by Gary Larkin
In the first year of mandated advisory votes on executive
compensation plans, two observations can be made: large public companies are shifting
pay practices toward pay for performance and CEO compensation at most non-banks
is back to the higher pre-financial crisis levels.
On one hand, an argument can be made that since the
recovery - as tepid as it is - has begun, companies are more apt to go back to
the old ways of exorbitant executive compensation. On the other hand, an
argument can be made that the higher compensation reflects higher performance
by those companies and that there is focus on pay for performance, where there
So what is the reality of the situation? If you hear one
important institutional investor tell it, you would believe the higher
compensation reflects their companies' higher profits. But at the same time
many of those S&P 500 companies are seeking out shareholders' views on the
compensation plan itself.
"A lot of companies went away from [rewarding stock]
options to straight cash [rewards] that were less structured to the stock
market price," Michael P. McCauley, senior officer of investment programs and
governance at the State Board of Administration of Florida, told me earlier
this week. The SBAFLA voted 3,566 proxies in 2010, according to its 2011 Corporate Governance Report.
In fact, he mentioned to me that a lot more companies are
reaching out to him to discuss their compensation plans prior to the annual
meeting. "In the past, we would get dozens of calls a year from companies,"
McCauley said. "Now, it's gone up 20 to 30 percent per year just before the
vote takes place."
Read the rest of this article on the Governance Center Blog
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