– Larry Schumer, Buck Consultants

A few days ago, I attended a session that included Pat McGurn of ISS.As he always does, Pat gave interesting insight into what is happening this proxy season. For example, here are some statistics on say-on-pay results so far in 2012 – and in comparison to 2011:

– Average “Yes” vote on say-on-pay among Russell 3000: 91% v. 90%
– % of companies that got at least 90% “Yes” vote: 73% v. 75%
– % fof failed votes: About 1% v. Less than 2%
– ISS recommendations: 86% in favor v. 88% in favor

So, not really much difference between 2011 and so far in 2012 except smaller percentage of “failures.”

Here’s an interesting fact – almost all companies who failed in 2011 made substantial efforts since then – as we expected – to both reach out to investors and change pay practices. All so far have gotten majority support in 2012 (egs. Beazer Homes, Jacobs Engineering and H-P). Pat also stated that “a lot of companies” who received “no” votes in the 20-40% range last season seem to have not reached out in a meaningful way.

Pat noted 3 big communication themes:

– Disclosure is much improved in 2012
– Direct engagement with investors is being done more, and being done better, when warranted
– Directors saying “No to exec perqs and big severance deals” more so every year

Also, Pat said a lot of people misunderstand ISS’s methodology regarding CEO pay disconnect – the financial screens are just the start, not the end. If a company fails the quantitative tests, then ISS goes thru a qualitative review -so his stats were – about 25% of companies fail the quantitative tests but only 23% of those companies get a “no” recommendation.

Also, ISS is looking more to 3- and 5-year TSR; they use 3-year (and also 1-year – but they are looking less at 1 year) for relative TSR and 5-year for absolute TSR.

– Broc Romanek, CompensationStandards.com

Yesterday, Glass Lewis announced it had launched a new “Issuer Engagement Portal.” As folks have complained about a lack of transparency regarding Glass Lewis’ voting policies over the years, this should be a positive development. Among the other things in the Portal are Glass Lewis’ “US Abridged Guidelines” and “Continental Europe Abridged Guidelines.” See Davis Polk’s blog on this development…

– Broc Romanek, CompensationStandards.com

Here’s news from this Towers Watson blog (remember that Netherlands, Norway and Sweden already have binding votes):

On March 14, the Department of Business, Innovation and Skills published a detailed consultation document on enhanced voting rights for U.K. shareholders, including the proposal to require binding say-on-pay votes in the U.K., pursuant to Vince Cable’s policy announcements in January. The main components covered in the consultation document are:

– An annual binding vote on future remuneration policy (If a company fails the vote, it will have to revert to the last approved policy and cannot implement any proposed policy changes, whether contentious or not.)
– Increasing the level of support required on votes on future remuneration policy from 50% up to 75% (or a level in between)
– An annual advisory vote on how remuneration policy has been implemented in the previous year
– A binding vote on individual directors’ exit payments over and above an amount equivalent to one year’s salary (regardless of the circumstance of termination and including any amounts in respect of in-cycle incentive payments, benefits and pension).

Comments on the consultation document are being accepted until April 27, 2012, and the government expects to publish draft legislation on this and the narrative reporting requirements over the next few months. The new voting regime, as finalized, is due to come into effect for reporting years ending on or after October 2013.

– Broc Romanek, TheCorporateCounsel.net

Last chance to take advantage of 25% off for our popular conferences – “Tackling Your 2013 Compensation Disclosures: 7th Annual Proxy Disclosure Conference” & “Say-on-Pay Workshop: 9th Annual Executive Compensation Conference” – to be held October 8-9th in New Orleans and via Live Nationwide Video Webcast. Here is the agenda for the Proxy Disclosure Conference (the Executive Compensation Conference’s agenda will be posted in the next week or so).

Early Bird Rates – Act by End of this Friday, April 13th: For the special early bird discount rate – both of the Conferences are bundled together with a single price – register by the end of this Friday, April 13th.

– Broc Romanek, CompensationStandards.com

As noted in this press release, in a Sarbanes-Oxley Section 304 clawback action, the SEC sued both the former CEO and CFO of ArthroCare last week to recover bonus compensation and stock sale profits they received during an accounting fraud at the company. The two former officers had not been personally charged in connection with fraudulent financial statements; two other former officers were charged for that last year. This jibes with the District Court of Arizona holding in SEC v. Jenkins – that disgorgement of compensation and profit under Section 304 does not require personal misconduct.

By my loose count, the SEC has used Section 304 at least seven or eight times since its birth in 2002 – see the list of links to SEC clawback actions in our “Clawbacks” Practice Area.

By the way, check out this recent Bloomberg piece: “Morgan Stanley Expands Reasons to Claw Back Executive Pay.”

– Broc Romanek, CompensationStandards.com

We have posted the transcript for our recent webcast: “What the Top Compensation Consultants Are NOW Telling Compensation Committees.”