The Advisors' Blog

– Melissa Burek, Margaret Engel and Kelly Malafis , Compensation Advisory Partners

In this survey, we present the findings of our review of 2010 proxy disclosures from a sample of Fortune 500 companies. The study includes 85 companies, representing seven industry groups. Here are some highlights from our findings:

– 75 companies or 88% make some type of affirmative disclosure related to their assessment of risk in the compensation program.

– Of the 10 companies that did not address compensation risk in their proxy statements, 5 or 50% filed their proxy statements prior to the publication of the SEC’s final disclosure rules in December 2009.

– 71% of the companies that make risk-related disclosures indicate that a formal risk review was conducted and comment on their assessment.

– Reflecting broad market trends, a significant majority of our research companies–68 of 85 companies or 80%–maintain some form of clawback provision.

– A financial restatement is required in nearly all cases. Further, 48 companies (71% of those with a clawback) disclose that fraud or misconduct are triggering events. Twelve companies (18%) disclose a non-compete/non-solicitation/confidentiality violation as a trigger, and three include improper ‘risk analysis’ as a trigger.

– The majority of companies have stock ownership guidelines for their executives, typically expressed as a multiple of salary. While less common, many companies also have stock holding requirements where executives must hold a percentage of net shares from stock option exercises or vesting of restricted shares for a period of time. Within our sample, 17 companies, or 20% made changes to their stock ownership requirements.