Dates: June 4-6, 2018 – Westin St. Francis, San Francisco, CA
More Details Coming Soon
June 12-14, 2017 – Swissotel, Chicago, IL
Equilar hosted its annual Executive Compensation Summit at the Swissotel in Chicago from June 12 to 14, convening nearly 400 executive compensation and governance professionals for the 8th annual event. Below are key takeaways and key quotes from the main sessions at the conference.
Tom Quaadman, Executive Vice President, U.S. Chamber Center for Capital Market Competitiveness was interviewed by TK Kerstetter, the host of Inside America’s Boardrooms on the state of corporate governance from the Washington perspective, particularly as it relates to executive compensation.
The Center for Capital Market Competitiveness was established in March 2007 to advocate legal and regulatory policies for the U.S. capital markets to advance the protection of investors, promote capital formation, and ensure U.S. leadership in the financial markets in the 21st century. Mr. Quaadman oversees the Center’s policy and lobbying operations. He has testified on a number of occasions before congressional committees on issues covering capital formation, financial reporting and corporate governance.
“Partisanship in Washington is a delicate situation for the Chamber, since we work on both sides of the aisle. Anything major you want to get done in DC you need to see the dam break a little to have that happen, and mid-term elections are often a catalyst. When we had the JOBS Act pass, designed to get more companies to IPO, that was strongly bipartisan.”
“The pendulum on shareholder rights is swinging around a lot. Mutual funds are getting very active where they wouldn’t have been before.”
“Major changes to Dodd-Frank are going to have to take place through regulation, not legislation. It will have much more of a role through new rules.”
“When you talk to people in Silicon Valley about why they are not going public you generally hear three things: audits, proxy advisors and concern about loss of control. If people didn’t think no-vote shares were the right move for Snap, they wouldn’t have invested. I think corporate America works with a diversity of structures. When we want every company to look the same we’ve gotten into trouble.”
A set of compensation consultants and attorneys debated five major executive compensation issues of the day. This high-energy deliberation shed light on key considerations facing governance professionals.
“Since executive pay is so heavily weighted toward long-term incentives and being paid out in equity, the result of highly correlated pay for performance is a self-fulfilling prophecy.”
“Performance shares may or may not be a fad, but it’s getting ahead of ourselves to say it’s here to stay. We often presume that all assumptions to develop these programs are going to be the same in the future. Those things can and will evolve, and those crystal ball predictions are often wrong because of these underlying assumptions that we assume will be the same.”
“What irritates everyone about executive compensation is this presumption that one size could fit all or most companies, and that’s where we are with TSR. It does not have to be a part of every pay program.”
“What is the objective of Say on Pay in the first place? To enhance accountability of compensation committee and facilitate communications. Has that happened with non-binding vote? Absolutely. Many shareholders say enough already on executive compensation.”
“The trend toward three years for incentives is an eternity for a company—that encourages long-term thinking and investment and reduces emphasis on quarterly earnings.”
“One thing I think we are in danger of doing is taking away the motivational value of executive pay. We’re herded into a very small corral that may not fit the business cycle, culture and strategy of very different investments.”
Experienced compensation committee and lead HR members discussed developing the compensation committee calendar and preparing the most relevant materials to help the compensation committee plan for their meetings, best processes for coordinating annual compensation reviews and feedback to the board, coordinating with the compensation committee on the CD&A and shareholder engagement needs, and other practical guidance.
“Board recruiting is not just limited to nominating and governance. We talk a lot about recruiting, and we’ve really expanded succession planning in the compensation committee discussion.”
“A board member’s job is one of the best in the world until it’s not, and we get paid to think about the downside. If you have too much pay when performance is bad, that keeps me up at night. That’s the place where as compensation committee members where we’re going to judged, and it’s also the toughest to fix.”
“It’s an easy thing to design a program based on what everyone else does. It’s easy to approve compensation elements that don’t stick out. I don’t see a lot of likelihood that it changes, unless people that stick out show it creates shareholder value. It’s really hard to prove, and in the absence of that, I see continued homogenization.”
This panel looked at key takeaways from the 2017 proxy season and provided valuable guidance on how companies should be preparing for SEC rules and investor recommendations impacting executive compensation design, shareholder engagement, and corporate governance practices in the year ahead.
“The dialogue between shareholders and boards is good over 90% of the time and has helped shareholders get a broader sense of what’s going on. My sense is we need to let this play out. Investors are asking better questions, and they have more informed opinions. They are not dictating, but asking how to understand things better. There is plenty there to create a constructive plan forward.”
“Have we found the right balance in the power structure between shareholders, the board and management? If we define “right” by whether everyone has a voice, then yes. But balance ebbs and flows. Depending on the issue facing the company, you’re going to have loud, louder and screaming voices from one of those constituents.”
“If Congress repealed Dodd-Frank, does anyone think Say on Pay is going away? No. These are post-regulation items. We’ve moved past the ability of the regulators to say what we do and what we don’t do. Social media gives a new voice to stakeholders that would have never been there before. Less regulation just means there is a vacuum that’s going to be filled.”
“You will have to do your CEO pay ratio.”
This group of investors and advisors shared firsthand insights on how shareholders are evaluating executive pay practices, red flags that garner scrutiny, as well as when and how they want to engage with companies.
“Investors increasingly have growing teams, they are using other data, and they have custom policies. Proxy advisor recommendations have weight, but it’s only one input.”
“A failed Say on Pay vote is likely going to result in an against vote for the comp committee and chair.”
“The CEO pay ratio is going to drive a lot of press, and a lot of internal questions. What’s really striking to me is that the larger issues that people talk about in CEO pay are absent at this conference. The fact that CEO pay grew so rapidly for a while, and it didn’t grow for front-line workers as rapidly, and how we got to the situation we’re in today—that’s how the CEO pay ratio is going to be received.”
“Personally I like to talk to the board, mainly because they are going to be ultimately responsible for executive pay, but also because you’re not talking to them about their own pay package.”