Compensation Committee

After months of deliberation in the midst of public disapproval over rising executive pay, the British government has proposed binding say on pay as part of a broader plan designed to rein in corporate compensation.

Non-CEO Chair roles and pay have been evolving, as illustrated by the results of this Meridian Compensation Partners’ study of non-CEO Board Chairs at the 500 largest U.S. companies. The results provide insight into choices companies are making as to type of COB role (e.g., prior CEO vs. independent chair) and how the role will be paid (e.g., as an employee or as a director).

Effective communication is critical when it comes to keeping shareholders apprised of issues well before annual meetings. Jamie Reeves, managing editor of special projects at Corporate Board Member, recently spoke with Patrick Quick, partner, Foley & Lardner LLP, about best practices for directors to embrace in the new year, particularly with regard to say on pay.

How will the ISS’s new approach to evaluating pay-for-performance and new proxy voting guidelines, announced in fall 2011, as well as the subsequent updates released this week, affect boards in 2012?

Executive compensation continues to command the center stage in public discourse about corporate governance. In the context of a troubled worldwide economy, the focus on pay in the financial services industry— most prominently evidenced by the Occupy Wall Street movement— has led to increased scrutiny of executive compensation at all companies.

Director fees have been largely flat since 2008. While there is some evidence of an increase in 2011, it does not appear to be widespread. Yet, many boards again seem reluctant to consider an increase for 2012. Pearl Meyer & Partners' Peter Miterko and Richard King believe that boards should actively review their compensation each year, particularly in 2012, to recognize both their increased workload and competition for talent.

In the new era of compensation committee governance, directors struggle more than ever to marry pay and performance in a way that supports business needs and addresses investor concerns. Unfortunately, in many companies, the information and tools directors have to make pay design decisions are still too limited.

A new Pearl Meyer & Partners report provides data on how companies plan to address executive compensation challenges created by the uncertain economic environment and the continued drive for increased regulatory and shareholder oversight of high-level pay programs.

Three tips for preparing for the 2012 proxy season: “Know your shareholders. Be responsive. Review all disclosures.”

Thanks to unfavorable say-on-pay votes, shareholder derivative actions related to executive compensation practices are on the rise.