In Equilar’s recent issue of C-Suite Magazine, Dan Martec, Editor-in-Chief, discusses the future of shareholder engagement and the impact on companies. In his article, Be Prepared to Perform, Martec explains that while typically 75% of companies pass their Say-on-Pay vote, shareholders will continue to demand more transparency. And because there is a concern about the shift in balance of power, identifying and addressing shareholder concerns is critical.
In the article, Martec suggests that for the second half of 2016 companies need to be prepared to:
Show How Pay and Performance Align – With the possibility of the proposed rules from Dodd-Frank regarding pay for performance disclosures being followed through on this year, companies need to be more prepared now than ever to not only divulge pay for performance practices, but be ready to explain and defend their pay strategies.
Discuss Pay Equality – Although the CEO to employee pay ratio rule isn’t slated to go into effect until 2018, it is not too early to start thinking about how this potential portrait of income inequality will impact shareholder behavior.
Assess your Board – Between board turnover, calls for board diversity, and the imminent retirement of a significant number of board members (according to an Equilar study cited in the article, 45% of all S&P 500 directors are over the age of 61, and another 15% are over the age of 72), boards need to plan ahead of time to secure valuable candidates.
In a spin on the classic line from the popular movie Jerry McGuire, shareholders aren’t asking companies to, “show me the money!”, but rather, “show me how you got the money!”
Has your company thought about how you will proactively manage these key elements?