NACD Convenes Compensation Advisory Council

WASHINGTON, June 14, 2011 /PRNewswire/ -- On June 9, a delegation of Fortune 500 corporate directors convened with institutional investors, regulators, and corporate governance experts to identify critical issues related to corporate compensation and develop guidelines to help boards navigate challenges in compensating executive management and driving shareholder value. The Washington, DC roundtable served as the first meeting of the National Association of Corporate Directors' (NACD's) National Compensation Advisory Council, which was established to bring the board's perspective to the table in national policy deliberations regarding executive compensation practices.

"Compensation has been a hot issue for boards, regulators, and management since the days of the Enron scandal," said Barbara Hackman Franklin, former U.S. Secretary of Commerce, current board director of Aetna and the Dow Chemical Company, and chairman of the board for NACD who serves on the NACD National Compensation Advisory Council. "New regulations are usually reactive, so we want to get ahead of the curve, helping boards to be in the best position to reward performance, build shareholder value, and avoid compensation controversy."

Setting the stage for discussion, institutional investors, compensation advisors, and regulators shared how the introduction of say-on-pay regulations has affected the corporate and business environments. The overwhelming sentiment was that the past year had been one for learning, with few -- if any -- big say-on-pay surprises. Shareholder representatives and stakeholders in the room noted that while say-on-pay has been effective in identifying outliers, it did not slow down the rate or complexity of executive pay which continue to increase.

Another theme throughout the Council's meeting was the need for directors to increase their communication with both regulators and shareholders. The need for clearer proxy statements, including compensation discussion and analysis (CD&A), was also well supported by many in attendance. In relation to pay for performance, the Council discussed what, specifically, performance metrics should measure, as well as the challenges presented when executives either don't perform or perform poorly.  

"NACD is the only organization that is really positioned to be the voice of the director on public policy issues and bring together the board members, the regulators, and the shareowners to address the state of executive compensation," said Ken Daly, president and CEO of NACD. "The only way to build confidence in and understanding of executive compensation is to have all the parties in the same room talking about the challenges presented and working out any differences of perception that may exist. We are pleased to have laid that foundation and look forward to more deliberations by this outstanding and productive group."

As a product of the meeting, the NACD Compensation Advisory Council will release a white paper outlining the top issues that should be on the board's agenda when framing executive compensation plans, including better ways to communicate compensation rationale to shareholders and other corporate stakeholders. The Council will continue to meet regularly over the next year to refine and advance its recommendations.

This is the third Advisory Council that NACD has developed to provide directors a voice in the public policy arena. The NACD Audit Advisory Council was established in 2009 and has been active on legislative and regulatory issues, most recently concerning the new Dodd-Frank whistleblower provisions, passed into law last year and enacted by the Securities and Exchange Commission (SEC) last month.  NACD's Audit Advisory Council is also working with the Public Company Accounting Oversight Board (PCAOB), the Financial Accounting Standards Board (FASB), the Financial Accounting Foundation, and other organizations to educate them on what impact their proposals would have on corporate boards.

In addition to the Audit and Compensation Advisory Councils, NACD launched a Governance Advisory Council last year, tasked with identifying ways to take board nominating and governance practices to the "next level" and improving communication between boards, investors, and regulators.

About NACD

The National Association of Corporate Directors (NACD) is the only membership organization delivering the information and insights that corporate board members need to confidently confront complex business challenges and enhance shareowner value. With more than 11,000 members, NACD advances exemplary board leadership. NACD is focused on creating more effective and efficient boards through director-led education and peer forums to share ideas and leading practices based on more than 30 years of primary research. Fostering collaboration among directors and governance stakeholders, NACD is shaping the future of board leadership. To learn more about NACD, visit NACDonline.org. To join, please contact Kelly Dodd at [email protected] or 202-380-1891.

Contact:
Henry Stoever, Director of Marketing
National Association of Corporate Directors
202-775-0509

SOURCE National Association of Corporate Directors

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