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Weighing in on Executive Comp

Three years of say-on-pay votes have resulted in more communication with investors.

By Susan Kelly | Updated on February 12, 2014
The coming proxy season will center on the votes on companies’ executive compensation plans that were mandated by Dodd-Frank. The three years of say-on-pay votes to date have resulted in a significant increase in companies’ efforts to reach out to investors to assess their views—and, if possible, influence their votes.

Compensation “tends to be a hot-button issue for management,” said Laura Richman, of counsel in the Chicago office of law firm Mayer Brown. “So just the existence of this advisory vote has increased shareholder engagement.”

With three years of experience with say-on-pay votes, “companies understand the playbook in terms of doing their shareholder outreach: that they need to do it earlier in the proxy process,” said Rajeev Kumar, senior managing director for corporate governance and research at Georgeson, a proxy solicitation and corporate governance consulting company. “They can’t wait until [proxy advisers] ISS and Glass Lewis come out with their recommendations and then try to get shareholders not to go along with their recommendations. They need to do outreach far earlier, even before they have filed their proxies.”

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