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Say on Pay Update, Annual Audit of Executive Compensation, & Watchdog Challenged Over Benchmarks | July 2012


2012 Say On Pay Update
by Jonathan Covington, Chris Crawford, & Brent Longnecker of Longnecker & Associates

The Dodd-Frank Act has given shareholders the right to approve or reject the compensation paid to the top executives of a company, a provision now known as “Say-on-Pay.” Last year brought 40 (officially 44, with four questionable vote counts) failures to say on pay, leaving everyone wondering how companies would react to shareholders decisions. The 2011 experience with say-on-pay had a significant impact on the way that companies made compensation decisions. In general, most companies saw an increase in performance in 2011, yet more companies have failed the 2012 say-on-pay vote than the previous year (57 companies as of July 7, 2012).

Executive Pay: Audit Needed
by Edward E. Lawler III for

Like many before it, this spring has seen a high level of outrage over the executive compensation payouts in some large corporations. Among companies that have been the target of corporate governance activists this spring are Citigroup, Barclays, and Chesapeake Energy. The debate over what to do about excessive and inappropriate executive compensation has been going on for decades. A few steps have been taken to correct the inappropriate compensation levels that are revealed every spring. The most visible recent step is the mandating of shareholder votes on executive compensation packages. In the United States, they are required, but the result is not binding. Only in a few European countries—the Netherlands, Norway, and Sweden—are they binding. EU regulators are now pushing for binding investor votes on executive pay.

Watchdog Challenged Over Pay Benchmarks
by The Wall Street Journal

Most companies have little trouble recognizing their main business rivals, but identifying their peers for purposes of setting executive compensation appears to be a different story. Disputes between publicly held companies and Institutional Shareholder Services Inc. over how these peer groups should be chosen are playing a big role in shareholders’ advisory votes on pay this year, with the companies and the influential proxy-advisory firm both jockeying to justify their choices. Already this proxy season, 52 companies have filed proxy supplements contesting ISS recommendations on their pay practices, up from 27 at the same point last year, according to Semler Brossy Consulting Group LLC, which advises clients on executive pay. Among this year’s supplementary filings, 26 have involved disputes about peer groups, compared with seven in the year-earlier period.

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