Financial Times Feature | The (advisory) ties that bind executive pay

Financial TimesShareholders of public companies in the UK and US have been voting on advisior (non-binding) resolutions regarding executive compensation, while those in other countries, including the Netherlands, Norway and Sweden have been doing the opposite.

In this Financial Times feature, co-authors by Bob Pozen, senior lecturer at the Harvard Business School and senior fellow at the Brookings Institution and Theresa Hamacher, President, NICSA discuss the reasons for advisory versus binding shareholder initiatives relative to executive compensation.  While the merits of both approaches can be debated, in the authors’ view shareholders generally do not reject companies’ proposed plans for executive compensation.  In addition, they make the observation that companies also generally react to shareholder desires relative to executive compensation, irrespective of whether it is in the form of an advisory or binding resolution.  Accordingly, since the authors feel that companies pay attention to shareholders’ views on executive compensation plans and take related appropriate actions, they did not feel that a major move towards binding shareholder resolutions was necessary at this particular point in time.

Read the full summary in this complete Financial Times* editorial.

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