Partner Melissa Burek, and Principal Michael Bonner wrote a report on long-term incentive plans that was published by the Harvard Law School Forum on Corporate Governance. The report analyzed 120 companies with a median revenue of $36 billion. CAP looked at the long-term incentive performance cycles that ended from 2015 to 2020 for these companies. In the report they unveil their main findings from this analysis.
The Harvard Law School Forum on Corporate Governance recently published findings from the popular CAP Early Filers report authored by Principals Lauren Peek and Joanna Czyzewski. In this report, CAP reviewed Chief Executive Officer (CEO) pay levels among 50 companies with fiscal years ending between August and October 2021 (defined as the Early Filers). CAP found that 2021 was definitely a “bounce back” year where median CEO pay was increased by 19%. This large increase in CEO pay is mostly due to a dramatic year over year increase (+73%) in the annual incentive payout since base salaries were flat at median and the grant-date value of long-term incentive increased 11%.
A CAP Alert authored by Partner Dan Laddin and Senior Analyst Louisa Heywood was published by the Harvard Law School Forum on Corporate Governance. The alert detailed recent action by the SEC to re-open the comment period for pay vs. performance proposed rules. The proposed changes include requiring disclosure of three new financial performance measures in addition to TSR and requiring companies to provide a list of the five most important performance measures used to determine compensation actually paid to the executive. In the memorandum, CAP supports the objective of enhanced transparency.
An article written by Principal Shaun Bisman and Associate Jared Sorhaindo was recently published by Harvard Law School’s forum on Corporate Governance. The article produced by the two followed ISS’ recently published policy updates for 2022. The updates will go into effect for annual meetings held on or after February 1, 2022 (and, in some instances, February 1, 2023). Their memorandum, originally posted on the CAP website, discusses key updates to ISS’ compensation and Environmental, Social and Governance (ESG) voting policies. Some highlights to their updated guidelines include a changed burn rate calculation, referred to as the Value-Adjusted Burn Rate and diversity-related changes, including a focus on board gender and racial/ethnic diversity. ISS already recommends a vote against where there are no women on the board and will recommend a vote against if the board has no apparently racially or ethnically diverse members.
Principal Shaun Bisman and Analyst Han Wen Zhang discuss Glass Lewis’ recently released 2022 policy guidelines. The new amendments address compensation, board diversity, and environmental and social areas. The key changes for 2022 focus on diversity and SPAC governance. This post discusses key compensation and Environmental, Social and Governance (ESG) updates.
Principal Shaun Bisman and Analyst Han Wen Zhang discuss ISS’ annual policy survey results. The global benchmark policy survey covers a wide array of issues including executive compensation, board meeting practices, and governance provisions. Key findings included that most respondents view the inclusion of ESG metrics as an appropriate way to incentivize executives and that for the 2021 proxy season mid-cycle changes to long-term incentive awards were viewed as a problematic response to the pandemic by ISS. Survey responses indicate investors favor more extensive disclosures on ESG issues and measuring compensation against long-term performance.
A CAP report was referenced when discussing director pay level trends based on the 2021 proxy disclosures. The report was produced by Partner Dan Laddin, Partner Matt Vnuk, and Associate Whitney Cook. Key takeaways include the median total board compensation remaining flat versus the previous year along with the fewest increases to board cash and/or equity retainers of any year during the last decade, in reaction to the COVID-19 pandemic. Looking ahead, they predict many companies to increase director pay levels and return to historic norms.