The Conference Board Task Force on Executive Compensation has issued recommendations for corporate institutions to restore credibility and increase trust in pay practices and oversight.
Source: www.conference-board.org
"Shareholders of American companies and the public deserve to see executive compensation programs that serve shareholders' interests and are explained to shareholders in thoughtful dialogue. Implementing the compensation principles we recommend is an important step in restoring the damaged trust in American companies," says Robert E. Denham and Rajiv L. Gupta, co-chairs of The Conference Board Task Force on Executive Compensation.
"We believe compensation committees and boards must be free to develop compensation programs that reflect their shareholders' interests and fit their companies' business objectives."
The statement is related to The Conference Board Task Force on Executive Compensation's new recommendations for corporate institutions to restore credibility and increase trust in pay practices and oversight.
Stop the abuses
The Task Force and its report continue the long history of principled leadership by The Conference Board – the global, independent business-membership and research association working in the public interest – and its Governance Center.
A significant regulatory reform debate has begun, and while government has important responsibilities, the Task Force believes that public companies and institutional shareholders also have a role and should take meaningful action to restore the trust that has been lost during the economic crisis.
Robert E. Denham and Rajiv L. Gupta continues:
"Real – and perceived – abuses in executive compensation have contributed to this loss of trust, and the Task Force report provides a practical set of guidelines that, if appropriately implemented, can make significant progress in restoring credibility in our corporations. We believe that a rules-based, 'check the box' approach cannot substitute for thoughtful board action discussed with shareholders."
The Task Force and its Advisory Group are comprised of corporate directors, shareholders, academics, and experts in compensation, governance and law. The full set of guiding principles and recommendations for compensation practices is outlined in the report: The Conference Board Task Force on Executive Compensation.
Use fair compensations
The Guiding Principles state that public companies should:
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Establish a clear link between pay, strategy and performance;
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Provide compensation that is fair, affordable and clearly aligned with actual performance;
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Eliminate controversial compensation practices that conflict with the notions of fairness and pay for performance – such as excessive golden parachutes, overly generous severance arrangements, gross-ups of parachute payments or perquisites, and golden coffins – unless specific justification exists;
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Demonstrate credible board oversight of executive compensation; and
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Foster transparency with respect to compensation practices and appropriate dialogue between boards and shareholders.
Act now
The Task Force encourages public companies to act now to demonstrate their commitment to best practices in executive compensation by adopting the Guiding Principles. A number of corporations have already made this commitment.
"We believe the work of the Task Force can result in meaningful change in corporate compensation practices. A diverse group of leading public companies have not only endorsed our principles, but have also pledged to implement the report's recommendations, and we expect others to sign on," Denham and Gupta says.
"We have significant support from investors and leading voices on executive compensation, reflecting that the report represents interests on both sides of the debate."
Read the full report: www.conference-board.org
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