Compensation and communication top topics in annual director survey

Photo courtesy of The Bees on Flickr

Photo courtesy of The Bees on Flickr

Executive compensation and director communication proved to be hot topics in PricewaterhouseCoopers’ 2014 Annual Corporate Directors Survey.

“With four years of ‘say-on-pay‘ behind us and equity markets rising to new levels, we asked directors to give their current perspective on compensation oversight,” Mary Ann Cloyd, Leader of PwC’s Center for Board Governance, said in a news release. “As for stakeholder communications, boards need to determine their role—and evaluate their processes and procedures governing such communications. To this end, we asked directors about their current behaviors and practices.”

A total of 863 public company directors responded to PwC’s survey over the course of the summer in 2014. Of those, 70% serve on the boards of companies with more than $1 billion in annual revenue.

The highlights include:

  • Compensation consultants continue to have the strongest influence on director decisions regarding executive compensation while CEOs have seen their influence drop.
    • 48% of directors describe compensation consultants as very influential, up 12 percentage points from 2013.
    • 51% of directors describe proxy advisory firms as at least moderately influential, compared to 49% last year
    • 39% of directors describe CEO pressure as moderately or very influential, a drop from 45% last year.
  • 84% of directors at least somewhat agree that “say-on-pay” voting caused their board to look at compensation disclosures in a different way, while 83% say it at least somewhat increased the influence of proxy advisory firms.
    • Nearly three-quarters of directors at least somewhat agree that “say-on-pay” increased shareholder dialogue
    • 66%, however, do not believe it effected a “right-sizing” of CEO compensation.
  • More than 80% of directors believe proxy advisory firms use a “one-size-fits-all” approach to governance and that their business model creates potential conflicts of interest.
    • A similar percentage say proxy advisory firm policies do not align with company needs or investors’ best interests.
  • Director communications with stakeholders increased across all constituencies.
    • 30% of directors say they enhanced communications with the company’s employees.
    • 66% of directors say they are communicating with institutional investors, compared to 62% last year.
  • Despite increased director-stakeholder communications, directors still have many concerns.
    • 94% of directors are at least somewhat concerned about the potential for mixed messages
    • Almost 90% are concerned about the “agendas” of some investors.
    • 89% of directors are at least somewhat concerned about violating Regulation Fair Disclosure
  • More than half of directors have not held discussions about company protocols and practices in preparation for director-shareholder interactions.
    • Almost half of directors questioned have not discussed company protocols and practices regarding:
      • the process by which shareholders can request direct dialogue with the board,
      • the particular director(s) who would participate in that dialogue, and
      • the topics allowed for discussion.

Clearly, say-on-pay votes are having an effect on how directors view compensation. And, while it’s good that they are more open to communicating with the various stakeholders in their companies, they may want to brush up on company protocols about how to do that.

Click here to download the full survey.

 

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One response to “Compensation and communication top topics in annual director survey

  1. Pingback: More transparency leads to more CEO pay, study finds |·

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