial Board

In a nearly unprecedented turn of events, 39 institutional investors issued a press release (Investors Issue Call for Annual Vote on Executive Pay)  calling for “public companies to support annual advisory votes on executive compensation in their 2011 proxy statements and for investors to vote for annual ‘Say on Pay’ votes.” 

According to Grahall’s Garry Rogers who has reviewed over 200 such early filings, a majority of public companies are recommending three-year votes. So the lines are clearly drawn in the sand.  Rogers says: “Although it’s still early, at this point the three year time period is clearly the most popular.”  However, the size of the filer also appears to be a factor on the frequency recommendation. Rodgers adds: “Seven of the ten largest companies have recommended annual reviews, and the overall rate of annual reviews is noticeably higher for companies over $1 billion in market capitalization when compared to smaller companies”.      

According to the press release, 39 institutional investors, major mutual funds and influential proxy advisor Institutional Shareholder Services (formerly RiskMetrics) have thrown their weight behind annual votes. 

Clearly a one-year period creates a much stronger “watchdog” atmosphere, and some companies may benefit from this level of oversight.  Our concern is that like any other corporate structure, program or protocol, “one size may not fit all.”  Two-year or even three-year voting periods might make sense for some public companies particularly if their compensation structures are based on longer performance periods.   In addition, some observers have argued that the one-year period may become just another compensation formality, while a three-year review would be more novel and taken more seriously, while promoting a more significant emphasis on long term growth.

In either event, the Say on Pay process has its weaknesses regardless of what duration period a company employs.  Already, one high profile filer Monsanto, received a 65% vote in favor.  Is that sufficiently high for the company to accept, or should it revise its compensation programs?  Clearly, 35% is a significant number of shareholders unhappy with the current program.  This starkly illustrates the potential quagmire that can result from an “up or down” Say on Pay” vote , which obviously doesn’t lend itself to specific interpretation, and it’s not clear what to do in such circumstances, other than to engage your shareholders.

What is clear is that as investors, mutual funds and ISS continue to press for annual reviews, we may just see the annual period become the norm, particularly at larger companies.   Whether this will result in maximum accountability, and encourage companies to communicate effectively with shareowners (who themselves may be voting against a program for individual reasons) remains to be seen. 

Contact Grahall’s OmniMedia Editorial Board at edie.kingston@grahall.com

Filed under: Expert Perspective - Rewards, Regulatory Updates



Say on Pay Goes On

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Expert Perspective from Grahall’s OmniMedia Editorial Board

An article by Richard Levick (Transparency on Executive Pay Begins with Clarity) caught our attention. 

Mr. Levick begins his article (much of which he shares was excerpted from the book “The Communicators: Leadership in an Age of Crisis “ that he co-authored with Charles Slack) noting that “…on Jan. 25, SEC commissioners voted 3-2 to enact the say-on-pay measure that subjects compensation plans to non-binding shareholder votes as often as once a year…”.  In our blog published on January 25th, Grahall’s Garry Rogers reminded us of that meeting and said:  “The final rules are not likely to contain any real surprises, but of particular interest will be whether exemptions for ‘small-companies’ and for new issuers will survive.” (To read more about the Say on Pay rules click here.) We followed up with Garry to get his take on the SEC hearings.
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Filed under: Expert Perspective - Rewards, Regulatory Updates



SEC to Hold Open Meeting on January 25 to Consider Final Rules on Say on Pay

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The Securities and Exchange Commission (“SEC”) has announced its intention to consider final rules for executive compensation advisory votes an open meeting to be held on Tuesday,  January 25, 2011. These rules are mandated by the Dodd-Frank Act, which requires all public filers to hold “say on pay” votes in 2011. Shareholders must be given the opportunity to advise companies whether future pay votes should occur every one, two or three years.

According to Grahall’s Garry Rogers: “The final rules are not likely to contain any real surprises, but of particular interest will be whether exemptions for ‘small-companies’ and for new issuers will survive.” Rogers adds that during the comment period, investors generally opposed this exemption while the smaller filers are pushing hard for adoption.

Click here to read the entire article regarding Say on Pay in Grahall’s Knowledge Center.

You can peruse other compliance and regulatory updates in Grahall’s Knowledge Center.

And you can contact Garry Rogers at Garry.Rogers@grahall.com.

Filed under: Expert Perspective, Regulatory Updates



Dodd Frank – Do You Know What You Need to Know?

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Expert Perspective from Grahall’s Garry Rogers
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act is aimed dead center at the heart of the financial services industry and contains substantial changes regarding the determination and reporting of executive pay and corporate governance.   These changes will impact all public filers.
 
Over the next few weeks we will highlight some of the more interesting, unusual and controversial issues in the legislation.  For example, “Say-on-Pay” is now mandatory for all public filers.  Changes are effective on January 21, 2011 (6 months from the date the Act was signed).  Did you know that Dodd-Frank will require that institutional investment managers be required to report no less than annually how they voted on the Say On Pay proposal, even though, starting in 2011, shareholders at most public companies will determine whether the advisory vote is to occur annually, biennially, or triennially. 
 
For a fuller discussion of Dodd-Frank’s new rules with respect to pay and governance read Grahall’s Regulatory Client Advisory DODD-FRANK FINANCIAL REFORM LAW CONTAINS SIGNIFICANT COMPENSATION CHANGES POTENTIALLY AFFECTING ALL PUBLIC FILERS.
 
For more information on Dodd Frank and how you may be impacted contact Garry Rogers at garry.rogers@grahall.com

Click here to access other important information for CEO’s.

Click here to access other important information for executives.

Filed under: Ask the Expert



Is there any real importance to the ratio of CEO to average worker pay?

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Expert Perspective by Grahall’s OmniMedia Editorial Board

The September 17, 2010 article in Financial Times (CEO/employee pay ratios) again addresses the nagging question of the seemingly outrageous difference between CEO pay and that of the average worker but raises the question as to whether a larger or smaller differential is “better”.   The author writes: “Would you work harder if the ratio [between the CEO’s pay and yours] was higher or lower? So called ‘tournament’ theories of income differentials reckon that higher is better…[but] others say that the level of chief executive pay is obscenely high and that investors have a right to know which firms reward bosses too much relative to the peons.”

Peons?  OUCH!   But let’s not argue the semantics of arrogance. 

Say on pay is here to stay.  Companies who are outliers with relatively high executive pay will be loudly criticized. 
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Dodd-Frank: First Impressions

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Expert Perspective by Grahall’s Garry Rogers

Daniel J. Ryterband prepared a good summary of the compensation and corporate governance implications of the Dodd-Frank bill in his July 16, 2010 article Dodd-Frank: What It Means for Comp and Governance published in Bloomberg.com’s Business Exchange.

Ryterband says: “The Dodd-Frank law will affect executive compensation and corporate governance starting in 2011 with the “say on pay” provision. Other elements will come into play as the SEC issues new regulations.”

Until the new regulations are issued by the SEC, it is difficult to predict how broad an impact the changes will have, but this fact is telling – the SEC has plans to add 800 additional staff on top of the 375 it had already requested for the coming year. Together, this would represent a 25% increase in staff size to 5,000 employees, up from the current 3,800. 
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Filed under: Expert Perspective - Rewards