For those coming to next week’s “Pay Ratio & Proxy Disclosure Conference,” you’ll hear tidbits about the hot “employee reaction” topic all day long – but particularly during the panel entitled “Pay Ratio: How to Handle PR & Employee Fallout.” Recently, as noted in this press release, Willis Towers Watson found that this was the topic of largest concern when it surveyed companies. Here’s an excerpt:
Indeed, roughly half of the respondents polled (49%) cited forecasting how their employees will react to the ratio disclosure as their number one challenge, but that other challenges still loom. About four in 10 (39%) said determining the consistently applied compensation measure (CACM) is their great challenge followed by getting accurate pay data (38%), deciding how to craft their required disclosure (37%) and determining where their pay ratio stands compared with that of their peers, their industry and the market (35%).
For those coming to next week’s “Pay Ratio & Proxy Disclosure Conference,” you’ll hear directly from ISS’ David Kokell (he leads the U.S. compensation research team for ISS) – during the panel entitled “Navigating ISS & Glass Lewis” – about how ISS will consider the new pay ratios that companies disclose. But in the meantime, you can read this note from ISS about “Contextualizing CEO Pay Ratio Disclosure.” Here’s an excerpt:
Pay ratio disclosures loom, and there appears to be a gap in expectations between issuers and investors. According to the 2017-2018 ISS Global Policy Survey results, 44 percent of respondents from the corporate community believe that the pay ratio information is not meaningful; investor respondents, on the other hand, largely intend to analyze pay ratios, with 63 percent indicating that they would both compare ratios between companies and assess a company’s year-over-year changes.
1. Average support for say-on-pay reached 92%, the highest level to date.
2. The say-on-pay failure rate was an all-time low of 1.3%.
3. The vast majority of boards and shareholders supported an annual say-on-pay frequency in 2017.
4. Total S&P 500 CEO pay increased to its highest level since 2011, in contrast to a slight decline in CEO pay seen at smaller companies.
5. The gap between median CEO pay in the S&P 500 vs. the Russell 3000 is the largest since say-on-pay began.
6. Performance-based pay elements continue to be emphasized while reliance on discretionary awards declined.
7. The median CEO golden parachute payment rose by nearly 75% in 2017, whereas average support for golden parachute votes dropped and the failure rate more than doubled.
8. Average support for equity plan proposals was consistent with prior years.
9. Shareholder proposals on compensation topics remained on the decline and, for the second consecutive proxy season, no proposals received majority support.
We have posted the transcript for our recent pre-conference webcast: “Pay Ratio Workshop – What You (Truly Really) Need to Do Now.” Now get ready for the main event taking place in less than two weeks in Washington DC and by video webcast – 20 pay ratio panels over 2 days: “Pay Ratio & Proxy Disclosure Conference.” It’s time to register now…
– How to Attend by Video Webcast: If you are registered to attend online, just go to the home page of TheCorporateCounsel.net or CompensationStandards.com to watch it live or by archive (note that it will take a few hours to post the video archives after the panels are shown live). A prominent link called “Enter the Conference Here” – which will be visible on the home pages of those sites – will take you directly to the Conference (and on the top of that Conference page, you will select a link matching the video player on your computer: HTML5, Windows Media or Flash Player).
Remember to use the ID and password that you received for the Conferences (which may not be your normal ID/password for TheCorporateCounsel.net or CompensationStandards.com). If you are experiencing technical problems, follow these webcast troubleshooting tips. Here are the conference agendas; times are Eastern.
– How to Earn CLE Online: Please read these “FAQs about Earning CLE” carefully to see if it’s possible for you to earn CLE for watching online – and if so, how to accomplish that. Remember you will first need to input your bar number(s) and that you will need to click on the periodic “prompts” all throughout each Conference to earn credit. Both Conferences will be available for CLE credit in all states except for a few – but hours for each state vary; see our “CLE Credit By State” list.
– Register Now to Watch Online: There is still time to register for our upcoming pair of executive pay conferences – which starts on Tuesday, October 17th – to hear Keith Higgins, Meredith Cross, etc. If you can’t make it to Washington DC to catch the program in person, you can still watch it by video webcast – either live or by archive. Register now to watch it online.
– Register in Washington DC to Watch In-Person: Starting next Thursday, October 12th, you will no longer be able to register to attend in Washington DC through this site – but you you always register to attend when you arrive in DC! You just need to bring payment with you to the conference and register in-person. But until next Thursday, you can still register online to attend in DC…
Love this blog by “As You Sow” because it points out a number of “real life” examples of companies that took action after they received a low vote for their say-on-pay. Check it out!
This FW Cook blog summarizes current equity plan voting stats among Russell 3000 companies. Here’s a teaser:
– There were a total of 412 proposals seeking shareholder approval of equity plan amendments and 191 proposals requesting shareholder approval of new equity plans. With the exception of three proposals, all received majority shareholder support.
– ISS opposed approximately 18% of the proposals because they failed to receive a passing score under the Equity Plan Scorecard or exhibited negative overriding factors, such as single-trigger vesting risk on a potentially “liberal” change-of-control definition.
– The average passing vote in the aggregate was 90% for both amendments and new plan approvals. With a favorable ISS vote recommendation, both types of proposals passed with 93% shareholder support, on average. Without ISS’ support, the passing rate dipped slightly below 80% for both types of proposals.
This FEI blog discusses this recent study that shows that CEOs at companies that rely on non-GAAP metrics tend to earn higher compensation. The upshot is that CEOs of S&P 500 companies that made large positive adjustments to non-GAAP earnings between 2010 and 2015 got paid $2.7 million (or 23% more) on average more than their expected annual compensation if GAAP numbers were used…
Here’s an excerpt from this column by NY Times Gretchen Morgenson:
It remains unclear, though, whether the company’s executives will take a financial hit for the failures that allowed thieves to steal Social Security numbers, driver’s license numbers and other sensitive data. Indeed, Equifax’s top managers may not feel any financial ill effects, given the company’s past compensation practices.
Over the last three years, when Equifax determined its top executives’ incentive compensation, it has used a performance measure that excluded the costs of legal settlements made by the company. If it follows this practice after dealing with the costs of settling legal claims arising from the security breach, Equifax’s top managers will essentially escape financial accountability for the blunder.
This troubles Charles M. Elson, a professor of finance at the University of Delaware and the director of its John L. Weinberg Center for Corporate Governance. “To the investors in the company, the legal settlement does impact earnings and stock price,” Mr. Elson said in an interview. “If the shareholders suffer because of this breach, why should management be excluded? These folks take home all of the upside and want none of the down.”
A few days ago, ISS released the survey results for its upcoming policy changes – with findings including:
– Pay Ratio Disclosures – ISS asked respondents how they intend to analyze data on pay ratios. Somewhat surprisingly, only 16 percent indicated that they are not planning to make use of this new information. Nearly three-quarters of the investor respondents indicated that they intend to either compare the ratios across companies/industry sectors, or assess year-on-year changes in the ratio at an individual company or use both of these methodologies. Of the 12 percent of investors who selected “other” as their response, some of them indicated a wait-and-see approach while other comments indicated uncertainty or concerns regarding the usefulness of the pay ratio data. Among non-investor respondents, a plurality (44 percent) expressed doubt about the usefulness of such pay ratio data.
Today’s Pre-Conference Webcast: “How to Apply SEC’s Pay Ratio Guidance”
For those registered for the upcoming “Pay Ratio & Proxy Disclosure Conference,” tune in today – 2 pm eastern (audio archive goes up when the program ends; transcript available in a week or so) – for the third in a series of three monthly webcasts that serve as a pre-conference: “Pay Ratio Workshop: What You (Truly Really) Need to Do Now.” There will be a heavy emphasis on “what now” given the SEC’s new guidance.
– Mark Borges, Principal, Compensia
– Ron Mueller, Partner, Gibson Dunn
– Dave Thomas, Partner, Wilson Sonsini
– Amy Wood, Partner, Cooley
Register Now: This is the only comprehensive conference devoted to pay ratio – and it’s only three weeks away! Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register today.