The Advisors' Blog

We’ve posted the transcript for the recent webcast: “Compensation Committee Responsiveness – How to Regain High Say-on-Pay Support.” Aileen Boniface of Clermont Partners, Steve Day of Calfee, Halter & Griswold, Brad Goldberg of Cooley and Tara Tays of Pay Governance discussed what has been triggering low say-on-pay votes and how to recover. Among many useful nuggets from this program was this suggestion made by Brad:

Each company needs to figure out exactly why shareholders voted against the proposal. The best way to do that is to read the proxy advisor reports and start to engage with your key shareholders. Typically, people are going to start with the significant shareholders in the top 15 or 25, which is the best place to start. Once you identify what the issues were and who you’re going to reach out to, you need to form the team, and there’s questions there of who’s involved. Key outside participants often will be the comp consultant and companies will often look to a proxy solicitor to help with the effort as well. Another key thing to consider is who from management — and more importantly, who from the compensation committee — can attend these meetings. Are you confident that the directors in your compensation committee are going to have sufficient knowledge of the program and be able to present in a meaningful way?

Tara also noted:

When there are significant changes that need to be made to executive compensation programs to increase shareholder support with respect to say-on-pay, it’s important to ensure the appropriate due diligence is taken around what makes sense for the company and what’s going to allow the company to continue to motivate executives, especially in this time. There shouldn’t be any rash decisions made. It is going to take a couple of meetings to get to the right solution to make sure that they position the programs in the right direction going forward.

Don’t rush into it. Take the time that’s needed. Make sure that the appropriate research is done in terms of what peers are doing, in terms of what the company can do with respect to forecasting a certain performance metric that’s being changed, with respect to their incentive plan designs. Then, make sure that there’s a balanced approach taken in terms of what shareholders want to see, what institutions want to see, and what’s needed for the company in order to drive results in the future.

– Liz Dunshee