In December of 2012, The Conference Board, along with the Center on Executive Compensation and the Society of Corporate Secretaries and Governance Professionals, convened a group of experts in compensation and corporate governance to create a conceptual framework to encourage greater consistency in the disclosure of supplemental measures of pay. The framework seeks to enhance proxy disclosures by companies above and beyond the current summary compensation table to better enable investors to assess the linkages between:
- pay actually received and performance metrics (typically shown through a realized pay disclosure) and
- pay and total shareholder return (typically shown through a realizable pay disclosure)
and thereby facilitate more meaningful discussions with companies. The group also believes that promoting a consistent approach to the most commonly used measures of pay may be helpful to the SEC as it works to develop regulations implementing Section 953(a) of the Dodd-Frank Act, which requires disclosure of the relationship between pay actually received and financial performance.
The working group believes that it is important to have a consistent, principles-based definition of pay with supplemental pre-established variations that could be used by companies depending on their circumstances (e.g., in the case of an acquisition or merger, recruiting a new CEO, a corporate turnaround or operating under a reorganization plan) to append the disclosures already included in the annual proxy statement. The group does not advocate a one-size-fits-all approach to telling the pay for performance story through use of an supplemental pay disclosure. However, there is agreement that the disclosure of realizable pay should be consistent across companies using realizable pay, and the disclosure of realized pay should be consistent across companies using realized pay. By creating disclosures with comparable meanings across companies, investors will be better able to understand and compare the disclosures.
The Working Group is currently holding roundtables and requesting input from investors, issuers, advisors, and other stakeholders on the draft recommendations. If you would like to provide comments on the draft white paper, please visit the comments page.
The working group will be accepting comments through September 15, 2013, with the intent of issuing a final paper in November of 2013.
To learn more about the working group, please click on the links below.