Shareholders, Staff Want Greater Transparency into Individual Managers’ Earnings – The Jamaica Gleaner
February 1, 2021
Providing strong incentives to increase shareholders value, retaining key talent and limiting shareholder cost are the three main objectives of executive compensation, Harvard researchers argued in 2018 study.
The ‘say on pay’ tool is emerging as a major mechanism to balance those objectives by driving improved corporate governance through stronger shareholders oversight while curbing excesses in the quest to reward performance.
Prior to the changes, US companies’ concerns ranged from a view that salaries were not material, relative to the performance of the company, and, therefore, no real benefits to investors, and that there was no substantive reason “to sacrifice” a matter of privacy, noted Marc Hodak, partner at Farient Advisors LLC, a US-based consultancy on executive compensation.
He said there was a view that revealing that pay amounts would put public companies at a hiring disadvantage relative to private employers, whose executives do not face that burden.
“Needless to say, in the US, these concerns were set aside and you can’t be listed on a US exchange without this disclosure,” he said, acknowledging that the overall compensation expense of banks “is clearly material”.
The precise details of managers’ compensation is “potentially” to mainly support the “window on governance” theory, which he said refers to investors’ belief that such disclosures give them a peek into the quality of a board’s leadership and decision-making.
Hodak, however, said the compensation details could be weaponized by shareholders to “tamp down pay by inciting controversy about pay levels and general inequality”.
by Jovan Johnson
About Marc Hodak
Partner, Farient Advisors, Dallas
Marc works closely with senior management, boards of directors, and investors, in both public and private companies to develop executive compensation programs that are shareholder-friendly, attractive to management, and responsive to the needs and concerns of boards.
He is a recognized thought leader in incentive plan design. His articles have been published in numerous magazines, including Forbes, NACD Directorship, Directors & Boards, and academic journals. He has been quoted in the national press, including the Wall Street Journal, Bloomberg, and Reuters.
He is a sought-after speaker at forums and conferences throughout the U.S. and Europe on executive compensation, corporate governance, and value management. Marc was named to the 2020 NACD Directorship 100, a list of the most influential people in corporate governance and the boardroom.
For the last 10 years, Marc has taught corporate governance as a professor at New York University’s Stern School and as visiting lecturer at the University of St. Gallen in Switzerland. Before joining Farient Advisors, Marc was the principal at Hodak Value Advisors and led value-based management implementation and related projects at Stern Stewart & Co. He earned his MBA in finance from the University of Pennsylvania Wharton School and a BS in aerospace engineering from the University of Maryland.