Research Finds Executive Compensation to Be 2012’s Hottest Corporate Governance Topic
Boards That Failed to Address Opposition to Compensation Are Most Vulnerable
West Palm Beach, Fla., April 16, 2012 — Shareholders increasingly want to hold management teams and boards of directors accountable for corporate performance and plan to use their proxy votes as a referendum on leadership and business performance, according to the second annual Corporate Governance Investor Survey from FTI Consulting, the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value. Continuing a trend that began with the advent of widespread say-on-pay voting in the 2011 proxy season, the survey of institutional investors outlines the growing desire for shareholders to have a greater say over corporate governance issues, as well as the tools at their disposal.
Shareholder voice growing louder in the boardroom
As executive compensation and corporate practices continue to make headlines, investors are increasingly looking at the upcoming proxy season as an opportunity to express their approval or disapproval of executive leadership. Several of the key findings from the survey underscore the evolving corporate-shareholder relationship:
- Eighty-one percent of investors believe that say-on-pay is very or critically important in 2012;
- More than eight in 10 investors say they would withhold votes for or would vote against directors of a company that did not adequately respond to shareholder dissatisfaction expressed in a prior year’s say-on-pay vote; and
- Nearly all (94 percent) respondents indicate that director independence is very or critically important, and 85 percent consider it very or critically important that companies have a policy for the re-election of directors.
“Historically, shareholder involvement into boardroom affairs has been reserved for activist investors. But increasingly, we are seeing that the investment community at large wants to have the levers to hold executive leadership accountable for performance and corporate practices,” said Elizabeth Saunders, Americas Chairman of the Strategic Communications practice at FTI Consulting. “Say-on-pay certainly has been a focal issue for investors, and, one year removed from the inaugural vote for many companies in 2011, we are going to see how companies ultimately are held accountable to shareholder opposition. Additionally, we’re seeing investors looking beyond financial statements in their assessment of current and potential investments. Companies that voluntarily adopt proxy access policies are considered better investment opportunities, and mainstream investors are increasingly looking for more transparency related to corporate lobbying, political spending and issues advocacy.”
The study’s findings illustrate the need for a strategic approach to meeting the myriad and growing needs of the investor community around corporate governance. Companies with disconnects between pay and performance that have not adequately addressed the gap with their shareholders may find themselves underprepared for the wave of opposition.
About the FTI Consulting Corporate Governance Investor Survey
For more information, methodology and access to the complete findings and white paper, please visit The Corporate Governance Investor Survey.
Survey results were collected from 143 investors (analysts and portfolio managers) in the United States and Canada from 134 different firms. The study was conducted online during January 2012.
About the Strategic Communications Practice of FTI Consulting
The Strategic Communications practice of FTI Consulting is one of the world’s most highly regarded communications consultancies. With more than 20 years of experience advising management teams in critical situations, the Strategic Communications practice supports clients in protecting and enhancing their reputation in the capital markets, society and the political environment. Services of the Strategic Communications practice are financial communications, corporate communications and public affairs, with specialty offerings that include strategy consulting, research, creative engagement, crisis and issues management, and change communications. The Strategic Communications practice of FTI Consulting is an established market leader in M&A communications and has been for many years.
About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 3,800 employees located in 24 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management, strategic communications and restructuring. The company generated $1.56 billion in revenues during fiscal year 2011. More information can be found at www.fticonsulting.com.