Shareholder Outreach & Say-on-Pay
Expert Say-on-Pay Consultants
Our say-on-pay advisory consultants can help with shareholder outreach to educate investors and board members about the industry comps, strategy, and reasoning behind executive compensation plans. The Dodd-Frank Act was signed in 2010 ushering in a new required disclosure for proxies a non-binding shareholder vote on executive compensation known as say-on-pay. Although “non-binding” we continue to see shareholder votes grow more and more influential in the executive pay space.
Advisory Vote on Executive Compensation
The vote allows shareholders the right to approve or disapprove of the company’s executive pay packages and offers companies an opportunity to evaluate compensation plans and address any shareholder concerns. As a result, shareholder support of executive compensation has been mostly positive in recent years, largely due to outreach efforts in preparation for the vote.
Say-on-pay rules for public companies require an investor vote on the highest paid executives at least once every 3 years. Publicly traded companies like corporations must also provide investors with a say on pay advisory vote, allowing them to choose the frequency with which they vote on the highest paid executives’ compensation. These companies must also disclose compensation for executives in the event of a change in control; merger, acquisition, liquidation, etc. In some situations, a public company must have approval for golden parachute compensation clauses through a shareholder advisory vote. Both say-on-pay votes and frequency votes appear on the annual shareholder meeting ballot as separate items.
NFP Compensation Consulting (NFPCC) Shareholder Outreach Process
NFPCC has always affirmed that outreach works. Over the years, we have learned that there is significant confusion and misconceptions among shareholders with respect to executive compensation. But with a properly structured outreach strategy that includes shareholder education, we can help to change these incorrect perceptions that will not only yield positive say-on-pay results but also strengthen sound governance practices overall. Our shareholder outreach process includes:
- Assessments of the structure of the compensation program relative to ISS models and prediction of potential voting outcomes.
- Utilizing the results, NFP Compensation Consulting helps companies reach out to shareholders, stakeholders, and advisory groups to educate, discuss and update issues around compensation and governance.
- Work with the company and committee to develop a strategy for communicating compensation and governance-related items to key company stakeholders with the goal of enhancing positive voting outcomes.
- Work with the CEO and any board members on key talking points as they relate to compensation or performance indicators that affect executive compensation. This collaboration is intended to highlight executive and shareholder alignment.
Further, this has opened new doors for Institutional Shareholder Services (“ISS”) who analyze executive compensation and provide say-on-pay voting recommendations to investors.
NFPCC’s assessments, education, and outreach efforts result in positive impacts to voting outcomes, and in certain cases, changes the ISS voting recommendations. Additionally, shareholder outreach enhances alignment between shareholders, board members and executives, resulting in more effective and sound governance practices that ultimately translate to maximized business performance. Contact us to see how your company can benefit from shareholder outreach. NFPCC’s outreach specialists are ready to assist you in developing a strategy to prepare for the vote.