Shareholders' influence over executive compensation growing
BY LAURIE WINSLOW World Staff Writer
Sunday, June 24, 2012
6/24/12 at 3:11 AM
Shareholders are having more impact on executive compensation as companies proceed cautiously when setting pay levels for leaders.
Last year was the first full year that "say on pay" went into effect, giving shareholders a nonbinding vote on an executive's compensation. And it is having an effect.
"It's a nonbinding vote. It doesn't seem to mean a whole lot on the surface, but it does mean a lot," said Chris Crawford, chief operating officer and executive director of Houston-based Longnecker & Associates, which provides executive compensation consulting services to public and private companies, including some in Tulsa.
Board members don't want the potential lawsuits, the liability that comes from that exposure or the negative attention, and they're taking their job seriously and not wanting to fail their say-on-pay votes.
Shareholder pressure also is affecting bonuses.
"It's really interesting right now," Crawford said. "There is a fair amount of strong discussion in the boardroom over what's right and what's appropriate from an executive compensation standpoint. Those meetings, they are lasting longer. There is more heat in those discussions, and so it's not for the fainthearted.
"The board members have always taken their jobs seriously, but now they've got this real external pressure that they really never had where they are watching public companies being sued for compensation, and that is bringing a whole new level of care and concern."
Last year 49 companies failed say on pay whereby companies received less than 50 percent shareholder approval for executive compensation. Nationwide, nine lawsuits were filed against companies last year, and Crawford said he expects more companies to fail say on pay this year.
The problem is that the information required to be disclosed on proxy statements doesn't truly show what an executive receives in actual take-home pay. The compensation reported includes long-term incentives, which reflects an accounting value, but not the real take-home value, which can lead to misunderstanding among shareholders, Crawford said.
Original Print Headline: Shareholders' influence over CEO pay growing
Laurie Winslow 918-581-8466