Lifshey, who is managing director at the New York office of Pearl Meyer & Partners, offered her executive pay tips at a recent webinar sponsored by BLR® and HR Hero®.
Overview of New Glass Lewis Protocols
Shareholder advisory group Glass Lewis has also made changes in its evaluation process.
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Effective Date |
Effective for annual meetings taking place on or after July 1, 2012 |
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Consistency with Prior |
Continue to evaluate a company’s pay-for-performance alignment in two steps: a quantitative review followed by a qualitative review:
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Key Revisions to the Quantitative Pay-For-Performance Model |
Peer Group Selection: Selection based on an algorithm that considers relationships within peer networks (self-reported peers of all filers within GL’s coverage universe) rather than focusing primarily on industry groupings and size characteristics |
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Actions to Take |
GL should not drive pay program actions; any potential actions should be considered in the context of what makes sense for the business and all stakeholders. |
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Key Considerations for Comp Managers
In planning executive compensation, says Lifshey, keep the following in mind:
1. Say on Pay Has Teeth
Compensation committees want to see a high level of shareholder support for the company’s executive compensation program.
2. Shareholder Support May Erode
Strong shareholder support in the past may not continue in the future if a company has a number of policies/plans that are considered poor pay practices, especially if pointed out by GL or ISS.
3. Committees Want a Positive ISS Review
Compensation committees are generally concerned with securing a reasonably positive review from ISS and/or Glass Lewis.
4. Take Time to Understand ISS & GL
To the extent possible, understand pending ISS and Glass Lewis policies, and take this information into account when establishing executive compensation plans for the upcoming year.
5. Go to the Shareholders
Take your story directly to shareholders if your company fails Say-on-Pay or receives a particularly negative write-up from ISS and/or Glass Lewis.
6. Take Advantage of Exemptions
Take advantage of all of your exceptions/exemptions if you are an Emerging Growth Company (EGC) or Smaller Reporting Company (SRC). EGCs and SRCs may be able to avoid certain aspects of reporting and voting, so if you fall into one of these groups, investigate your status and potential benefits, Lifshey recommends.
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