Tag: short-term incentives

Does an unfavorable say-on-pay vote mean what it says?

Not really, according to this study by academics from the University of Pennsylvania Law, Rutgers Business and Berkeley Law Schools to be published in the Harvard Business Law Review. Say on pay was initiated under a Dodd-Frank mandate adopted against the backdrop of the 2008 financial crisis, largely in reaction to the public’s railing against the levels of compensation paid to some corporate executives despite poor performance by their companies, especially where those firms were viewed as contributors to the crisis itself. Say on pay was expected to help rein in excessive levels of compensation and, even though the vote was advisory only, ascribe some level of accountability to boards and compensation committees that set executive compensation levels.  So far, however, say-on-pay votes have served largely as confirmations of board decisions regarding executive compensation and not, in most cases, as the kind of rock-throwing exercises that many companies had feared and some governance activists had hoped. The study reported that, since 2011, the average annual percentage of say-on-pay votes in favor has exceeded 90%, while “the percentage of issuers with a failed say on pay vote has never exceeded 3% and, in 2016, that number dropped to just 1.7%.” The study examined what the few failed (or low) votes really meant.

Is there a fix for short-termism?

by Cydney Posner Much has been written about the problems associated with the prevalence of short-term thinking in corporate America.  As noted in a post from The Harvard Law School Forum on Corporate Governance and Financial Regulation, a recent academic study revealed that “three quarters of senior American corporate officials […]

It’s back to square one: pay CEOs with short-term incentives?

by Cydney Posner How to structure executive pay to drive performance over the long term—while avoiding pay levels that would be considered excessive—is a conundrum for compensation committees, consultants, proxy advisory firms and others involved in setting or analyzing executive compensation. And the analysis has only become more complex since […]