Board-Shareowner Communications on Executive Compensation
RiskMetrics is not the only entity seeking
comments on a paper. Stephen Davis is looking for input on this Millstein
Center paper: "Board-Shareowner
Communications on Executive Compensation." The 8-page paper - which is
an executive summary and initial findings - presents findings of a
six-month research project that included interviews with directors, senior
managers and investors on their views of dialouge regarding executive pay.
A final paper will be published once more input is received.
Logically, the "say on pay" movement is
addressed in the paper. Given that the media contains reports that some
investors are now rethinking their views on "say on pay," some of the
research might be dated already, even though it's not that old. I
personally talked to some investors who now find themselves on the other
side; and I find myself leaning against it for now (as I have
blogged about). So please send Stephen your comments.
On pages 5-6 of the paper, there is this
finding related to say on pay:
Compulsion, through crisis or other
acute events, is the foundation under most current US corporate
initiatives to foster governance dialogues with institutional owners.
Evidence suggests that scandals over
executive compensation - whether payouts for failure or backdating stock
options - were key contributors in 2007 in motivating certain boards to
increase their interaction with shareowners. Exercises in board dialogue
on governance have generally not come about in the United States as a
product of proactive, long-term strategic outreach by untroubled
corporations. This reality has contributed to growing investor
conviction that regular dialogue will not spread widely in the absence
of compulsion, even where companies are troubled. As a result, many
funds back a UK-style annual advisory vote on executive pay policies, a
measure that helped open channels of communication between UK boards and
their equity owners.
- Broc Romanek, CompensationStandards.com
Posted by broc at