“We were surprised that many companies that conducted pay-for-performance analyses chose not to disclose the findings to their shareholders, particularly given that the companies that did so found their approach helped boost shareholder support,” Goldstein said. “This finding reinforces our belief that conducting and disclosing a thoughtful pay-for-performance analysis is a best practice that companies should adopt regardless of whether the SEC requires such disclosure for upcoming proxies.”When asked why they decided not to disclose the results of their pay-for-performance analyses to shareholders in 2012, companies offered various reasons. Nearly four in 10 (39%) said they were waiting for SEC disclosure rules to be issued, while roughly three in 10 were concerned about setting a precedent that would likely require the disclosure of a similar analysis in the future or said the analysis did not yield incremental valuable information to shareholders. Other findings from the Towers Watson survey include:
- Among the companies that conducted a pay-for-performance analysis, 81% compared their performance to a company-defined peer group.
- More than half (52%) of companies conducting analyses continue to rely on the pay required to be disclosed in the Summary Compensation Table when assessing pay for performance. While this may align with how proxy advisors have historically considered pay, there’s growing interest in other measures of pay outcomes, such as earned pay and “realizable pay,” that take into account stock plan payments the Summary Compensation Table ignores.
- In terms of measuring performance, 73% of those conducting analyses used total shareholder return, but most also considered other measures that reflect income statement and balance sheet results.
- Only about half of the survey respondents engaged with shareholders on pay-for-performance issues in 2012, but nearly one-quarter (23%) plan to engage more actively in 2013.
About the AnalysisThe Towers Watson survey was conducted in September 2012 and is based on responses from executive compensation executives and professionals at 253 large and midsize U.S. publicly traded companies. About Towers Watson Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.