Addressing Key Shareholder Issues in Corporate Governance and Compensation

In today’s dynamic corporate landscape, shareholders are becoming increasingly vocal about issues ranging from executive compensation to board governance. As companies navigate these challenges, it’s essential to address shareholder concerns proactively. Here are several pressing topics gaining attention:

1. Compensation Transparency and Accountability

Shareholders are more attuned to executive compensation, especially with the growing importance of fairness and performance alignment. Head of HR and Total Reward, including executive compensation, are now integral to shareholder dialogues. Companies are expected to offer clear structures that justify compensation in relation to company performance.

2. Clawback Provisions: More than Just Improper Payments

Clawbacks have always been a mechanism to recover funds from improper bonuses, but shareholders are now pushing for broader application. Reputational damage, not just financial missteps, could now trigger clawback clauses. It’s a move that politicizes compensation but aligns it with a company’s brand and ethical stance.

3. Majority Voting Standards for Board Members

The introduction of majority voting standards is a hot topic. Shareholders argue for its implementation to ensure that directors truly represent the majority’s interest. This also ties into the ongoing conversation about board succession and the need for clear and accountable processes.

4. CEO and Chairman Separation: The Debate Resurfaces

The debate around the separation of the CEO and Chairman roles continues to resurface. Many shareholders believe that separating the two positions can provide better checks and balances at the top, ensuring no concentration of power. Companies need to weigh the pros and cons while addressing shareholder concerns.

5. Overboarding: How Many Boards is Too Many?

The issue of “overboarding” — where directors serve on too many boards — is becoming a point of contention. Best practices suggest a cap, with many advocating for no more than four boards per director. Ensuring directors can fully dedicate themselves to their responsibilities is a hygiene check that every company should consider.

6. Non-GAAP Financial Measures in Pay Committees

Shareholders are also scrutinizing the use of non-GAAP financial measures in executive pay calculations. While these measures can provide a more nuanced view of performance, they can also be manipulated, making transparency in compensation structures essential.

7. Addressing Cyber Risk: What’s the Board Doing?

As cyber threats grow, shareholders are asking, “What is the board doing to mitigate cyber risk?” Companies must ensure that their boards are equipped to handle these challenges with robust cyber governance strategies and risk management frameworks.

8. Say-on-Pay: Less Than an A+? What Comes Next?

For companies that have garnered less than an A+ on their say-on-pay vote, addressing the underlying concerns is critical. Shareholders want to see concrete actions, including executive compensation reviews and potentially new structures that align better with long-term performance.

9. Finding Board Members Who Hold the Center

Finally, in a rapidly changing world, it’s crucial to find board members who can “hold the center” and not sway with every trend. Shareholders value consistency and resilience, especially in turbulent times. Companies should look for directors who can navigate change while staying true to the company’s core mission.