During the second year of say-on-pay votes, institutional investors and their proxy advisers are prompting more companies to improve their CEO pay practices, according to a new report by the Conference Board, the NASDAQ OMX Group, and Stanford University's Rock Center for Corporate Governance.
A majority of companies surveyed said they are likely to change their compensation practices to win support from institutional investors and proxy advisory firms during say-on-pay votes, according to the report, which was based on a recent survey of 110 large and mid-cap public companies. Of the surveyed companies, 72 percent said they review the voting policies of proxy advisory firms or engage with an advisory firm to get feedback on their compensation practices.
Companies that received low support during their say-on-pay votes in 2011 said they are more likely to make changes to their compensation programs this year by enhancing disclosure, introducing performance-based equity awards, reducing potential severance payments, changing their pay targets, or by reducing compensation levels, according to the report.
ISS updates its voting policies on executive pay and other proxy voting matters each year after receiving broad input from institutional investors, corporate issuers, and other market participants. During ISS’ 2011-12 policy survey, more than 300 respondents weighed in on issues that included compensation, board independence, engagement triggers, and social and environmental issues.