As companies review their executive compensation program designs and related corporate governance policies, current market practices and recent trends can provide competitive benchmarks that are helpful in understanding “best practices,” as well as facilitate productive boardroom discussions.
Highlights of Meridian’s 2018 Corporate Governance & Incentive Design Survey
■ Prevalence of proxy access bylaws among the Meridian 200 (currently 75%) has increased nearly 40 percentage points since 2016 (38%).
■ The great majority of Meridian 200 companies (91%) elect directors annually (i.e., declassified structure).
■ More than three-quarters (79%) of Meridian 200 companies directly address current board member diversity in their proxy filing.
■ Nearly all of the sample companies (99%) have at least one female board member; however, nearly three-quarters (71%) still have a board makeup that is less than 30% female.
■ Nearly two-thirds (65%) of survey companies that separate the board chair (CoB) and CEO elect an independent director as CoB, representing a 13 percentage point increase over five years (52% in 2013).
■ The median CEO pay ratio among Meridian 200 companies is 208:1.
■ Nearly three-quarters (70%) of the Meridian 200 include a proxy summary.
■ While CD&A executive summaries and volitional disclosures are nearly universal (95%), such disclosures continue to increase in length, typically spanning three or more pages (70%).
■ Over three-quarters of survey companies (78%) disclosed shareholder outreach efforts, with nearly one-half (46%) providing specific detail on feedback received and/or actions taken.
■ For annual incentive plans, the most prevalent performance metrics continue to be Operating Income, Revenue, Cash Flow and Earnings Per Share (EPS).
■ Nearly all of the Meridian 200 (98%) grant performance-based vehicles as part of their long-term incentive (LTI) plans, most often (88%) measuring performance on a cumulative basis (typically three years).
■ Relative total shareholder return (TSR) continues to be the most prevalent (64%) metric in performance-based LTI plans (64%), used either as a weighted measure (82%) or payout modifier (22%).
Financial highlights of the Meridian 200 companies are provided below. All figures shown are as of the end of fiscal year 2017.
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This survey was authored by Mike Meyer and other consultants of Meridian Compensation Partners, LLC. Questions and comments should be directed to Mr. Meyer at firstname.lastname@example.org or (847) 235-3627.
This report is a publication of Meridian Compensation Partners, LLC, provides general information for reference purposes only, and should not be construed as legal or accounting advice or a legal or accounting opinion on any specific fact or circumstances. The information provided herein should be reviewed with appropriate advisors concerning your own situation and issues.