As this issue of C-Suite hits your desk, another proxy season is on the books, and the high season for annual shareholder meetings is underway. Aside from voting on who will return to the boardroom, the Say on Pay vote will be one of the most anticipated—and pored over—topics of conversation at these meetings.
Indeed, shareholders, proxy advisors and regulatory agencies are demanding more transparent executive pay disclosures, which has inevitably led to an increase in length and depth of information in the Compensation Discussion and Analysis (CD&A) section of companies’ annual proxy statements. In the past five years, word count for the average CD&A has increased 8.4%, up from 8,416 words in 2011 to 9,121 words in 2015 among S&P 100 companies (Figure 1). As you can see in Figure 2, the longest CD&As run more than twice that long, and even though a few companies have significantly shorter executive pay disclosures, even several of the five shortest were submitted at nearly 5,000 words.
To counteract the ballooning text required to accurately explain how pay relates to company performance, companies are using more summary and visual information to draw readers’ eyes, such as tables of contents and summaries for the CD&A section as well as compensation program checklists that explain visually what companies “do” and “don’t do” when it comes to pay practices. (Figures 3 & 4)