CD&A: The Second Time Around

A study by Pearl Meyer & Partners found only about 25 percent of companies surveyed said expanded disclosure had an impact on how they set shortterm or long-term performance goals. “The fact it’s not impacting how people are getting paid shows the SEC’s intent is working,” says Jannice Koors, a managing director at PM&P. She says it doesn’t mean compensation disclosure isn’t a factor. “How it is going to look in the proxy will always be part of the discussion.”

PM&P’s annual survey of the proxy process does reveal a lack of progress toward the SEC’s goal that compensation disclosures be written in “plain English.” On average, respondents indicated a readability score that puts their filings at about the reading level of a college junior—slightly more difficult than last year’s respondents. But companies had an easier time completing the process: on a pain scale of 1 to 5, respondents said drafting this year’s CD&A ranked a 3.5, compared to a 4.2 last year.

A separate study on disclosure, conducted by Equilar, finds it’s becoming more common for Fortune 100 companies to disclose performance targets they expect executives to meet. Disclosing actual targets, which helps explain why executives deserve the compensation packages they receive, increased from 56 percent last year to 66 percent.

“As more and more companies cross the bridge of providing performance targets, it gets harder for other companies to make the argument that they don’t have to,” says Alexander Cwirko- Godycki, research manager at Equilar.