Published in directorship - september 2011

Say on Pay and Say on Frequency: What We've Learned So Far

By Michael Enos

Starting in 2011, shareholders gained a new voice in executive compensation in the form of two new SEC mandates: Say on Pay advisory votes on executive pay programs and related Say on Frequency votes to decide how often to hold the pay referendums. Boards are keenly aware that ignoring any negative messages delivered by their investors in such votes puts them at risk of continued dissatisfaction that could result in voting campaigns against directors or even legal action. At the same time, they must be aware of the recommendations and critiques issued on their programs by influential proxy advisory services.

This article discuss the 2011 shareholder voting results and how companies can use this information going forward to improve their program designs, especially pay-for-performance; to make their proxy disclosures more clear and persuasive; to avoid common pitfalls; and otherwise to increase their prospects for gaining shareholder support in 2012.