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Information Requirements for Investor Decisions
Comments of
John C. Wilcox
Senior Vice President and Head of Corporate Governance,
TIAA-CREF
and
Member of Steering Committee, AFSCME-Pfizer "Working Group" for Advisory
Voting
November 13, 2007
The burden of
making compensation disclosures clear and understandable should fall on
corporate boards, not on investors.
We all know that
compensation disclosures are often incomplete, overly detailed, unclear and
difficult to relate to performance. The burden of sifting through such poor
disclosure certainly falls on investors, but that burden is unrelated to an
advisory vote. In fact, investors are obligated to make informed decisions
about compensation regardless of the quality of disclosure and regardless of
whether there is an advisory vote. I think it is problematical to suggest
that investors are more diligent in their analysis of compensation when
there is an advisory vote than when there is not.
Efforts to
improve compensation disclosure (including the new SEC disclosure rules) are
designed to put the disclosure burden back where it belongs – on company
boards and compensation committees. The advisory vote should not be seen as
burdensome, but as an appropriate means for shareholders to inform companies
that their compensation disclosure is inadequate and they’ll have to do
better.
I think it is
counterproductive for investors to suggest that the advisory vote creates
more work for them. Poor disclosure is what leads to more work. Over the
long term the advisory vote should help improve the quality of compensation
disclosure and lighten investors’ analytical workload.
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