Compensation Committee Leadership Network, January 2015
At the December 3-4, 2014, meeting of the Compensation Committee Leadership Network (CCLN), members were joined by guests focusing on three respective subject areas: Wendy Fried from Addison discussed the compensation discussion and analysis (CD&A) section of the proxy statement; Korn Ferry Vice Chair Jane Stevenson, CEO succession; and Ed FitzGerald and Ning Chiu from Davis Polk & Wardwell, forthcoming SEC compensation rules. This ViewPoints summarizes the discussions in those three areas:
The evolving CD&A
The CD&A was historically a compliance document that was drafted by lawyers for regulators. Today, it is a storytelling opportunity – a way to explain complicated compensation decisions to a large number of stakeholders. Members discussed how their CD&As have changed in the last few years to respond to interest from a growing number of parties. Reader-friendly choices like using more plain English, including more visuals and summaries, and addressing the most important issues in depth have helped to expand the CD&A’s audience and purpose.
CEO succession and management development
Selecting the leaders to run the company in the future is perhaps the board’s most important responsibility. Yet many companies do not begin their succession process in earnest until a CEO announces a date of departure. Members discussed the benefits of continuous succession planning that is linked to management development and corporate strategy. They also raised the prospect of a working group to create a set of principles to guide boards as they strive to improve the succession process.
Forthcoming regulatory changes
The Securities and Exchange Commission (SEC) recently delayed its own deadline for finalizing the executive compensation rules required by the Dodd-Frank Act. Members discussed the SEC’s obligations and related company plans concerning clawback rules, pay-for-performance disclosures, antihedging requirements, and pay ratio disclosures.