Views on improving the integrity of global capital markets
17 November 2015

Expert Panel: Executive Pay Disclosure in the “Say on Pay” Era

Tis the season … for compensation committees to draft the Compensation Discussion and Analysis (CD&A) section of next year’s proxy statement.

Most annual general meetings (AGMs) at US corporations are held in April and May, so investor relations professionals, corporate secretaries, and board compensation committees are now hard at work crafting the CD&A sections of next year’s corporate proxy that typically goes to shareowners a few months prior to the AGM.

Because the CD&A is a company’s primary engagement tool with investors, it must tell a company’s compensation story in a concise manner that investors will understand. The CD&A is also used to comply with US SEC requirements, but we feel that the CD&A is first, and foremost, a communications document — and the primary channel for investors to get information on a company’s compensation practices.

Earlier this year, CFA Institute released the second edition of our Compensation Discussion and Analysis (CD&A) Template to help issuers craft a CD&A that serves both issuer and investor needs.

The CD&A is often the main document investors use to understand a company’s pay practices before that investor decides how to cast his or her ballot on a company’s “say-on-pay” vote. It is therefore imperative that a company, and its board’s compensation committee, tell the executive pay story in a clear and succinct manner so that investors can make informed decisions.

The CD&A Template can help improve investor understanding of a company’s pay practices, serve as a global model for improved investor communications around compensation issues, and elevate compensation disclosure beyond an exercise in legal compliance.

To promote better CD&A communication, CFA Institute will hold an online forum over the course of an entire business day on “Executive Pay Disclosure in the “Say on Pay” Era” Monday, 7 December. We are lucky to have a distinguished panel — including experts responsible for writing and reviewing corporate CD&As — discuss the current state of the CD&A in the US and highlight best practices.

If you have a question for me or for the panel, please post it in the comments section below. This article will serve as your anchor for the forum as the discussion will unfold below the text of the post.
Join the Forum

Featured Panelists:

Some of the questions we will discuss:

  • What do investors want from the CD&A section of the proxy statement?
  • What are some of the most significant improvements you have seen in the CD&A over the past 5–10 years?
  • For companies with limited resources to devote to the CD&A, what are some of the most important things to focus on?
  • What process do issuers go through in creating a strong CD&A — who is involved, what is the timeline?
  • What is the state of engagement around executive compensation between companies and investors?
  • How has increased engagement improved the CD&A?
  • Is the CD&A all about “say on pay” these days or are there other substantive issues at play?
  • When should you start drafting your CD&A?
  • Who should be involved in the process?
  • How has engagement shaped the CD&A landscape?
  • What are your thoughts on the pay ratio rule proposed by the SEC?
  • Can you speak to the issue of realized vs. realizable pay?
  • Are there any nascent compensation issues you expect to grow in importance?
  • Are companies doing a better job of linking pay to performance in the “say-on-pay” era?
  • Are companies doing a better job of linking pay to execution of strategy?
  • Which pay governance issues have improved the most in recent years? Which still need work?
  • Have clawback policies worked to correctly influence behavior?
  • Which companies can we look to as examples that do pay disclosure well?

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About the Author(s)
Matt Orsagh, CFA, CIPM

Matt Orsagh, CFA, CIPM, is a senior director of capital markets policy at CFA Institute, where he focuses on corporate governance, ESG, and climate change analysis. He writes and speaks frequently on these topics on behalf of CFA Institute. His paper, Climate Change Analysis in the Investment Process was named “Best ESG Paper” by Savvy Investor in 2021.

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