Late last week, ISS published its “Governance Insights” newsletter with an article on “The Seven Saving Graces of Executive Compensation.” It says there are more than 1,400 cases over the last four years where a company has triggered a “medium” or “high” level of concern on the quantitative pay-for-performance tests, yet were able to overcome concerns and ultimately pass their say-on-pay votes. So how did they do it? (The answer was not divine intervention!)
The bottom line from John Roe, Head of ISS Analytics, is improved disclosure. He does outline seven important action themes that are common to the situation above and those should be heeded. But it’s improved disclosure of what the committee has subsequently done and why that is the common thread among them. In short, it’s the persuasive CD&As that most effectively position companies for say-on-pay support.
In my view, “improved disclosure” can benefit any company, regardless of their P4P assessments or say-on-pay votes. This means taking the time to challenge your CD&A narrative and finding areas for measurable improvement. Audit its readability. Question its content. Ask yourself if adding information would strengthen the business case for your program or just increase word count. Consider the tone and style of writing and decide if that needs to change. And don’t wait until the last minute to do it.
Nothing bad can come from making improvements to your CD&A story. It may take a little time and require some additional rounds of review and debate now, but it could do a world of good and possibly keep you out of the say-on-pay fire in the future.
