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A good CD&A should “strike the perfect balance between compliance and communication,” according to panelists from Pearl Meyer & Partners who spoke Nov. 18 at the National Association of Corporate Directors webinar Compliance & Communication: The Dynamic Duo of Disclosure.
Compensation disclosure is a “constantly evolving topic,” partly driven by a change from “an audience of largely regulators looking at these proxies, to an audience of investors, shareholders and the media,” saidDeborah Lifshey, a Managing Director at Pearl Meyer & Partners.
The various audiences for disclosure affect the way CD&As are drafted. Say-on-pay results “send signals about the way boards are making decisions about pay,” said Sharon Podstupka, a Vice President at Pearl Meyer & Partners. This provides pressure to do a really good job developing the CD&A. Podstupka said “boilerplate language simply isn't effective anymore and takes the drafting process to a whole new level.”
Based on a study conducted by Pearl Meyer & Partners surveying 157 public companies, in 2015, 29 percent of companies surveyed plan to add a description of their shareholder engagement actions, over 35 percent of companies surveyed plan to do a better job of explaining how they arrived at their pay decisions by including some kind of alternative to the summary compensation table and 38 percent of companies surveyed plan to add graphical descriptions to enhance the understanding of their disclosures.