Shareholder Engagement on Executive Compensation – A Primer on the Why, When, Who and How?

As the 2015 proxy season enters the final stretch and shareholder votes are tabulated, calendar year public companies will be analyzing their Say-on-Pay outcome, lessons learned and next steps. While solid design and comprehensive proxy disclosure remain the most effective way to mitigate the need to defend a company’s compensation policies and practices, direct shareholder engagement can help to clarify key issues and establish credibility with investors. Five years ago, the idea of board members and senior executives actively engaging in direct discussion with shareholders about executive compensation was almost inconceivable. Today, it is a rapidly growing trend that we expect to accelerate as shareholder interest in executive compensation policy and alignment between pay and performance continues to grow. The purpose of this article is to provide an overview of the shareholder engagement process with respect to executive compensation and related governance issues.