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Shareholder Scrutiny of Executive Remuneration to Continue

06/09/2012 - FTI Consulting, Strategic Communications

Publicly held companies will be subject to increased investor pressure on executive remuneration through and beyond the “shareholder spring,” according to the latest research from FTI Consulting. Institutional investors based in Europe, North America, Asia and Latin America indicated that executive compensation is under increasing scrutiny.

This reinforces the findings of the FTI Consulting study of corporate governance among North American investors in January, 2012. Eighty-eight percent of the more than 170 global institutional investors polled say that executive compensation is important to their investment decision, with 62% wanting an annual say-on-pay vote. The FTI Consulting research also found that Board Directors no longer can rely solely on written communications with shareholders. Ninety-two percent of the investors surveyed say that companies need to engage in corporate governance road shows with major shareholders, with over half (58%) expecting it once a year.

While deteriorating financial performance has undoubtedly led to increased shareholder scrutiny of corporate governance practices and executive remuneration in particular, we do not see this increased interest as a passing trend that will simply recede as market conditions improve. The findings of the survey support the view that investor focus on corporate governance is here to stay.

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