While agreeing the U.S. executive pay model has improved over the past five years, corporate directors and institutional investors remain sharply divided over several key aspects, including the impact of say-on-pay voting, according to a new survey from by Towers Watson and Alliance Advisors, a proxy solicitation firm. One area of agreement: neither group thinks the Dodd-Frank Act’s CEO pay-ratio disclosure rule, as proposed by the Securities and Exchange Commission, will do much to improve the executive pay landscape.
Under the SEC’s rule proposal, companies must produce a median compensation figure for all workers, domestic and overseas. This calculation will then be revealed as a ratio to CEO pay. Many companies have voiced concerns that this calculation would be difficult, expensive, and not very meaningful. Just 11 percent of directors who responded to the survey think the rule would help make executive compensation more effective. Surprisingly, because the rule has been touted as a benefit for them, only a quarter of the participating investors felt it would be effective or meaningful.
