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Here is something that I blogged recently on CompensationStandards.com’s “The Advisor’s Blog“: What should be the frequency of our say-on-pay vote? This is a question being mulled at most companies these days. Perhaps we are starting to get an answer when ISS issued its draft policy updates last week for comment, which included this statement, an excerpt of which is below:

The MSOP is at its essence a communication vehicle, and communication is most useful when it is received in a consistent manner. ISS supports an annual MSOP for many of the same reasons it supports annual director elections rather than a classified board structure: because it provides the highest level of accountability and direct communication by enabling the MSOP vote to correspond to the information presented in the accompanying proxy statement for the annual shareholders’ meeting. Having MSOP votes only every two or three years, potentially covering all actions occurring between the votes, would make it difficult to create meaningful and coherent communication that the votes are intended to provide. Under triennial elections companies, for example, a company would not know whether the shareholder vote references the compensation year being reported or a previous year, making it more difficult to understand the implications of the vote.

Recently, I caught up with a proxy solicitor – Dave Bobker of Phoenix Advisory Partners – to get his analysis of what companies should be considering regarding the frequency of their say-on-pay vote in this podcast, in which Dave addresses:

– What frequency do you think most companies will pick? Least?
– What frequency do you see most investors asking for?
– What would you recommend?
– What factors should companies consider when picking a frequency?

Nugget #2: Board Evaluations – Consider Splitting “Questionnaire” into Two Components (One Oral and One in Writing)

A few months ago, I started dribbling out some of the gems that Alan Dye and I shared a number of years ago during a series of “50 Nuggets in 50 Minutes” webcasts. Here is #2:

Board Evaluations – Consider splitting “questionnaire” into two components: one oral and one in writing – A number of companies split the format of their board evaluations. They use a written questionnaire for administrative issues, such as whether the length of meetings is appropriate and whether materials are sent out timely. The more sensitive and substantive questions are asked in an oral interview (“substantive” questions are those that directly relate to the company’s recent performance issues). This can allow for more candid and valuable feedback as some directors might balk if asked to reduce their concerns to writing due to perceived liability concerns.

One member notes that since they began board self-evaluation, they have used the bifurcated model of survey and interview – the survey helps identify areas to explore in the interviews and the interviews have provided the most value to the board.

We have sample board evaluations – and sample board committee evaluations – posted in our “Board Evaluations” Practice Area.

The Latest Trends in Dow 30 Governance Disclosure

A few weeks ago, Davis Polk teamed with The Conference Board and issued this press release about disclosure trends of the Dow 30 over the past year. The findings included:

– Risk oversight models vary, but boards tend to directly review strategic risk issues.
– Non-financial companies typically report having a dedicated Chief Risk Officer.
– The CEO/chairman combination remains the prevalent leadership structure in the Dow 30.
– Specific industry expertise is cited as critical in director selection, and all companies say they consider diversity when identifying director nominees.
– Companies recognize a correlation between top-executive compensation and risk behavior, using an array of measures to mitigate such risk including clawbacks and stock-holding guidelines.
– A number of non-financial companies retain compensation consultants through their governance, rather than compensation, committees.
– Compensation consulting fees can be small relative to other disclosed fees paid to the same consultants for, e.g., actuarial or HR services.

– Broc Romanek