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View More Press Releases by Towers Watson

Press release:

One-Third of U.S. Companies Expect to Fundamentally Change Pay-For-Performance Disclosures, Towers Watson Poll Finds

Issued by: Towers Watson

Date: June 18, 2015

ARLINGTON, VA, June 18, 2015 -- One in three U.S. public companies expect to significantly change their approach to disclosing information on how they reward their executives in the wake of the Securities and Exchange Commission’s (SEC’s) proposed pay-for-performance disclosure rules, according to a poll by global professional services company Towers Watson (NASDAQ: TW). The poll also found that a majority of companies are likely to provide additional information and analysis that go beyond what the proposed rules will require.

In April, the SEC issued proposed rules to implement the Dodd-Frank provisions that require companies to disclose the relationship between executive compensation actually paid and the company’s financial performance. The proposal would require company proxy statements to include a pay-versus-performance table and an explanation of the relationship between pay and performance. The Towers Watson poll of 453 corporate executives and compensation professionals was conducted June 4, during Towers Watson’s national webcast on the proposed rules.

According to the poll, 33% of respondents expect the pay-for-performance disclosure rule will fundamentally change their approach to executive pay disclosure. More than half of the respondents (55%) expect to do more than the minimum that would be required under the SEC proposal: 37% plan to disclose additional information and analyses to help tell their pay-for-performance story, while 18% will perform and may disclose additional pay-for-performance analyses.

“With the SEC rules on the table, companies can carefully evaluate how they tell their pay-for-performance story to shareholders,” said Steve Kline, a director in Towers Watson’s Executive Compensation consulting group and the practice’s pay-for-performance analytics team leader. “The fact that many companies expect to provide more information than the rules require is encouraging, although for many, the real challenge will be deciding the best way to present this information in their proxies.”

The poll also found that nearly half of the companies (46%) have been waiting for the rules to be issued and now expect to make some changes to their Compensation Discussion and Analysis (CD&A), while one in 10 view this as an opportunity to revamp their CD&A significantly. Additionally, roughly half of respondents (51%) anticipate using the same peer group for their pay-versus-performance disclosure that they use for benchmarking their total compensation.

“While not surprising given the language of the Dodd-Frank requirement, the fact that the SEC proposal defines performance in this disclosure as total shareholder return (TSR) will put even more shareholder focus on this measure,” Kline said. “However, TSR is only a part of the pay-for-performance story. Companies will want to think carefully about the broader performance picture and how best to help shareholders understand how the pay programs support long-term value creation.”

About Towers Watson
Towers Watson (NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 15,000 associates around the world, the company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Learn more at towerswatson.com.


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