The Compensation Committee’s Guide To COVID-19

Compensation Committees must be incredibly flexibly during the current pandemic. Adapting rapidly to the once stable 2020 outlook has resulted in creative measures on how to align executive and non-executive compensation after sharp market downtowns and an unstable economic environment. Download the guide by Meridian Partners, Diligent and CGLytics.

The Compensation Committee’s Guide To COVID-19

 

Governance, pay for performance, short- and long-term incentives, equity, and much more.

Download our latest white paper to learn how you can address a range of governance, design and administration challenges that involve executive and non-employee director compensation programs.

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Wirecard Pre- and Post-Scandal: A Board Effectiveness Analysis

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FTSE 100 & Executive Compensation: Setting the tone for 2020

With the COVID-19 pandemic presenting unprecedented challenges to shareholders and investors, what issues should compensation committees be focused on in 2020 and 2021? CGLytics takes a look at the FTSE 100 companies’ corporate governance and executive compensation practices for navigating the challenges ahead.

FTSE 100 & Executive Compensation: Setting the tone for 2020

 

With the COVID-19 pandemic presenting unprecedented challenges to shareholders and investors, what issues are they focused on during the 2020 proxy season?

CGLytics looks at the FTSE 100 companies’ corporate governance and executive compensation practices reported in 2019 to gain insights into what heightened challenges lie ahead in 2020.

Read the white paper SETTING THE TONE FOR 2020: FTSE 100 Review to gain perspective on the executive compensation landscape and learn what impact COVID-19 is having on executive pay and performance alignment in 2020.

Download the report to learn more

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AGMs: Tactics for a Plague Year

In a time of crisis and confusion, shareholders are more eager than ever to get answers from their boards and management. Yet holding traditional AGMs is nearly impossible. What are the best options for running AGMs during a plague year?

In a time of crisis and confusion, shareholders are more eager than ever to get answers from their boards and management. Yet holding traditional AGMs is nearly impossible.

Postponing them may also not be a good option. Advisors, analysts, shareholders, investors, employees and all other stakeholders are all eager to understand their companies’ way forward in such troubled times, and the AGM offers the best way to address this. Postponing the AGM, even for good reasons, sends a bad signal to the markets at the very time when addressing investor and broader social concerns is critical.

For example, many companies are considering reducing dividends due to the challenging economic conditions, yet CEO pay reductions are not on the AGM agendas. CEO pay continues to rise, regardless of performance. The top 35 highest-paid CEOs on the S&P 500 received a combined Total Realized Compensation (TRC) of almost $3 billion in 2019, yet pay-for-performance alignment is badly skewed at nearly half of the companies on the index as our statistics show.

If postponing is not an option, companies do have two other options at their disposal: Running a ‘hybrid’ AGM, which would combine physical presence with virtual communications, or making the entire AGM virtual. Most companies don’t have such options included in their Articles of Association, but the first step at the hybrid or virtual AGM would mean voting on such changes. The London Stock Exchange is currently pushing for emergency legislation to change the companies act to allow all companies to stage virtual shareholder meetings. 

The hybrid option means that either board members are physically present at the AGM, while shareholders communicate with them via virtual links, or that shareholders send representatives to physically attend the meeting while board members communicate via video or audio communications. Voting ahead of meetings is also an option, working with proxy advisors.

Swedish telecoms and networking firm L.M. Ericsson has chosen the former hybrid option for its 2020 AGM on 31 March. The President and CEO Börje Ekholm will not attend in person, but will participate via links (it is not clear whether other board members will attend in person). A live webcast of the meeting will be available to shareholders.

To keep the numbers of attendees down, Euroclear Sweden will offer shareholders who are individuals the option to vote via proxy, and other opportunities to work with proxies are made available to shareholders. “No food or refreshments will be served,” the official invitation warns.

Ericsson’s official invitation offers links to Nomination Committee proposals as well as to some shareholder motions.

But, in this hybrid approach to the AGM, is it clear that board members will be able to fulfil their fiduciary responsibilities in communicating with shareholders? Will it be possible to hold a dynamic discussion of the company’s affairs? Will shareholders be able to work with proxy advisors on such short notice – how will policies be communicated? Will a shareholder wishing to pose a complex question to the CEO get sufficient airtime?

The alternative hybrid approach to running AGMs would mean that board members are physically present, while shareholders communicate with them entirely via audio, video and messaging. And there is the further alternative, in which all communication takes place virtually.

Each of these alternatives poses many of the same questions that we’ve raised above. One of the virtues of the physically-attended AGM is that a shareholder can follow up on questions, or insist on attention to specific subjects. Can shareholders be sure this will happen online?

The even larger question being asked at some companies will be whether all shareholders have had access to sufficient information to vote before the AGM. For example, under current conditions, it may not be possible for the audit of financial statements to be concluded. Some companies are opting to work with financial reporting that is incompletely audited. This poses a serious corporate governance challenge that the board would have to address at the AGM.

The diffusion of extensive financial and non-financial information to shareholders and their representatives ahead of the meeting is also critical for these virtual or semi-virtual AGMs to succeed. Given that shareholders must accept somewhat limited access to the board, they must be certain that all of the information relevant to decision-making on matters such as executive compensation, director election, Stock Purchase Plan has been provided in advance.

Boards that take all the necessary steps to ensure that shareholders have the information they need ahead of the AGMs will be fulfilling their fiduciary responsibilities to shareholders. At the same time, Shareholders will need to step up and leverage technology and information to support their engagement. The AGM will provide the basis for the company to move forward even in a Plague Year.

Latest Industry News, Views & Information

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State of Play: European Board Diversity

This report examines gender and age diversity on boards in the European corporate governance landscape. Examining female representation, the report reveals that many countries are not yet at the 40% requirement, proposed by the European Commission in its European 2020 strategy.

State of Play: European Board Diversity Report

Diversity is still a hot topic. Legislative bodies are addressing concerns from investors as they realize the importance of having a balanced board in terms of gender, age, skills and expertise, for better decision-making.

Providing companies and investors with valuable insights about board composition and potential red flags to mitigate corporate governance risk in 2020, CGLytics has released its first diversity report based on the European market.

The State of Play: European Board Diversity report examines gender and age diversity in the European landscape and by region. The report reveals that female representation on boards is not yet at the 40% requirement in many countries, proposed by the European Commission (EC) in its European 2020 strategy.

Read the report with valuable insights including:
● How gender diversity is included in country governance codes
● European countries with the highest and lowest gender diversity
● Countries with the biggest increase of female representation
● Inclusion of women in board leadership
● Overboarded directors by country
● Composition of directors by age brackets

Download the report to learn more.

DOWNLOAD THE REPORT

Latest Industry News, Views & Information

  • All
  • Blog
  • Uncategorized

Aston Martin: Speeding Towards 8th Bankruptcy or Revitalization?

A skill-deficient board led to the overestimation of Aston Martin’s market appeal. How does the introduction of new CEO Tobias Moers impact Aston Martin’s board composition, skillset, and expertise?

Wirecard Pre- and Post-Scandal: A Board Effectiveness Analysis

This article examines Wirecard’s corporate governance practices, board effectiveness score compared to their DAX and sector peers, and shortfalls in board expertise pre- and post-scandal.

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Takeaway.com is on a mission to assert its dominance as one of the world’s leading online food delivery service providers. Mergers and acquisitions have resulted in an increase in bonuses for the CEO and the board, plus an improvement in board structure.