Given the dramatic level of shareholder approval for most compensation programs during the 2011 proxy season, many directors may be inclined to view the historic Shareholder Say on Pay and frequency of Say on Pay votes as over and done. They would be mistaken.
In Winston & Strawn’s excellent eLunch (webinar) program last week, “Preparing for the 2012 Proxy Season: Governance and Executive Compensation Strategies,” Michael Melbinger, Christine Edwards, Oscar David, Erin Stone and Erik Lundgren reviewed the past season and advised that this is no time for complacency. (The presentation is still available online.) Boards should be reviewing what they learned from their shareholders and preparing for the upcoming season, which will feature more Dodd-Frank requirements in the CD&A and other disclosures that link pay to performance. “Prepare early. Think about it now. Tell your story,” Melbinger told the audience.
The SEC wanted Say on Pay to cause boards to interact with shareholders. That’s what happened, particularly for companies with contentious issues. Those that prepared executive summaries, used charts and plain English to explain their compensation plans and even those who filed supplemental materials were largely successful.
The curtain has been lifted. Shareholders have greater expectations for communication with the board, more involvement in governance. Smart boards will anticipate shareholder issues and minimize contentious issues. Don’t
wait for 2012 proxy season. Begin now.