March 9, 2021

NACD Board Talk: Compensation Experts Exchange Insights on ESG, Planning Amid Turbulence

by Mandy Wright

Each February, board compensation committees typically evaluate the prior year’s business performance and individual executive contributions. Up for review are whether or not targets were hit and how executive compensation compares to peers. What better time to bring together a group of compensation experts to discuss the latest trends in the pay arena?

NACD hosted a virtual panel of such experts and board members on Feb. 25, moderated by Christopher Y. Clark, NACD publisher and senior director of partner relations, to do just that.

What will be the Biden administration’s effect on what’s left to implement of Dodd-Frank?

Robin A. Ferracone: We’ve got two outstanding Dodd-Frank issues pertaining to compensation. One is the pay-for-performance disclosure, on which we probably will get some uptake [from the administration]. The other is finalization of the clawback provision. For clawbacks, we have some preliminary rules that we’ve been sitting on for five years now. But I do not think that finalizing these two provisions is going to create a lot of change. Companies are already looking at pay for performance, and they’re already way ahead on clawbacks by including reputational risk in clawbacks. Another change is that the US Securities and Exchange Commission (SEC) has said that companies should discuss their human capital practices in their 10-Ks if they think such disclosures will be informative to shareholders. That opens the floodgates for more discussion on human capital, which is a good thing. In addition, there will be more attention from the SEC on standards around ESG and DE&I reporting.

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