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Companies are failing to effectively communicate executive compensation in proxies according to a new study by the Rock Center for Corporate Governance at Stanford University. Boards are being advised to take a fresh look at compensation disclosures, take more time to write them and use simpler language to make them easier to read.
Sharon Podstupka, Vice President at Pearl Meyer & Partners, says a common thread among companies with effective CD&As is that the comp committee sets out the planning process and tone for the disclosure well before the close of the fiscal year. Podstupka advises companies to start their CD&A content development earlier and suggests a time frame of three months before the end of the fiscal year.
Boards and management may also want to bring in an outsider to write the proxy to make it clearer. “[Attorneys] play a critical role, but having them partner with different kinds of writers to help streamline and make content easier to read can provide a clearer outcome,” Podstupka adds.