The Advisors' Blog

This blog from Pearl Meyer’s Sharon Podstupka points out that it’s not too soon to begin drafting your CD&A – particularly if your comp committee changed executive goals or compensation structures during 2021. Sharon predicts that these items will be the most challenging to address and would benefit from a head start:

1. Goal-Setting – “If your organization had to take an alternative approach to setting performance goals for 2021 given the continued market uncertainty at that time, it will be extra important to clearly outline the factors the committee considered in making its final decisions—especially if year-end results are currently projecting to be significantly higher than the original expectations (e.g., we set conservative targets and never could have forecasted how great we’d do by the end of the year).”

2. ESG Metrics – “If your organization has formally adopted ESG metrics in your annual or long-term incentive plans for 2021 or are planning to adopt them for 2022, make sure the CD&A is putting this change front-and-center and then some… For those that do not have formal ESG metrics in their plans, you’ll still want to be clear in the CD&A about how ESG influences compensation committee decisions about NEO pay.”

3. Board Responsiveness & Shareholder Engagement – “If your CD&A doesn’t acknowledge how the compensation committee stays connected to shareholders on executive compensation matters, you are open to scrutiny. And, if your organization is in a situation where it has experienced declining support over the years and/or below 70% support (for ISS) and/or 80% support (for Glass Lewis), this should be viewed as a critical area of content to address even if no changes to the plans were implemented.”

– Liz Dunshee

Programming Note: The Advisors’ Blog will be off tomorrow and Friday, back next week. Merry Christmas, to those who are celebrating!