Executive compensation

Executive pay: dollars and sense

Executive compensation remains a hot-button issue. In 2012, average pay for CEOs of the biggest 350 companies was $14.1 million, up from $12.5 million in 2011.1 Compensation consultants were at least moderately influential over the board’s decisions on executive pay, the most among eight groups of potential influencers, according to 83% of directors.

Corporate boards continue to take say on pay seriously, three years after the rule was implemented. In fact, 70% of directors say their company took some action in response to their company’s most recent say on pay voting results, up from 64% a year earlier. What did they do?

  • Nearly half (47%) say the company enhanced proxy statement compensation disclosures to make them easier to understand.
  • More than one-third (36%) made pay more performance-based to better align with shareholder value.
  • And 27% increased the use of compensation consultants or hired new ones.

Only 3% said their company actually reduced overall compensation levels. Perhaps reductions weren’t necessary: The vast majority of companies received shareholders support of over 90%, and nine of ten companies received at least 70% support.2 Nearly half of directors (47%) say that a shareholder vote of less than 70% approval would prompt them to consider modifying compensation structures.

1 Economic Policy Institute, “CEO Pay in 2012 Was Extraordinarily High Relative to Typical Workers and Other High Earners,” June 26, 2013.

2 Broadridge & PwC, ProxyPulse, Second Edition 2013.

Whose voice count when it comes to compensation?
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