The Advisors' Blog

– Broc Romanek, CompensationStandards.com

A new study by BDO USA surveyed directors on a variety of topics, including these related to pay practices:

– Say-on-Pay Not Helpful to Managing Pay – More than three-quarters (78%) of board members do not believe Dodd-Frank’s “Say-on-Pay” disclosure rules will help them better manage the compensation of their key executives. In fact, just one-fifth (22%) describe the rules as helpful. Directors who serve as members of their board’s compensation committee were even more likely (91%) to say the new rules will not help manage executive pay. Moreover, an overwhelming majority (81%) of board members believe shareholder criticism of executive compensation frequently suffers from 20/20 hindsight.

– Compensation Weary – Dodd-Frank’s executive compensation mandates seem to have taken a toll on corporate directors. When asked a variety of topics they would like their board to spend more or less time on, 71 percent say they do not want to spend more time on executive compensation – no other topic elicited such a negative response.

– Non-Binding Votes are Non-Issue – Although most board members do not find Dodd-Frank helpful, they do not see the non-binding nature of the Say-on-Pay votes as a problem. When asked if the non-binding nature of the Dodd-Frank Say-on-Pay votes diminished their effectiveness, only a quarter (24%) of the directors agreed. Three-quarters (76%) feel the non-binding nature of the votes do not limit their effectiveness, and directors serving on their board’s audit (85%) and compensation (79%) committees were even more likely to feel this way.

– Change of Control Provisions – Less than a fifth (19%) of directors perceive the disclosure of change-of-control provisions in executive compensation packages, mandated by Dodd-Frank, as having a negative impact on M&A activity. In fact, three-quarters (81%) indicate this provision will have no impact on merger activity. Members of compensation (91%) committees are even more confident that these disclosures will not adversely affect M&A activity.

– Board Compensation – When asked about their own compensation as board members, more than two-thirds (69%) believe their compensation is commensurate with their responsibilities. Yet, almost one-third (31%) feel their compensation is lacking, given the increased responsibilities and workload brought about by recent regulatory changes. Board members serving on the compensation committee (39%) were more likely to feel their compensation needs to be enhanced.