I took a look today for more examples of say-on-pay frequency voting recommendations and only found a couple.
Lightpath and Plexus recommended a triennial vote. Lannett highlighted the pros and cons of both annual and triennial say on pay votes but came down in favor of annual. Also noteworthy in their proxy was their report of risk assessment in comp programs which includes a handy check list of company practices in place that prevent it. Similarly there is a clear and detailed list of qualifications (also included in the Plexus proxy with a check list by director of which had what experience) required when recruiting to create a diverse and well rounded board.
Air Product & Chemicals not surprisingly has opted to recommend a say on pay vote every third year for the reasons that are now falling into the regular categories of long term focus of compensation, overburdening and confusion of shareholders and allowing the board time to evaluate feedback and develop a response. This makes 13 to six so far in favor of triennial.
The Board recommends a vote every three years. As described in the Compensation Discussion and Analysis, the Company’s Executive Officer compensation is designed with a long-term focus. Key elements of the program include performance measures that require creation of shareholder value across economic cycles, long-term orientation of the pay mix to reward the disciplined long-term investments that are fundamental to our business model, and substantial linkage to long-term stock performance. The Board intends that the program be responsive to shareholder concerns, but is concerned that annual votes on the program could foster a short-term focus and undermine some of its most thoughtful features.
Finally, the Board believes that the Company will be better served by periodic votes on compensation that afford the Committee time to understand concerns and deliberate appropriate responses, and allow shareholders time to see responsive changes. In the event an advisory vote indicates shareholder concern, the Board believes shareholders will be best served if the Board takes the time to understand the issues and thoughtfully develop responsive alternatives.
What was more interesting was their CD&A. It starts with a section discussing the business and economic climate, what the company has done to adjust and how this will contribute to long term value creation for shareholders. This leads directly into a new section entitled "pay for performance" which highlights how compensation is linked to this value creation and stressing long term orientation of compensation, outline of goals and metrics, linkage between compensation and risk taking, hold past retirement policy and ownership guidelines. From there is heads into a more traditional discussion of program design and components and compensation levels for the fiscal year.
Overall it was a pretty meaty and thorough outline of how they link pay to performance and in my opinion a really good example to take a look at when drafting your own CD&A.
I have included below a very nice new chart above from the company's comp consultant, Farient, which clearly illustrates company performance and the impact on performance adjusted pay.
This section has a lot of new charts including the below which illustrates the CEO’s pay sensitivity to performance from 1998 to present followed by compensation actions taken in the last year. The improvements to the disclosure are substantive and this is a great example to take a peek at. It is a nice balance of facts and charts and is pretty readable which will be helpful in the coming say on pay vote.
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