December 10, 2015
5 Things That Comp Committees Need to Know
– Broc Romanek, CompensationStandards.com
Here’s some of the highlights from this new EY report:
– Investors overwhelmingly support SOP proposals: The vast majority of SOP proposals – about 12,000 in total –have averaged more than 90% support. Each year, less than 10% of all proposals receive low support and only about 2% fail.
– When are compensation committee members vulnerable: This year, votes against compensation committees at companies with low SOP votes averaged 9%—an “opposition penalty” of 3 times the average 3% vote against other directors of these companies.
– How compensation committees respond to low SOP support: Of the S&P 500 companies with low SOP support in 2014, nearly all (88%) modified their pay practices and/or disclosures following outreach efforts. These engagement-driven changes appear to have paid off, with the average SOP vote increasing nearly 30 percentage points from 57% to 85%.
– Prepare for future pay-related requirements, including CEO pay-ratio, now: Forward looking boards of all companies can anticipate that the changes ushered in by SOP – such as enhanced company-investor dialogue – will become more widespread over time.