Tag Archives: say on pay

Just as the U.S. seeks to roll back regulations, the European Parliament adopts new corporate governance rules

by Cydney Posner

Just when the U.S. is looking at how to roll back its regulations on corporations (among others) (see, e.g., this PubCo postthis PubCo post and this PubCo post), the rest of the world seems to be headed in the opposite direction.  On Tuesday, the EU Parliament approved a Shareholder Rights Directive, which introduces, among other things, the concept of binding say-on-pay votes for companies listed in EU markets (over 8,000 of them). The Directive also includes some interesting measures intended to impede short-termism.  According to the press release fact sheet issued by the European Commission, the Directive must still be adopted by the European Council (expected shortly) and, assuming adoption, will become effective two years thereafter. Continue reading

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Hitting populist note, U.K. proposes enhancements to corporate governance — will the new U.S. administration follow the populist playbook?

by Cydney Posner

One of the prevailing narratives of the recent Presidential election was that the same gestalt that drove the Brits to vote for Brexit also animated the pro-Trump forces and led to his presidential victory.  Why then, when it comes to regulation of corporate conduct, do the two countries appear to be headed in such different directions? Or are they? Continue reading

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Undo Dodd-Frank?

by Cydney Posner

With Congress and the Presidency soon in Republican control, look for the Financial CHOICE Act (or perhaps an enhanced version) to be re-introduced in the next Congress.  The bill, sponsored by Jeb Hensarling, Chair of the House Financial Services Committee, was framed as a Republican proposal to reform the financial regulatory system necessary to undo the burdens of Dodd-Frank, which were characterized as a distraction from the SEC’s basic statutory responsibilities. In addition to taking aim at much of Dodd-Frank, among other things, the bill places a heavier burden on proxy advisory firms, regulators and regulations generally and eases some other regulations. Although the bill was never expected to make much progress this year, the NYT suggested that the bill may “help shape the Republican agenda in the next term.” The bill’s chances of becoming law have, well,… to say that they have substantially improved doesn’t quite do the situation justice. In an interview with the WSJ on November 11, Hensarling said “that he planned to make the bill… his top priority next year.” Of course, the Congress may decide to just take a hatchet to Dodd-Frank and various other statutes and rules altogether. Or, alternatively, the Senate Dems could filibuster the Senate version of the bill, or threaten to do so, which could lead to some negotiation. But if the Financial CHOICE  Act is signed into law in substantially the same form, the question then is: will we see more private ordering? Will governance activists begin to submit shareholder proposals for, e.g., pay-ratio and hedging disclosures? Will some companies continue a form of conflict minerals compliance on their own initiatives?

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PwC survey of directors showed skepticism on the benefits of shareholder engagement, critical views of some board colleagues and gender splits on board diversity

by Cydney Posner

In its annual survey released Tuesday of more than 800 corporate directors, PwC identified ten key findings, including critical views on other board members, split views on board diversity and skeptical views on the benefits of shareholder engagement.

  • Of the directors surveyed, in 2016, 35% thought that at least one of their board colleagues should be replaced, compared with 31% in 2012. The reasons most frequently cited were lack of preparation for meetings (2016: 25%/2012: 11%), lack of the right expertise (17%/13%), aging (12%/15%) and overstepping of boundaries of the board’s oversight role (12%/10%). Not surprisingly, directors with briefer tenures tended to be more critical: 39% of those serving for two years of less thought a director should be replaced, compared with 29% for directors that had served for more than ten years. Surprisingly, however, only 8% of directors surveyed indicated that, following a board self-evaluation, they had decided not to renominate a director as a result. Moreover, only 49% of directors reported that their boards made any changes as a result of the self-evaluation process — and most of those changes related to the composition of committees or adding more expertise. Only 14% took action to diversify their boards.

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Does a low favorable vote for a say-on-pay proposal affect directors’ reputations outside the company?

by Cydney Posner

As discussed in a PubCo post last week, say on pay has had some surprising consequences. While there hasn’t been much impact on the levels of executive pay, according to this paper, one group that have experienced some impact from say on pay are directors. The academic study indicates that, following low favorable votes for say-on–pay proposals, directors incur significant reputational damage and financial costs, which the authors contend should motivate directors to provide better oversight of executive comp from the get-go.  Moreover, the authors believe that their study shows that say on pay “has given shareholders an important, albeit indirect, increase in influence over executive compensation.”  Continue reading

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Are the days of “I’ll-scratch-your-back” cronyism history?

by Cydney Posner

As discussed in a PubCo post last week, a theory that is currently gaining purchase is that, whether as a result of say on pay or otherwise, the increased influence of proxy advisory firms has led to a kind of homogenization of executive pay packages based on standard metrics.  This piece in the WSJ, by a former CFO, argues that these types of standardized formula pay programs are problematic and, because “the days of ‘I’ll scratch your back’ cronyism are long gone,” more board discretion is warranted. He even spots a trend in that direction. Continue reading

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The unintended consequences of say on pay

by Cydney Posner

This post from the Columbia Law School CLS Blue Sky blog, “Should Say-on-Pay Votes Be Binding?,”  by two executives from the Institute for Governance of Private and Public Organizations  in Canada, in exploring the issue raised in the post’s title, looks at the question of the effectiveness and impact of non-binding say-on-pay votes.  Initially conceived as a way to allow investors to express their views on executive compensation and, presumably, rein in runaway executive pay packages, say on pay has not exactly had the consequences that had originally been anticipated. Continue reading

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