Tag Archive: shareowner communications

Give Them Something to Talk About: Open Dialogue Fosters Alignment on Compensation

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Executive compensation is again making headlines, as several companies grapple with the new provisions set by Dodd-Frank, including say on pay.

A recent article from the Wall Street Journal noted that “there remains plenty of upward pressure on pay. CEO cash bonuses rebounded in 2010…and executives can be well rewarded by stock grants as company performance and share prices improve. Still, companies face more pressure to defend those packages…”

This news highlights the importance of effective, transparent communications from the boardroom. Now that shareholders of publicly traded companies have an advisory vote on executive pay, board members should be prepared for increased scrutiny of executive compensation packages. It is critical that boards communicate the reasoning behind compensation packages, and how they align with the company’s long-term strategic plans.

Last year, NACD issued the Report of the NACD Blue Ribbon Commission on Performance Metrics: Understanding the Board’s Role, which provided directors with recommendations on using performance metrics to guide compensation decisions, and the board’s role in assessing those metrics. The BRC report serves as a great resource for directors who want to make sure that the established compensation packages demonstrate how the board is rewarding corporate performance.

Improving communications between directors and shareholders can help to promote transparency and build confidence. Shareholders may have more confidence in the board and less reason to challenge compensation packages where supporting metrics are easily available.

For additional tools to help boardrooms navigate both current and future regulatory and environmental changes, please visit the NACD Resources page.

Chief Engagement Officer and the Engagement Oversight Committee

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Don't forget to sparkle

 A recent blog by British twitter maven Lucy Marcus got me thinking about where new thinking and fresh strategy comes from. Lucy rightly points out that new beginnings take time and that, in this cost-conscious era, there is a risk that no company has the patience to sew seeds and give them time to grow. We’ll call this impatience, and certainly it is a failing that often besets the super-bright who are restless company executives, and their peripatetic counterparts who become board members.

There are other stumbling blocks in the way of innovation too, and chief amongst them is information overload. At NACD’s recent Investor Insights Roundtable , Denny Beresford revealed that he had seen proxy statements that were longer than the 10-K. Anne Sheehan, director of corporate governance for CalSTRs, concurred. “Don’t send me the charter; I can read that for myself,” she pleaded, making a request for only critical information, presented in a concise and accessible form.  As all of us know, too much information can be as bad as too little. Swamp your readers and they’ll find it all too easy to miss your point.

But there is one shortfall that always stands in the way of progress for fresh thinking, and that is lack of imagination. Too few C-suites, committees and other information providers really think about the message they wish to convey, and ways to engage the audience they seek. The best teachers understand that without engagement, there is no education. Information is passed and knowledge is gained through story-telling, entertaining experiences that stick in the mind, and the thoughtful paring down of data and equally thoughtful pumping up of passion, color and context. These are skills and approaches that have value in every area of life, business and governance. They should not be confined to the classroom.

 At NACD’s Director Professionalism® course in Deer Valley, UT last week,

Deer Valley, UT

 our engagement quotient was high: Richard Levick discussed crisis planning at the board level, using the miserable face of an oil-soaked shag and the equally miserable face of former BP CEO Tony Hayward to make his key points; Rob Galford, compensation chair at Forrester Research, used his physical presence and party tricks (“point your finger in the air. Now, on the count of three, point it at the spokesperson in your group”) to drive home some interesting thoughts on performance metrics; and Charles Elson, a director on the board of HealthSouth corporation, used catch phrases (“Don’t be sleazy; Don’t be sloppy”) to help more than 60 directors grasp the essence of the Duty of Loyalty and the Duty of Care.

All of this leads me to an interesting opportunity for washed-up television producers such as myself: We should position ourselves as Chief Engagement Officers for corporations prone to boring their boards to death. We could be creative conduits, taking the dry, dense and dusty and turning it into presentations worthy of prime-time. Similarly, all boards should look for comedians down on their luck, children’s book illustrators with a gift for detail that captivates, and song and dance acts capable of rhyming “audit” with either “plaudit” or “sod it.” Once identified, this rag-tag group should form an Engagement Oversight Committee with advisory status to the board. This EOC would work alongside the GC and reshape anything terminally turgid into a director’s delight. It would solve an unemployment problem in the entertainment sector, and would greatly enhance not only board meetings, but also board, company and stock performance. It might also offer an interesting second career opportunity for burned out teachers…

 If you sleep at night surrounded by spreadsheets and with PowerPoint as your pillow, urge your company to consider this engagement initiative, and soon you’ll look forward to board meetings: We put the “Glee” in governance.

 If you are an NACD member, you can access our Investor Roundtable insights here

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