How Boards Can Better Communicate Executive Compensation to Investors

Inside Americas Boardrooms
Over the years, the Securities & Exchange Commission has tried to mandate disclosures in a company's annual proxy so that shareholders can better understand the decisions made by management and the board on their behalf. It's safe to say that no section of business operations receives greater focus than executive compensation. Yet, in the SEC's efforts to provide investors more information, the Compensation Discussion & Analysis (CD&A), one of its mandated disclosures, has grown beyond what the average investor can understand.

In this episode, Charles Tharp (Executive Vice President of the HR Policy Association & Senior Advisor of Research and Practice at the Center On Executive Compensation) joins host TK Kerstetter to discuss the current trends and pitfalls of compensation disclosure-and how boards can be more efficient and effective with the CD&A.

[blockquote source="Charles Tharp, HR Policy Association & Center On Executive Compensation"]Unfortunately, today much of the text of a CD&A is trying to justify the accounting number that so many people focus on. But, if [boards] would back up and disaggregate pay-The What, The How, and The Why-I think it would be very helpful to the reader.[/blockquote]

With an extensive background on this topic, Tharp outlines best practices and specific tactics that compensation committees can employ to improve readability and clarity. In this episode, we cover:

  • How should boards be structuring their CD&A to create a roadmap for investors?
  • What tactics are successful boards using to communicate compensation effectively?
  • Which boards are doing an excellent job with compensation disclosure?