Equilar Institute
Resources
Investor Guidelines
Before engaging with your investors, check into the voting guidelines for each firm. The list below is a valuable
resource for learning how institutional investors will vote their shares.
Beliefs and Expectations Related to Executive Compensation Practices
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We believe that compensation committees are in the best position to make compensation decisions and
should maintain significant flexibility in administering compensation programs, given their knowledge
of the strategic plans for the company, the industry in which the company operates, the appropriate
performance measures for the company, and other issues internal and/or unique to the company.
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Companies should explicitly disclose how incentive plans reflect strategy and incorporate long-term
shareholder value drivers; this discussion should include the commensurate metrics and timeframes by
which shareholders should assess performance.
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We support incentive plans that foster the sustainable achievement of results. Although we believe
that companies should identify those performance measures most directly tied to shareholder value
creation, we also believe that emphasis should be on those factors within management’s control to
create economic value over the long-term, which should ultimately lead to sustained shareholder
returns over the long-term. Similarly, the vesting timeframes associated with incentive plans should
facilitate a focus on long-term value creation, as appropriate to that particular company.
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While we do support the concept of compensation formulas that allow shareholders to clearly understand
the rationale for compensation decisions, we do not believe that a solely formulaic approach to executive
compensation necessarily drives shareholder value. BlackRock believes that compensation committees should
use their discretion in designing incentive plans, establishing pay quanta, and finalizing compensation
decisions, and should demonstrate how decisions are aligned with shareholder interests.
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BlackRock does not discourage compensation structures that differ from market practice. However, where
compensation practices differ substantially from market practice, e.g. in the event of unconventional
incentive plan design or extraordinary decisions made in the context of transformational corporate events
or turnaround situations, we expect clear disclosure explaining how the decisions are in shareholders’
best interests.
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BlackRock does not discourage compensation structures that differ from market practice. However, where
compensation practices differ substantially from market practice, e.g. in the event of unconventional
incentive plan design or extraordinary decisions made in the context of transformational corporate events
or turnaround situations, we expect clear disclosure explaining how the decisions are in shareholders’
best interests.
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We expect companies to select peers that are broadly comparable to the company in question, based on
objective criteria that are directly relevant to setting competitive compensation; we evaluate peer
group selection based on factors including, but not limited to, business size, relevance, complexity,
risk profile, and/or geography.
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We do not believe that arbitrary limits on potential compensation are necessarily in shareholders’
best interests if those limits have the potential to cap performance. However, we expect compensation
committees to ensure that incentive plans do not incentivize excessive risk taking beyond the company’s
determined risk appetite and that rewards are reasonable in light of returns to shareholders.
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We do not set forth a preference between cash, restricted stock, performance based equity awards,
and stock options, amongst other compensation vehicles. We acknowledge that each may have an appropriate
role in recruiting and retaining executives, in incentivizing behavior and performance, and in aligning
shareholders’ and executives’ interests. Compensation committees should clearly disclose the rationale
behind their selection of pay vehicles and how these fit with intended incentives. We also observe that
different types of awards exhibit varying risk profiles, and the risks associated with pay plan design
should be in line with the company’s stated strategy and risk appetite.
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We expect compensation committees to consider and respond to the shareholder voting results of relevant
proposals at previous years’ annual meetings, and other feedback received from shareholders, as they
evaluate compensation plans. At the same time, compensation committees should ultimately be focused on
incentivizing long-term shareholder value creation and not necessarily on achieving a certain level of
support on Say on Pay at any particular shareholder meeting.
Say on Pay Analysis Framework
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We analyze the compensation practices in the context of the company’s stated strategy and identified
value drivers and seek to understand the link between strategy, value drivers and incentive plan design.
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We examine both target and realizable compensation in order to understand the compensation committee’s
intended outcomes, to judge the appropriateness and rigor of performance measures and hurdles, and to
assess the pay plan’s sensitivity to the performance of the company.
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We review the pay and performance profiles of the company’s disclosed peer companies, as applicable,
to identify relative outliers for potential further analysis. We supplement our analysis of the company’s
stated peers with an independent review of peer companies as identified by third party vendors and our own
analysis; part of this analysis includes an assessment of the relevance of the company’s stated peers and
the potential impact the company’s peer selection may have on pay decisions.
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We conduct our analysis over various time horizons, with an emphasis on a sustained period, generally 3-5
years; however we consider company-specific factors, including the timeframe the company uses for performance
evaluation, the nature of the industry, and the typical business cycle, in order to identify an appropriate
timeframe for evaluation.
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We review key changes to pay components from previous years and consider the compensation committee’s
rationale for those changes.
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We examine extraordinary pay items (including but not limited to actual or contractual severance payments,
inducement grants, one-time bonus and/or retention awards) to understand the compensation committee’s
rationale and alignment with shareholder interests.
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We may engage with members of management and/or the compensation committee of the board, where concerns
are identified or where we seek to better understand a company’s approach to executive compensation.
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We consider BlackRock’s historical voting decisions (including whether a concern that led to a previous
vote against management has been addressed, or whether we determined to support management at previous
shareholder meetings with the expectation of future change), engagement activity, other corporate governance
concerns at the company, and the views of our portfolio managers.
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We assess the board’s responsiveness to shareholder voting results of relevant proposals at previous
years’ annual meetings, and other feedback received from shareholders.
Engagement and Voting on Say on Pay
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In many instances, we believe that direct discussion with issuers, in particular with the members of the
compensation committee, can be an effective mechanism for building mutual understanding on executive
compensation issues and for communicating any concerns we may have on executive compensation.
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In the event that we determine engagement is not expected to lead to resolution of our concerns about
executive compensation, we may consider voting against members of the compensation committee, consistent
with our preferred approach to hold members of the relevant key committee of the board accountable for
governance concerns. As a result, our Say on Pay vote is likely to correspond with our vote on the directors
who are compensation committee members responsible for making compensation decisions.
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We may determine to vote against the election of compensation committee members and/or Say on Pay proposals
in certain instances, including but not limited to when:
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We identify a misalignment over time between target pay and/or realizable compensation and
company performance as reflected in financial and operational performance and/or shareholder
returns;
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We determine that a company has not persuasively demonstrated the connection between strategy,
long-term shareholder value creation and incentive plan design;
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We determine that compensation is excessive relative to peers without appropriate rationale
or explanation, including the appropriateness of the company’s selected peers;
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We observe an overreliance on discretion or extraordinary pay decisions to reward executives,
without clearly demonstrating how these decisions are aligned with shareholders’ interests;
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We determine that company disclosure is insufficient to undertake our pay analysis; and/or
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We observe a lack of board responsiveness to significant investor concern on executive compensation
issues.
Read the Full Guidelines Here
The Committee will generally vote FOR management proposals on say-on-pay. However, the Committee will generally
consider the proposal on a CASE-BY-CASE basis in situations where: (1) there are excise tax gross-ups, excise tax
indemnification or "make whole" provisions in recent change-in-control or severance agreements, (2) the company's
stock performance is poor relative to peers and its compensation arrangements or pay practices is deemed excessive
relative to peers, (3) the company fails to address compensation issues identified in prior meetings when adequate
opportunity to address has passed, or (4) there appears to be an imbalance in a company's long term incentive
compensation plans between the performance-based and time-based awards for the executive officers.
Read the Full Guidelines Here
Compensation programs are one of the most powerful tools available to the company to attract, retain, and motivate
key employees to optimize operating performance, profitability and sustainable long-term shareowner return. CalPERS
considers long-term to be five or more years for mature companies and at least three years for other companies.
Well-designed compensation programs will be adequately disclosed and align management with the long-term economic
interests of shareowners. CalPERS believes shareowners should have an effective mechanism by which to periodically
promote substantive dialogue, encourage independent thinking by the board, and stimulate healthy debate for the
purpose of holding management accountable for performance through executive compensation programs. However, CalPERS
does not generally believe that it is optimal for shareowners to approve individual contracts at the company specific
level. Implicit in CalPERS U.S. Principles related to executive compensation, is the belief that the philosophy and
practice of executive compensation needs to be more performance-based. Through its efforts to advocate executive
compensation reform, CalPERS emphasizes improved disclosure, the alignment of interests between executive management
and shareowners, and enhanced compensation committee accountability for executive compensation.
With this in mind, CalPERS recommends the following:
Structure and Components of Total Compensation
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Board Designed, Implemented, and Disclosed to Shareowners: To ensure the alignment of interest
with long-term shareowners, executive compensation programs are to be designed, implemented, and disclosed to
shareowners by the board, through an independent compensation committee. Executive compensation programs should
not restrict the company’s ability to attract and retain competent executives.
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Mix of Cash and Equity: Executive compensation should be comprised of a combination of cash
and equity based compensation.
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Shareowner Advisory Vote on Executive Compensation: Companies submit executive compensation
policies to shareowners for non-binding approval on an annual basis.
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Executive Contract Disclosure: Executive contracts should be fully disclosed, with adequate
information to judge the “drivers” of incentive components of compensation packages.
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Targeting Total Compensation Components: Overall target ranges of total compensation and
components therein including base salary, short-term incentive and long-term incentive components should be
disclosed.
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Peer Relative Analysis: Disclosure should include how much of total compensation is based
on peer relative analysis and how much is based on other criteria.
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Executive Compensation Alignment with Business Strategy: Compensation committees should
have a well-articulated philosophy that links compensation to long-term business strategy.
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Sustainability Objectives and Executive Compensation: Executive compensation plans should
be designed to support sustainability performance objectives particularly with regard to risk management,
environmental, health, and safety standards. Sustainability objectives that trigger payouts should be
disclosed.
Incentive Compensation
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Performance Link: A significant portion of executive compensation should be comprised of
“at risk” pay linked to optimizing the company’s operating performance and profitability that results in
sustainable long-term shareowner value creation.
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Types of Incentive Compensation: The types of incentive compensation to be awarded should be disclosed such as the
company’s use of options, restricted stock, performance shares or other types.
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Establishing Performance Metrics: Performance metrics such as total stock return, return
on capital, return on equity and return on assets, should be set before the start of a compensation period
while the previous years’ metrics which triggered incentive payouts should be disclosed.
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Multiple Performance Metrics: Plan design should utilize multiple performance metrics when
linking pay to performance.
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Performance Hurdles: Performance hurdles that align the interests of management with long-term
shareowners should be established with incentive compensation being directly tied to the attainment and/or
out-performance of such hurdles. Provisions by which compensation will not be paid if performance hurdles are
not obtained should be disclosed to shareowners.
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Retesting Incentive Compensation: Provisions for the resetting of performance hurdles in the
event that incentive compensation is retested should be disclosed.
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Clawback Policy: Companies should recapture incentive payments that were made to executives
on the basis of having met or exceeded performance targets during a period of fraudulent activity or a material
negative restatement of financial results for which executives are found personally responsible.
Equity Compensation
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Equity Ownership: Executive equity ownership should be required through the attainment and
continuous ownership of a significant equity investment in the company. Executive stock ownership guidelines
and holding requirements should be disclosed to shareowners on an annual basis. In addition to equity ownership,
a company should make full disclosure of any pledging policies. Further, stock subject to the ownership
requirements should not be pledged or otherwise encumbered.
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Hedging: The use of derivatives or other structures to hedge director or executive stock
ownership undermines the alignment of interest that equity compensation is intended to provide. Companies
should therefore prohibit the activity and provide full disclosure of any hedging policies.
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Equity Grants Linked to Performance: Equity based compensation plans should incorporate
performance based equity grant vesting requirements tied to achieving performance metrics. The issuance
of discounted equity grants or accelerated vesting are not desirable performance based methodologies.
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Unvested Equity Acceleration upon a Change-in-Control: In the event of a merger, acquisition,
or change-in-control, unvested equity should not accelerate but should instead convert into the equity of the
newly formed company.
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Recapturing Dividend Equivalent Payouts: Companies should develop and disclose a policy for
recapturing dividend equivalent payouts on equity that does not vest. In addition, companies should ensure
voting rights are not permitted on unvested equity.
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Equity Grant Vesting Period: Equity grants should vest over a period of at least three years.
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Board Approval of Stock Options: The board’s methodology and corresponding details for approving
stock options for both company directors and employees should be highly transparent and include disclosure of: 1)
quantity, 2) grant date, 3) strike price, and 4) the underlying stock’s market price as of grant date. The approval
and granting of stock options for both directors and employees should preferably occur on a date when all corporate
actions are taken by the board. The board should also require a report from the CEO stating specifically how the
board’s delegated authority to issue stock options to employees was used during the prior year.
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Equity Grant Re-pricing: Equity grant re-pricing without shareowner approval should be prohibited.
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Evergreen or Reload Provisions: “Evergreen” or “Reload” provisions should be prohibited.
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Distribution of Equity Compensation: How equity-based compensation will be distributed
within various levels of the company should be disclosed.
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Equity Dilution and Run Rate Provisions: Provisions for addressing the issue of equity
dilution, the intended life of an equity plan, and the expected yearly run rate of the equity plan should
be disclosed.
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Equity Repurchase Plans: If the company intends to repurchase equity in response to the
issue of dilution, the equity plan should clearly articulate how the repurchase decision is made in relation
to other capital allocation alternatives.
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Shareowner Approval: All equity based compensation plans or material changes to existing
equity based compensation plans should be shareowner approved.
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Cost of Equity Based Compensation: Reasonable ranges which the board will target the total
cost of new or material changes to existing equity based compensation plans should be disclosed. The cost
of new or material changes to existing equity based compensation plans should not exceed that of the
company’s peers unless the company has demonstrated consistent long-term economic out performance on a peer
relative basis.
Read the Full Guidelines Here
CalSTRS believes companies should formulate comprehensive executive compensation policies and obtain an advisory
vote of shareholders regarding the policy on a periodic basis. The executive compensation policy should provide
the overarching guidelines for how the company will structure and implement its executive compensation program.
It should be written in plain English, avoid relying on boilerplate language, and be detailed enough that owners
can understand the company’s executive compensation philosophy, and how the program will be constructed and
implemented going forward. The policy should also provide adequate flexibility for the company to implement its
executive compensation program consistent with the company’s evolving situation, opportunities, and challenges.
CalSTRS believes there are several important advantages to preparing a formal executive compensation policy and
obtaining the shareowners’ advisory vote, including:
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It articulates and reinforces a comprehensive long-term view of the executive compensation program;
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It provides a baseline for evaluating the effectiveness of executive compensation programs over time;
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It provides a comprehensive checklist of topics compensation committees should consider as part of their
oversight role;
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It provides owners with appropriate input with respect to the policies under which companies will implement
and operate executive compensation programs;
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It will greatly assist companies in meeting the spirit as well as the letter of SEC disclosure rules; and
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It will enhance efficiency, provide consistency, and may reduce the instances in which the company and
shareowners are surprised by outcomes related to the compensation program, thereby reducing the negative
reaction in the marketplace to specific events.
CalSTRS provides this Model Executive Compensation Policy Guideline to help communicate to companies shareowners’
minimum expectations for the policy. The Guidelines provide the key elements of an executive compensation policy,
as well as the goals and objectives companies should consider in developing the policies. CalSTRS believes the
policy document should serve as one of a company’s primary communication tools regarding its executive compensation
programs and should encompass all forms of compensation. CalSTRS believes executive compensation policies should
contain the following components, at a minimum: Compensation Committee; total compensation, plan elements and mix;
incentive and bonus compensation; equity compensation; dilution; re-pricing; contractual arrangements; post-employment
benefits; and tax and accounting matters.
Read the Full Guidelines Here
FMR will generally vote for proposals to ratify executive compensation unless such compensation appears misaligned
with shareholder interests or otherwise problematic, taking into account such factors as, among other things, (i) whether
the company has an independent compensation committee; (ii) whether the compensation committee engaged independent
compensation consultants; (iii) whether, in the case of stock awards, the restriction period was less than three years
for non-performance-based awards, and less than one year for performance-based awards; (iv) whether the compensation
committee has lapsed or waived equity vesting restrictions; and (v) whether the company has adopted or extended a Golden
Parachute without shareholder approval.
Read the Full Guidelines Here
Good pay practices should align management’s interests with long-term shareholder value creation. Detailed disclosure of
compensation criteria is preferred; proof that companies follow the criteria should be evident and retroactive performance target
changes without proper disclosure is not viewed favorably. Compensation practices should allow a company to attract and retain
proven talent. Some examples of poor pay practices include: abnormally large bonus payouts without justifiable performance linkage
or proper disclosure, egregious employment contracts, excessive severance and/or change in control provisions, re-pricing or
replacing of underwater stock options/stock appreciation rights without prior shareholder approval, and excessive perquisites.
A company should also have an appropriate balance of short-term vs. long-term metrics and the metrics should be aligned with
business goals and objectives.
Read the Full Guidelines Here
Invesco evaluates executive compensation plans within the context of the company’s performance under the executives’ tenure.
Invesco believes independent compensation committees are best positioned to craft executive-compensation plans that are suitable
for their company-specific circumstances. Invesco views the election of independent compensation committee members as the
appropriate mechanism for shareholders to express their approval or disapproval of a company’s compensation practices. Therefore,
Invesco generally does not support shareholder proposals to limit or eliminate certain forms of executive compensation. In the
interest of reinforcing the notion of a compensation committee’s accountability to shareholders, Invesco generally supports
proposals requesting that companies subject each year’s compensation record to an advisory shareholder vote, or so-called
“say on pay” proposals.
Read the Full Guidelines Here
Generally, review on a case-by-case basis executive pay and practices as well as certain aspects of outside director
compensation. Where the company’s Say on Pay proposal received 60% or less support on its previous Say on Pay proposal,
WITHHOLD votes for the compensation committee and or vote against the current Say on Pay proposal unless the company has
demonstrated active engagement with shareholders to address the issue as well as the specific actions taken to address
the low level of support.
Read the Full Guidelines Here
MFS will analyze advisory votes on executive compensation on a case-by-case basis. MFS will vote against an advisory
vote on executive compensation if MFS determines that the issuer has adopted excessive executive compensation practices
and will vote in favor of an advisory vote on executive compensation if MFS has not determined that the issuer has
adopted excessive executive compensation practices. Examples of excessive executive compensation practices may include,
but are not limited to, a pay-for-performance disconnect, employment contract terms such as guaranteed bonus provisions,
unwarranted pension payouts, backdated stock options, overly generous hiring bonuses for chief executive officers,
unnecessary perquisites, or the potential reimbursement of excise taxes to an executive in regards to a severance package.
In cases where MFS (i) votes against consecutive advisory pay votes, or (ii) determines that a particularly egregious
excessive executive compensation practice has occurred, then MFS may also vote against certain or all board nominees. MFS
may also vote against certain or all board nominees if an advisory pay vote for a U.S. issuer is not on the agenda, or the
company has not implemented the advisory vote frequency supported by a plurality/ majority of shareholders.
Read the Full Guidelines Here
We consider proposals relating to an advisory vote on remuneration on a case-by-case basis. Considerations include
a review of the relationship between executive remuneration and performance based on operating trends and total
shareholder return over multiple performance periods. In addition, we review remuneration structures and potential
poor pay practices, including relative magnitude of pay, discretionary bonus awards, tax gross ups, change-in-control
features, internal pay equity and peer group construction. As long-term investors, we support remuneration policies
that align with long-term shareholder returns.
Read the Full Guidelines Here
Northern Trust generally votes for proposals that call for ratification of the compensation of the named Executive
Officers and the accompanying narrative disclosure of material factors provided to understand the Summary Compensation
Table in the Company's proxy statement where Northern Trust believes that the specific circumstances relating to the
individual company warrant such shareholder involvement. Northern Trust votes on a case by case basis on shareholder
advisory votes concerning the compensation of named executive officers, taking into account whether the current disclosure
of factors required by Item 402 of Regulation S-K is adequate, whether the executive compensation is sufficiently tied to
performance goals, whether performance metrics are adequately disclosed and reasonable and whether the ratio of
discretionary to overall executive compensation is adequately explained in the performance metrics.
Read the Full Guidelines Here
SSGA believes executive compensation plays a critical role in aligning executives interest with shareholder’s, attracting,
retaining and incentivizing key talent, and ensuring positive correlation between the performance achieved by management
and the benefits derived by shareholders. SSGA supports management proposals on executive compensation where there
is a strong relationship between executive pay and performance over a five-year period. SSGA seeks adequate disclosure of
different compensation elements, absolute and relative pay levels, peer selection and benchmarking, the mix of long term
and short term incentives, alignment of pay structures with shareholder interests as well as with corporate strategy and
performance. Further, shareholders should have the opportunity to assess whether pay structures and levels are
aligned with business performance on an annual basis.
Read the Full Guidelines Here
"Say on Pay" votes are determined on a CASE-BY-CASE basis, using our proprietary, quantitative scorecard as an initial
screening mechanism. AGAINST in cases where there is an unacceptable number of problematic pay elements such as:
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poor linkage over the past three to five years between the executives' pay and the company's performance
and profitability;
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the presence of objectionable structural features in the compensation plan, such as supplemental executive
retirement plans, golden parachutes, excessive perquisites, tax gross-up provisions, and automatic benchmarking
of pay in the top half of the peer group; and
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a lack of proportionality in the pay plan relative to the company's size and peer group.
The recommendations of our external proxy advisors will be a secondary factor in our analysis.
Read the Full Guidelines Here
Although we do not prescribe specifics, below we outline the general principles that should guide the establishment
of compensation plans and CD&A disclosures.
General Principles
Executive compensation should be based on the following principles:
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Compensation should be objectively linked to appropriate company-specific metrics that drive long-term
sustainable value and reflect operational parameters that are affected by the decisions of the executives
being compensated.
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Compensation plans should be based on a performance measurement cycle that is consistent with the business
cycle of the corporation.
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Compensation should include a mixture of cash and equity that is appropriate based on the company’s
compensate on philosophy without incentivizing excessive risk.
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Compensation should consider the overall performance of the company as well as be based on each executive’s
responsibilities and criteria that are actually within each executive’s control or influence.
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Compensation should be reasonable by prevailing industry standards, appropriate to the company’s size and
complexity, and fair relative to pay practices throughout the company.
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The board should not unduly rely on comparative industry data and other outside surveys to make compensations
determinations; especially if such information is inconsistent with the company’s compensation philosophy.
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Compensation Committees should work only with consultants who are independent of management.
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Companies should use peer groups that are consistent with their industry, size, scope and
market for executive talent.
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Executive performance evaluations should include a balance between formulaic and subjective
analysis without being overly reliant on either.
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If employment contracts are in place for named executive officers, such contracts should balance
the need to attract and retain the services of the executive with the obligation to avoid exposing
the company to liability, unintended costs and excessive transfers of corporate treasury; especially
in the event of terminations for misconduct, gross mismanagement or other reasons constituting a “for cause”
termination.
Principles Specific to Equity-Based Compensation Plans
While equity-based compensation can offer great incentives to management, it can also have great impact on
shareholder value. The need for directors to monitor and control the use of equity in executive compensation
has increased in recent years. It is the board of directors that is responsible for oversight of the company’s
equity compensation programs and for the adequacy of their disclosure.
In general, equity-based compensation should be based upon the following principles:
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The use of equity in compensation programs should be determined by the board’s equity policy. Dilution of
shareholder equity should be carefully considered and managed, not simply an unintended consequence.
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The use of equity in compensation programs should be determined by the board’s equity policy. Dilution of
shareholder equity should be carefully considered and managed, not simply an unintended consequence.
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Equity-based plans should take a balanced approach to the types of equity used. Equity that is not linked
to performance metrics runs the risk of rewarding or punishing executives for market movements beyond their
control.
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Equity-based plans should be judicious in the use of stock options. When used inappropriately, option
grants can provide incentives for management to focus on the company’s short-term stock price rather than
long-term performance.
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Equity-based plans should specifically prohibit “mega grants,” defined as grants to executives of stock
options whose value at the time of the grant exceeds a reasonable multiple of the recipient’s total cash
compensation.
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Equity-based plans should establish minimum vesting requirements and avoid accelerated vesting.
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Equity-based plans should specifically prohibit any direct or indirect change to the strike price or value
of options without the approval of shareholders.
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Companies should support requirements for stock obtained through exercise of options to be held by
executives for substantial periods of time, apart from partial sales permitted to meet tax liabilities
caused by such exercise. Companies should establish holding periods commensurate with pay level and seniority.
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Companies should require and specify minimum stock ownership requirements for directors and company
executives to ensure their interests are aligned with shareholders.
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Backdating of option grants should be prohibited. Issuance of stock or stock options timed to take
advantage of nonpublic information with short-term implications for the stock price should also be prohibited.
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Equity plans should prohibit recipients from hedging or otherwise reducing their exposure to changes in
the company’s stock price as this can result in their interests no longer being aligned with shareholders.
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Generally, dividends (or equivalents) associated with unvested shares should be accrued, payable after the
shares have vested and such amounts should be disclosed. However, if dividends are paid on unvested shares
then such payment amounts should be disclosed along with a reasonable rationale.
Compensation Discussion and Analysis
A company’s compensation disclosure should be based on the following principles:
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The disclosure should be clear, concise and generally able to be understood by any reasonably informed shareholder.
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The disclosure should explain how the program seeks to identify and reward the value added by management.
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The disclosure should identify how compensation is linked to long-term sustainable value creation.
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Performance metrics, weights and targets should be disclosed, including why they are appropriate given
the company’s business objectives and how they drive long-term sustainable value.
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When possible, charts should be used in conjunction with narratives to enhance comprehension.
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When compensation decisions are inconsistent with generally accepted practices, care should be given
to provide shareholders with a reasonable explanation as to why such actions were deemed appropriate.
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Significant changes to the compensation program from year to year and accompanying rationale should be
prominently identified.
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Companies should explain their rationale for the peer group selected, including reasons for (a) changes
to the group from year to year and (b) any differences in the peer group of companies used for strategic
and business purposes and the peer group used for compensation decisions.
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Non-GAAP financial performance measures should be presented alongside their GAAP counterparts with an
explanation of why each adjustment was made.
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Tax gross-ups, if not generally available to all employees, should be accompanied by disclosure explaining
why they are reasonable and necessary.
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If employment contracts are in place for named executive officers, such contracts should be disclosed in
detail with an explanation of how such contracts are in the best interest of the company and its shareholders.
Read the Full Guidelines Here
In addition to proposals on specific equity or bonus plans, the funds are required to cast advisory votes approving
many companies’ overall executive compensation plans (so-called Say on Pay votes). In evaluating these proposals, we
consider a number of factors, including the amount of compensation that is at risk, the amount of equity-based
compensation that is linked to the company’s performance, and the level of compensation as compared to industry peers.
The funds will generally support pay programs that demonstrate effective linkage between pay and performance over time
and that provide compensation opportunities that are competitive relative to industry peers. On the other hand, pay
programs in which significant compensation is guaranteed or insufficiently linked to performance will be less likely
to earn our support.
Read the Full Guidelines Here
For more information on shareholder engagement, visit the resources below.
The Conference Board Task Force
SDX Protocol