Law & Health Weekly, September 27, 2008, Saturday
Law & Health Weekly
September 27, 2008, Saturday
HEADLINE: CENTER ON EXECUTIVE COMPENSATION; First-of-a-Kind Study Reveals Nation's 25 Largest Institutional Investors' Views on Executive Compensation
BODY:
A first-of-a-kind study commissioned by the Center On Executive Compensation to identify the perspectives of the nation's largest 25 institutional investors on executive compensation matters confirms that making broad assumptions about their views on this topic often does not reflect realities, underscoring "a need for a thoughtful and reasoned approach to any executive compensation policy changes," according to the Center (see also Center On Executive Compensation).
The study was conducted on behalf of the Center by Kevin F. Hallock, Professor of Labor Economics and of Human Resources Studies and Director of Research at the Center for Human Resources at Cornell University, who concluded that "though further study is needed, it "[appears to] be the case that some of the strong views held by activist institutional investors are not generally held by the majority of or even very many of the largest institutional investors."
Through confidential interviews with senior representatives from 20 of the 25 top institutional investors based on management of U.S.-based equities, it was determined that the top issue of concern was ensuring pay-for-performance, followed by preserving the Boards' role to set compensation and being able to "trust" and rely on compensation committees, and seeking greater clarity in both a company's pay disclosures and the SEC's requirements.
The study also found that large institutional investors do not have a shared view on all executive compensation issues. "While they agree about some issues, such as favoring pay for performance and rejecting "say on pay," they are almost evenly split on others, such as the necessity of maintaining the independence of the compensation consultant and disclosure of performance targets," stated the Center in its summary of the findings.
According to the Center's report, the study was commissioned because these institutions collectively represent over $6 trillion in U.S. equities, or 65 percent of the top 300 institutional investors.
"Given the top 25 institutional investors' massive representation of investors' interests, we believed that the views of this important shareholder constituency should be better understood and factored into the on-going national dialogue about how best to inform and structure executive pay practices and the rules and regulations that guide them. Moreover, the Center's members were interested in securing the findings as a part of their individual efforts to expand and enhance their dialogue with shareholders on these topics," said Charles G. Tharp, the Center's Executive Vice President for Policy.
The Center said its findings are being made available to senior human resource executives, directors, compensation consultants, law makers and regulators, academics and the media as a part of its effort to contribute a balanced and reasoned view "into what often can be a complex and highly individualized process ... "
Keywords: Center On Executive Compensation.
This article was prepared by Law & Health Weekly editors from staff and other reports. Copyright 2008, Law & Health Weekly via NewsRx.com.
LOAD-DATE: September 18, 2008
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