Pay-for-Performance alignment will continue to be the paramount concern of compensation committees designing executive pay packages and of shareholders who are asked to vote on them.
If you have had occasion to read the Compensation Discussion & Analysis section of a proxy statement recently, you likely came across a statement quite similar to this one:
In today's Say-on-Pay environment, it is critical for compensation committees to establish a solid corporate governance foundation for designing, implementing and administering executive compensation programs. Ultimately, however, a committee's success will not be assessed by this foundation, but by the soundness of compensation programs built upon it. This structural integrity is measured by outcomes: the degree of alignment between total realizable executive pay* and corporate financial and shareholder returns on the one hand and the motivation and retention of the executive team on the other.
The 2011 proxy season was marked by considerable interest in CEO pay due to the heightened scrutiny of executive compensation and Say-on-Pay (SOP) advisory votes. As has been the practice in recent years, major media sources and compensation advisors have released studies of CEO pay in 2010 based on analyses of proxy statements of prominent Fortune 500 companies. As these studies’ data and methodologies vary, their findings tend to be inconsistent. Given the stock market turbulence in recent weeks, and in consideration of the highly critical environment regarding executive pay in particular, we believe that such studies can draw strong reactions as certain media organizations use findings to emphasize their favorite themes.
