NEW YORK--(BUSINESS WIRE)--The Council of Institutional Investors have released a report by Farient Advisors, a leading independent executive compensation and performance consulting firm, analyzing investor motivations to vote against “say on pay” at companies where the proposal failed to receive majority support at 2011 annual meetings. Say on pay gives shareowners a voice in how top executives are paid.
The paper, titled “Say on Pay: Identifying Investor Concerns,” is co-authored by Robin Ferracone, executive chair of Farient, and Dayna Harris, a vice president of Farient. It draws on data from 37 companies whose pay plans fell short of majority support between January and July 2011, as well as interviews with institutional investors, investment management firms, proxy advisers and solicitors, and company officials.
“This report will help both active investors and companies to understand which executive pay practices are viewed as detrimental to long-term shareowner value,” said Ferracone, author of the book “Fair Pay, Fair Play: Aligning Executive Performance and Pay.” “Keeping a hefty portion of target pay performance-based is key to receiving a positive vote.”
“Boards at companies where say on pay proposals garnered significant opposition should be reaching out to their investors to discuss their concerns,” said Ann Yerger, executive director of the Council of Institutional Investors. “They should also review their pay practices and consider appropriate changes.”
Key findings include:
- Investors voted against executive compensation for four primary reasons: pay for performance disconnect (92 percent); poor pay practices (57 percent); poor disclosure (35 percent); and unreasonably or inappropriately high compensation (16 percent).
- Investors evaluated performance and pay over multiple years, looking primarily at total absolute shareholder return (TSR) over one-, three- and five-year periods.
- Investors focused their time on in-depth analysis of pay at “outlier” companies, those with the largest disconnect between pay and performance.
Ferracone and Harris will discuss the paper today during a plenary session at the Council of Institutional Investors’ fall conference in Boston.
About The Council of Institutional Investors
The Council of Institutional Investors is a nonprofit association of pension and other employee benefit funds, foundations and endowments with combined assets that exceed $3 trillion. It is a leading voice for good corporate governance and strong shareowner rights. It strives to educate its members, policymakers and the public about good corporate governance, shareowner rights and related investment issues, and to advocate on its members’ behalf.
About Farient Advisors
Farient Advisors is an independent executive compensation and performance advisory firm that provides performance-sensitive and defensible advice on executive pay. Farient is uniquely designed to meet the ongoing and increasingly complex needs of compensation committees through a combination of top compensation advisors who routinely work with boards and executives. Farient’s professionals adhere to disciplined processes and analytical standards to ensure the delivery of high-integrity services year in and year out.