Corporate Governance

US Companies Divided on Say-on-Pay Frequency, Towers Watson Poll Finds

By Delisha J. Grant

According to a new poll conducted by Towers Watson (NYSE, NASDAQ: TW), U.S. companies are split on how frequently they should put their executive compensation programs to a nonbinding say-on-pay shareholder vote.  According to its press release, Towers Watson further reports that while some companies are making adjustments to their pay-setting processes, many are not yet clear on how to assess the success of the vote or prepared to address the results of the shareholder poll.

 Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, companies are required to conduct say-on-pay votes at least every three years.  However, it is left up to the company to decide whether it will hold annual, biennial or triennial votes.  Companies are also required to put the say-on-pay frequency question to a nonbinding shareholder vote at least every six years.

 While 51% of poll respondents expect to hold annual say-on-pay votes, nearly as many respondents (49%) don?t know what level of favorable shareholder say-on-pay votes will be considered a successful outcome by their boards, and only 8% of the respondents have a process in place for analyzing the results of the vote. 

 Poll results indicate that companies have a range of reasons for favoring a particular frequency.  Four in ten respondents cited accountability to shareholders and a desire to minimize administrative burdens as factors having the greatest influence.  Other factors include shareholder preferences, proxy advisory policies, and providing shareholders with an avenue to express concern about executive pay without casting negative votes on other matters.

 According to Towers Watson senior consultant, James Kroll, ?The survey responses suggest that companies are struggling to understand the implications of say-on-pay votes and many are taking a wait-and-see approach to measure success?This new era will require companies to step up their ongoing communication with shareholders and tell a compelling story about how their pay programs help drive business performance, while also listening and responding to shareholder concerns.?

Full post as published by PomTalk on January 06, 2011 (boomark / email).