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For copies of the summary and full report of the study conducted for the Center On Executive Compensation, announced in the release below, see


Center On Executive Compensation, September 10, 2008 press release


Press Release




Contact: Tim Bartl



For Immediate Release

September 10, 2008


First-of-a-Kind Study Reveals Nation’s 25 Largest Institutional Investors’ Views on Executive Compensation


Some views differ from activists’; confirms “reasoned approach” to policy changes needed;

Pay for performance, role of the Board and need for better disclosure are top issues

Washington, D.C. – A first-of-a-kind study commissioned by the Center On Executive Compensation to identify the perspectives of the nation’s largest 25 institutional investors on executive compensation matters confirms that making broad assumptions about their views on this topic often does not reflect realities, underscoring “a need for a thoughtful and reasoned approach to any executive compensation policy changes,” according to the Center.

The study was conducted on behalf of the Center by Kevin F. Hallock, Professor of Labor Economics and of Human Resources Studies and Director of Research at the Center for Human Resources at Cornell University, who concluded that “though further study is needed, it “[appears to] be the case that some of the strong views held by activist institutional investors are not generally held by the majority of or even very many of the largest institutional investors.”

Through confidential interviews with senior representatives from 20 of the 25 top institutional investors based on management of U.S.-based equities, it was determined that the top issue of concern was ensuring pay-for-performance, followed by preserving the Boards’ role to set compensation and being able to “trust” and rely on compensation committees, and seeking greater clarity in both a company’s pay disclosures and the SEC’s requirements.

The study also found that large institutional investors do not have a shared view on all executive compensation issues. “While they agree about some issues, such as favoring pay for performance and rejecting “say on pay,” they are almost evenly split on others, such as the necessity of maintaining the independence of the compensation consultant and disclosure of performance targets,” stated the Center in its summary of the findings.

According to the Center’s report, the study was commissioned because these institutions collectively represent over $6 trillion in U.S. equities, or 65 percent of the top 300 institutional investors.

“Given the top 25 institutional investors’ massive representation of investors’ interests, we believed that the views of this important shareholder constituency should be better understood and factored into the on-going national dialogue about how best to inform and structure executive pay practices and the rules and regulations that guide them. Moreover, the Center’s members were interested in securing the findings as a part of their individual efforts to expand and enhance their dialogue with shareholders on these topics,” said Charles G. Tharp, the Center’s Executive Vice President for Policy.

The Center said its findings are being made available to senior human resource executives, directors, compensation consultants, law makers and regulators, academics and the media as a part of its effort to contribute a balanced and reasoned view “into what often can be a complex and highly individualized process…”

According to the Center, an in-depth review of the complete study, which can be found on its Web site at, further reveals that:

·             The majority of large institutional investors do not support a shareholder vote on executive compensation, believing instead that boards should be responsible for compensation decisions and held accountable through greater disclosure and ultimately by shareholders who determine whether to reelect them;

·             Large institutional investors are not generally concerned with the level of executive compensation, provided it is clearly and appropriately linked to company results; however, they believe the pay-for-performance link could be further strengthened and unanimously support equity as a form of aligning executives and shareholders’ interests;

·             One-third of the large institutional investors raised unsolicited concerns over the influence that proxy advisory services have over the proxy voting process, including compensation matters;

·             Despite updated SEC disclosure rules, the overwhelming majority of large institutional investors has been disappointed in the rules and how companies have implemented them, especially the lack of clarity in the Compensation Discussion and Analysis. The investors believe there is room for improvement and that it will occur over time. In the meantime, they do not support a “one-size-fits-all” approach to selecting or determining performance metrics, instead preferring multiple performance metrics tailored to measure the achievement of a company’s strategic goals; and

·             Large institutional investors were split on the issue of the independence of executive compensation consultants, with just under half supporting independence and the others divided between disclosure of other relationships with the company and those not seeking any disclosure.

The Center On Executive Compensation [] is a not-for-profit research and advocacy organization dedicated to developing and promoting principled pay and corresponding governance practices that serve the best interests of shareholders and other corporate stakeholders. Headquartered in Washington, D.C, the Center is hosted by HR Policy Association, the organization representing the chief human resource officers of more than 250 of the largest corporations in the United States (, and supported by subscriber companies.

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This Forum program is open, free of charge, to anyone concerned with investor interests relating to shareholder advisory voting on executive compensation, referred to by activists as "Say on Pay." As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The organization of this Forum program was supported by Sibson Consulting to address issues relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of performance leadership relating to the issues being addressed.

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