Performance Shares Offer Built-In Board Oversight To Restless Shareholders

July 1, 2010 - PRLog -- Restless shareholders are making themselves heard.

No longer content to sit in the back of the annual meeting, shareholders are standing up and demanding that corporate boards become more forthcoming and transparent about their executive compensation practices.

Such requests frequently include a provision called “Say on Pay.”1 This proxy addition has already gained traction as a method by which shareholders can exert influence on the structure of executive compensation arrangements, according to a new report from SFG Publications, “Five Reasons to Like Performance Shares (And One Reason to Think Twice).”

Report author, Charles “Chuck” Steege CFP®, has been exploring the growing relationship between corporate responsibility, fiduciary transparency and executive compensation for more than a decade. Mr. Steege was assisted in the development of his report by the financial social media agency, Advisolocity, which provided additional creative and copy-writing support.

Mr. Steege said, “Last November, Microsoft Corporation’s board of directors approved a “Say on Pay” plan to allow its shareholders the ability to cast a nonbinding advisory vote on the company’s senior executive compensation plan every three years. Around the same time, a narrow majority of shareholders of Cisco Systems Inc. approved a proposal to vote on that company’s executive compensation plan.

As “Say on Pay” increasingly becomes a way for shareholders to make their voices heard on compensation policy, performance shares likewise grow in stature as a positive outcome to a mutual need.

The use of performance shares continues to rise steadily — up 63%, through year-end 2009. According to research firm Frederic W. Cook & Co. (FWC), performance shares have continued to rise in popularity when compared to other equity compensation alternatives.

“By aligning compensation strategies with business outcomes, companies are more likely to send a clear message to the shareholder about their commitment to transparency and sound business practices,” Mr. Steege concluded.

1MAPI Manufacturers Alliance Issue in Brief March 9, 2010

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