The NASPP Blog

To the tune of “What Does the Fox Say“:

CEO says “More!”

Accountant says “Expense!”

Lawyer says “No!”

And stock plan admin says “Sigh…”

But there’s one sound
That no one knows
What do the investors say?

Actually, What Do the Investors Say?

As we are heading into next year’s proxy season (and now that you have that horrible song in your head), I thought it might be a good time to look at what the investor hot buttons are likely to be with respect to executive and stock compensation.  I listened to the recording of the session “Say-on-Pay Shareholder Engagement: The Investors Speak” at the 10th Annual Executive Compensation Conference and found a few recurring themes.  The panelists were Aeisha Mastagni of CalSTRS, Karla Bos of ING, and Donna Anderson of T.Rowe Price; the panel was moderated by Pat McGurn of ISS.

• The investor panelists take a rather dim view of retention grants. They also don’t like programs that grant the same value of stock to execs every year (so that when the stock price drops, execs get more shares).
• They weren’t keen on TSR or EPS as performance metrics.  They felt EPS is too easily manipulated and too short-term and they would rather see goals that drive TSR, not TSR goals themselves.  Which is interesting because TSR and EPS are the two most popular performance metrics in our 2013 Domestic Stock Plan Design survey (co-sponsored by Deloitte).
• They didn’t have a lot of use for supplemental proxy filings but opinions were mixed as to the value of realizable pay disclosures.
• For next year’s proxy season, the main areas of focus that they generally agreed on were performance awards and metrics, CIC provisions, and employment contracts (e.g., retention bonuses). If you don’t have a good story to tell on those topics, you might want to get cracking.
• They all thought the CEO pay-ratio disclosure was of dubious value. 

They all also insisted that they were very open-minded about stock and executive compensation and that they don’t blindly follow ISS (it’s just that they happen to agree with ISS on most issues).

Another key takeaway for me was that all of the investors explained that they focus on “the outliers” when reviewing proxy statements.  They have lots of proxies to review and can’t do an in-depth analysis of each one. But if something about your executive pay grabs their attention because it is outside the norm, they will look closer at your company.  So make like a junior high student and try to blend in.

Don’t believe me? For $60, you can listen to the session yourself!

– Barbara