- Consultant Influence Increases Directors report that compensation consultants continue to have the most influence among outside entities over their decisions on pay, with 48% of directors describing them as "very influential" (up from 36% last year). Only 17% of directors described investors as "very influential," compared to 22% last year, perhaps reflecting that many companies are taking a new look at incentive plans.
- Impact of Say on Pay The vast majority—83% of directors—believe the "real impact" of say on pay has been to increase the influence of proxy advisory firms. In addition, directors believe say on pay has encouraged them to "look at compensation disclosure in a different way," with 84% saying they at least somewhat agree with this statement. Beyond not impacting the level of pay, almost a third believe it has failed to improve investors' understanding of pay practices.
- Concerns With Proxy Advisors Not surprisingly, 85% of directors reported they are concerned with proxy advisors' "one-size-fits all" approach to governance while 80% say their policies do not align with investors' interest and proxy advisors' business models have potential conflicts of interest.
- Director Communications Director engagement increased across all categories compared to last year, with almost a third (30%) of directors reporting they increased communication with company employees, and 25% reporting increased contact with investors and external auditors.
- Risks of Director Engagement Although 73% of directors now believe it is at least "somewhat appropriate" to discuss executive compensation with investors, almost all of them are at least somewhat concerned about the potential for "mixed messages," and 89% worry about "special agendas when investors seek direct communications with the board."
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Authors: Ani Huang
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Ani Huang
Senior Executive Vice President, Chief Content Officer, HR Policy Association
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