Worth Reading … Say on Pay, CD&A Guidance

As public companies and shareholders gear up for the first big wave of SEC-required advisory votes on executive compensation, the frequency of such votes and golden parachute compensation plans in the wake of the Dodd-Frank Act, the search goes on for best practices and advice.

In the past couple of months, there has not been a shortage of both as law firms, compensation consultants, and corporate governance education centers or think tanks. For those of you who need a refresher on the three Say on Pay-related votes this year, here they are:

• Say on Pay: A non-binding, advisory shareholder vote on the compensation plans of the top executives of a public company. Starting with annual meetings after Jan. 21, 2011, companies must include a description of the compensation plan in the Compensation Discussion & Analysis (CD&A) section of the proxy statement that serves as a platform for explaining the compensation programs' logic. The frequency of the vote, which is determined separately by shareholders, cannot be more than triennial.
• Say When on Pay: Again, a non-binding, advisory shareholder vote on the frequency of the Say on Pay vote to be held at least once every six years. Shareholders are to be asked if they favor a vote every year, two years, three years or abstaining.
• Golden Parachutes: A non-binding, advisory shareholder vote on the compensation package of the top executives when a change in control would trigger the severance clause in a executive's contract with the company. Some of the more controversial elements of some golden parachute plans include excise tax gross-ups, large bonuses, stock options and high severance payments.

Perusing much of what has been written about these type of advisory votes heading into the 2011 proxy season, I came upon four documents that address the many different elements of each while also providing clear guidance on CD&A's, compensation committees, and executive compensation plans themselves.

Read the rest of this article on the Corporate Governance Blog, a blog by Gary Larkin

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