It's now 2011, and corporate proxy season's springtime peak will arrive before we know it. At least where CEO pay packages are concerned, many companies have sprung into action to avoid inevitable heat from shareholders. If nothing else, that's a refreshing change from the days when those businesses simply didn't seem to care.
Quick, look responsible!
Earlier this week, Reuters cited a survey conducted by consulting firm Towers Watson, which showed that almost half of the companies questioned were changing up their compensation policies in advance of upcoming say-on-pay votes. (The Dodd-Frank financial reform law requires non-binding say-on-pay votes at least every three years.)
Although many companies have already adjusted their compensation practices in the aftermath of greater public and shareholder scrutiny, some are also examining how they explain their practices, as well as linking pay to performance measures.
Companies' directors are also in the hot seat, since their mostly blithe rubber-stamping of managers' compensation packages helped allow CEO pay to soar to outrageous levels over the last several decades.
Heading off the naysayers
The companies now scrambling to change their pay ways would like to avoid the humiliation of having shareholders vote against those policies, even if those votes are non-binding. Last year, Occidental Petroleum (NYSE: OXY), Motorola (NYSE: MOT), and KeyCorp (NYSE: KEY) all experienced the embarrassment of shareholder ire, in the form of withering "no" votes on high pay.
Outrageous perks have been in the spotlight in the last year or so as well. Among other companies, Visa (NYSE: V), Johnson Controls (NYSE: JCI), and Monsanto (NYSE: MON) have now ended or limited the use of "tax gross-ups," long one of the banes of corporate governance fans. (Visa is also ending personal use of corporate jets.)
Will it be enough, or "too little, too late"?
Until now, regardless of public opinion in the wake of the financial crisis, most companies' approach to CEO compensation hadn't seemed to change much. In November, The Wall Street Journal reported that CEO pay was actually experiencing price inflation, even though the average CEO took home 263 times as much pay as the average worker in 2009.
I'm glad to see that many corporate boards and management teams now appear more concerned about public perception of their pay packages. Making these conciliatory gestures to stave off shareholder ire in the coming proxy season is a step in the right direction. Let's hope it's also a step in the "doing the right thing" direction.
Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance.
