You’ve Failed Say on Pay—Now What?

You’ve Failed Say on Pay—Now What?Zoom inDownload PDF

What should your company do if it fails say on pay? Because mandatory say on pay is only two years old, a definitive answer hasn’t yet emerged. But from the evidence, it appears that there is one thing that you should not do: increase CEO pay without a strong link to performance.

Say-on-pay failures are few; nevertheless, directors should be wary. At the very least, failing say on pay can be embarrassing for directors and, at worst, could adversely affect their chances of being re-elected to their current board if proxy advisors oppose or being recruited to new boards in the future. Internally, most of the onus for failure is likely to fall on members of the compensation committee, raising the stakes for those directors. The negative ramifications are amplified for those companies that fail a second consecutive time.

Download the entire article, which first appeared in the Feb. 15, 2013, NACD Directorship article, “You Failed Say on Pay—Now What?”