August 5, 2024
Say-On-Pay: Increasing Focus on Non-CEO NEOs
From a say-on-pay perspective, companies usually expect investors to focus on concerns with CEO compensation, but this Semler Brossy article from earlier this summer noted that “competitive CEO pay alone does not always provide a ‘free pass'” for say-on-pay support and said, “it appears that assessments of non-CEO NEO pay have become more rigorous.” Specifically, in 2024, companies were criticized for these “one-time NEO pay actions that used to fly under the radar”:
– the lack of performance-based NEO equity grants (where the CEO received performance-based grants)
– one-time grants to NEOs (and not to the CEO)
– high average pay for the proxy-disclosed executive group (rather than just elevated CEO pay)
– the acceleration of awards upon an NEO’s retirement
The article notes that increasing levels of executive officer pay at all levels are being more closely scrutinized as the cost of management grows and notes that companies may still be at risk even when the quantitative evaluations of CEO pay and performance are low concern. If you have a one-time non-CEO NEO pay action this year, make sure you’re using your CD&A to explain the purpose and rationale, almost as much (if not as much) as if that one-time pay action was for your CEO!
– Meredith Ervine