Ownership structure is perhaps among the most significant corporate governance factors, as it determines the balance of power within a corporation and can directly affect governance practices and company behavior. In our review of CEO ownership, we focus on corporate governance characteristics of companies with CEO ownership concentration, and we examine the effect of CEO ownership on company performance.
- We draw a distinction between CEO ownership concentration in terms of voting power and CEO ownership in terms of a dollar value in the company’s stock. Significant ownership in value does not necessitate significant voting power.
- CEO voting power concentration is
… Read more
In recent years, non-executive director compensation has received attention in the U.S. Increased board workloads, shifts in director compensation structure (away from meeting fees and towards slightly larger base retainers, for instance), a few instances of shareholder litigation in relation to excessive director pay, and a few voluntary submissions of management proposals asking for shareholder approval of their non-employee director compensation programs have all contributed to the activity.
Upon review of current trends in director pay, we observe a reasonable increase in total director compensation, across all market segments, and we continue to see differentiation by industry group. Although director … Read more
How much compensation does a CEO really end up with? It’s a tough question to answer – the summary compensation table is often cited as what the CEO is paid, but the ultimate value that an executive realized from those grants can differ significantly from the amounts disclosed.
For years, companies have recognized this potential discrepancy; since even before the advent of say-on-pay, companies in perilous performance positions have turned to alternative measures of pay to demonstrate that executives have shared in the pain that investors feel in their portfolio values. These alternatives have included various forms of realizable and … Read more
In the U.S., shareholder proposal filings have historically played an important role in advancing corporate governance and in highlighting key risks related to environmental and social issues. Some of the major shifts in governance practices during the past two decades – including the annual elections of directors, the adoption of majority vote standard for director elections, and the adoption of proxy access among large firms – were largely prompted by shareholder resolution campaigns. Shareholder proposals have also served as a driving force for greater corporate awareness of environmental and social risks, such as climate change risk management, diversity and inclusion … Read more
Analyzing corporate governance at companies in emerging markets can be really tough. A combination of differing regulatory standards, disclosure requirements, market norms, local investor preferences, and more all collude to make the evaluation of governance structures difficult. Giving credit where due, emerging market economies have made significant corporate governance strides over the past decade, as the adoptions and revisions of governance codes and relevant regulations have led to better disclosure standards, higher levels of board independence, and more shareholder protections.
Despite these developments, emerging markets continue to have a unique set of characteristics which require special attention when assessing corporate … Read more
Over the past three decades, shareholder proposals have transformed the corporate landscape in the U.S. by spurring the adoption of governance best practices. Annual director elections, majority vote rules for director elections, shareholder approval for poison pills, and proxy access bylaws are some of the critical governance practices that have become common practice thanks to investor support for shareholder proposal campaigns led by a wide variety of investors—some large; others small. Despite the advisory (non-binding) nature of most shareholder proposals in the U.S., successive waves of campaigns eroded boardroom entrenchment by convincing directors to respond to shareholders’ calls for accountability, … Read more
Appearances can be very deceiving. Case in point: The high-level summary numbers of voting results over the last 19 years seem to indicate that little has changed regarding proxy voting behavior among investors owning U.S. companies. A simple analysis of median vote support levels for management and shareholder proposals seems to reveal stasis – support levels remain at approximately the same levels they were back in the early to middle 2000s.
But the reality is that investor voting behavior among owners of U.S. companies has changed significantly – perhaps almost revolutionarily – over the past two decades. Corporate governance has … Read more
As the world greets the New Year, investors and companies may take a moment to reflect on key corporate governance priorities in light of a potentially more challenging business environment in the year ahead. The prospect of slower global economic growth, combined with a higher cost of borrowing, and continued uncertainty regarding global trade will demand watchful management of a new set of risks in both developed and developing markets. Macroeconomic trends will likely have an impact on firm performance and companies’ balance sheets, raising greater awareness of audit quality concerns and executive compensation practices. Meanwhile, many governance topics that … Read more