The Towers Watson analysis also found that many companies are making changes to the Compensation Discussion and Analysis (CD&A) sections of their proxies. One-half of the companies Towers Watson studied (50%) added an executive summary to their 2011 proxy statements, and as a result, nearly two-thirds (64%) of companies now include an executive summary. Additionally, 85% disclosed specific performance goals for the 2010 plan year, while more than three-fourths (78%) showed actual performance attained for 2010 to support the annual bonus paid.
“With investors and other stakeholders seeking more clarity in CD&As, it’s no surprise that many companies are taking steps to enhance them,” said Friske. “Companies want to improve their shareholder communication of the linkage between their compensation philosophies and executive pay practices, and many have succeeded in developing documents that allow them to communicate in a simple and straightforward manner. This has been an integral part of the planning process for say-on-pay votes for most companies.”
Strong shareholder support for say–on–pay
The analysis also found that companies that have disclosed say-on-pay voting results reported average support of 90% of the votes cast, and three-fourths (75%) of these proposals have won more than 90% support. Only four companies have failed to win majority support for their say-on-pay proposals to date. Additionally, more than three-fourths (76%) of companies have seen majority shareholder support for annual say-on-pay votes.
Only one-third (33%) of companies recommending triennial votes received majority support.? ?“Based on our analysis, it appears that most companies are getting it right in terms of their executive pay practices, although many continue to fine-tune their approaches,” Friske said. “In the say-on-pay environment, shareholders and other constituents are watching closely. Companies are well aware that circumstances, perspectives and priorities can change quickly, and there’s no room for complacency.”
Other findings from the Towers Watson proxy analysis include:
• Almost three in 10 (29%) companies made one-time and/or retention grants in 2010, compared to 16% in 2009. The vast majority of grants in both years were awards that vest solely on the basis of time.
• One-fourth (25%) of companies changed the performance measures used for 2010 annual bonuses, while slightly fewer (24%) changed performance goals for long-term incentive awards.
About the Analysis
The Towers Watson analysis is based on a review of 2011 proxies filed by 170 Fortune 1000 companies by late March.