The “New Normal” of Executive Compensation Disclosure
Pearl Meyer & Partners’ survey reveals almost 90% of respondents agree that
reader-friendliness is as important as ensuring technical accuracy
NEW YORK, March 18, 2015—Effective communication about executive compensation
remains a top priority among Boards and management teams, yet there is significant
room for improvement.  According to Pearl Meyer & Partners’ survey, PM&P On Point:
The New Normal of Annual Compensation Disclosure, only 11% of public company
respondents rated the effectiveness of their Compensation Discussion and Analysis
(CD&A) as excellent.
Make the CD&A easier to understand
Disclosure mandates on executive pay aren’t new, but expectations about the quality
and clarity of this information have changed dramatically over the years.   The CD&A
has grown from a legal document into a communication tool that can outline the
connections between compensation and business strategy. Multiple stakeholders are
paying close attention to this information and often find the content lacking, as
evidenced by recent research from the Stanford Graduate School of Business that
stated institutional investors are “deeply dissatisfied with compensation disclosure.”
According to the Pearl Meyer & Partners’ survey, the number one request of the Board
to management respective to CD&A content is that it be made easier to understand.
Companies who rate their CD&A as excellent or very good are considerably more likely
to present information in a reader-friendly format and leverage content trends such as
executive summaries, charts and graphics. 
“Boards clearly understand the importance of straight forward and effective
communication, yet even by their own assessment, they’re falling short,” said Sharon
Podstupka, Vice President, Pearl Meyer & Partners and author of the survey.
“Disclosure is no longer about following a prescriptive roadmap. Companies are
realizing that it is about developing a strategy that positions them to tell their unique
story and creating a format that works best for their audiences.”
Timing and teams are important
The schedule for developing CD&As clearly impacts the effectiveness of the final
document. Of those who wait until after the close of the fiscal year to start planning,
almost half (48%) rated the effectiveness of their CD&As as just fair or needs
improvement. Additionally, 30% of those same respondents acknowledge that planning
always begins “too late.”
Who is involved in the planning and development also warrants consideration. A
majority of companies (79%) who feel confident in their CD&A bring in their internal
communications professionals to help tell the story. Approximately 40% also take
advantage of external graphic designers and writers.
Can effective CD&As improve Say-on-Pay outcomes?
More than 62% of respondents who rated the effectiveness of their CD&As as excellent
or very good noted that Say-on-Pay has influenced the writing style of their disclosure.
The survey indicates that a well-developed CD&A can lead to better Say-on-Pay votes,
as almost 70% of those who said that the effectiveness of their CD&As was excellent or
very good reported a Say-on-Pay vote of better than 90%. In comparison, only 50% of
those who reported the effectiveness of their CD&As as fair or needs improvement
achieved the same level of Say-on-Pay voting results.
“The findings related to Say-on-Pay are especially illuminating,” said Podstupka. “This is
an excellent example of where the rubber meets the road and it substantiates the
benefits of an easy-to-read and well-constructed CD&A. The better shareholders
understand pay rationale, the more likely they are to support it.”
Podstupka continues, “We suggest four actions Compensation Committees should take
as they develop their next CD&A: leverage specialized resources, allow significant
planning time, use plain and concise language and don’t be shy about incorporating
graphics to help explain key information.” 
About the survey
The 2015 survey PM&P On Point: The New Normal of Annual Compensation Disclosure
was conducted between September 24, 2014 and January 23, 2015 and included 93
public company participants. The survey was designed to gain insight into the
communication approaches companies use to develop the narratives for their CD&A
and gauge the levels of perceived effectiveness of those documents. The executive
summary is available at
http://www.pearlmeyer.com/newnormalofannualcompensationdisclosure.
Additional Resources
 Creating Engagement Through Executive Compensation Communication
 Pearl Meyer & Partners’ Communication Services
 PM&P Advisor Video Blog Trust and Communication
 Follow us on LinkedIn and Twitter
About Pearl Meyer & Partners
For more than 25 years, Pearl Meyer & Partners has served as a trusted independent
advisor to Boards and their senior management in the areas of compensation
governance, strategy and program design. The firm provides comprehensive solutions
to complex compensation challenges for multinational companies ranging from the
Fortune 500 to not-for-profits as well as emerging high-growth companies. These
organizations rely on Pearl Meyer & Partners to develop global programs that align
rewards with long-term business goals to create value for all stakeholders:
shareholders, executives, and employees. Pearl Meyer & Partners maintains U.S.
offices in New York, Atlanta, Boston, Charlotte, Chicago, Houston, Los Angeles, San
Francisco and San Jose, as well as an office in London.