LAKE FOREST, Ill.--(EON: Enhanced Online News)--Meridian Compensation Partners, a leading executive compensation and corporate governance consulting firm, has found that companies are increasingly focused on using their proxy statements to provide detailed rationale for executive pay decisions. “In our current environment of enhanced scrutiny over executive compensation pay levels and design practices, companies have clearly received the message that shareholders expect robust disclosures justifying compensation decisions,” observed Matthew Wolfson, a senior consultant at Meridian. “Proxy disclosures have come a long way from the days when the rationale behind the numbers was an untold story.”
“Proxy disclosures have come a long way from the days when the rationale behind the numbers was an untold story.”
The findings were released as part of Meridian’s 2013 Corporate Governance and Incentive Plan Design Survey which reviewed pay practices of 250 large U.S. companies with median revenues of $14.5B. Among the findings:
- Though not currently required by SEC disclosure rules, a strong majority of companies (87%) now provide an executive summary to the Compensation Discussion and Analysis (“CD&A”) section of the proxy. These summaries, which have emerged as a best practice, typically use tables or charts to highlight recent company performance, key pay decisions and best governance practices of the company.
- Long-term performance-based vehicles (e.g., performance shares/units) are now used at over 90% of companies surveyed and make up over 50% of the annual long-term incentive (“LTI”) value granted to senior-most executives. Payouts of these performance-based vehicles are most frequently based on total shareholder return or earnings-based metrics (e.g., net income, EPS, etc.). In addition, stock options and service-based restricted stock remain prevalent, used by 64% and 58% of companies respectively. This is consistent with recent trends towards a “portfolio approach” in which a company’s LTI program mix consists of two or more vehicles.
- While still a minority practice, approximately one-fifth (22%) of companies provided a representation of realized and/or realizable pay, either compared with target or reported compensation (i.e., as disclosed in the Summary Compensation Table). An increase in these disclosures is anticipated as companies look for additional ways to analyze and communicate executive pay decisions.
- Consistent with recent Meridian studies, approximately 40% of companies currently separate the roles of Chairman of the Board and Chief Executive Officer. However, only approximately one-eighth of the companies that currently separate the roles have mandated this practice by company policy.
For your copy of Meridian’s 2013 Corporate Governance & Incentive Plan Design Survey, please contact Matthew Wolfson at firstname.lastname@example.org.
About Meridian Compensation Partners
Meridian Compensation Partners, LLC is a fully independent executive compensation firm providing trusted counsel to Boards and Management at hundreds of large companies. We consult exclusively on executive and Board compensation matters, including their design, amounts and related corporate governance practices. Our dozens of consultants throughout the U.S. and in Canada have decades of experience in pay solutions that are responsive to shareholders, reflect good governance principles and align pay with performance. Visit us at www.meridiancp.com