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Reader Profile

Editor's note:  Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today.  If you'd like to participate in this section in the future, please email Scott Chase

Donald Delves, Founder and President, The Delves Group


With the advent of shareholder “say-on-pay” votes, has proxy statement disclosure of executive pay improved significantly?

Surprisingly, no, it has not changed all that much. Some companies have added an executive summary, or some useful tables showing the relationship between pay and performance. Most companies seem to be sticking with the traditionally dense legalese, painfully small type and extensive footnotes that make proxy statements so challenging to read and navigate.

Are there exceptions that stand out?

Yes, Coca Cola, Prudential, and Celanese really stand out. I am sure there are others, but I have found these three almost enjoyable to read. They actually seem to care about the reader and want the reader to understand and appreciate how – and why – their compensation programs are put together, and why they paid what they paid.

What stands out about these three proxy statements in particular?

Some of it is very simple. They all depart from the small, dense type and use more friendly, readable fonts and headings. They all use color well and intersperse well designed summary tables and charts which are easy to read and understand. The language is also different. While very thorough, the explanations are helpful and informative and written in relatively plain English. Coca Cola in particular seems to have adopted a no-footnotes standard. Instead of extensive footnotes, they have explanations.

Do you think this kind of disclosure will have an effect on shareholder voting?

That is unlikely, but the communication from these three companies is clear – we are proud of our pay programs; we have nothing to hide; we want you to understand how and why we pay our executives.

Are there other examples of disclosure that you find particularly helpful or useful?

Yes, Kimberly Clark has some excellent charts and tables that show the historical relationship between pay and performance. GE has a very good summary at the beginning of the proxy and shows both reported pay and “realized” pay. Best Buy and AT&T clearly describe the principles they operate by.

If a company was going to change one or two things to improve its proxy disclosure, what would you recommend?

Probably the most helpful thing is to answer most shareholders’ main question: How did you perform and how did that affect compensation? Provide a short, bullet-point summary, either at the beginning of the proxy, or the beginning of the CD&A, stating “here is how we performed…” and “this resulted in an annual incentive payout of X and a long-term incentive payout of Y.”

Secondly, look for opportunities, wherever possible, to summarize the design, goals, measures and payouts of incentive plans in tables, rather than verbally. Make it easy for the reader to understand your pay programs and pay actions. Also, look for opportunities to demonstrate the link between pay and performance.

Is there a trend you would like to see other companies follow in the future?

Yes, but it is not a trend yet. Follow Coca Cola’s example and have a communications expert, instead of a legal expert, prepare the proxy statement.



Don Delves, founder and president of The Delves Group, is a highly sought-after consultant and speaker on corporate governance and executive pay and performance. With over twenty years’ experience in consulting with major corporate boards and executive teams across the country, Delves helps companies ensure that they are getting what they pay for with their compensation dollars. Delves is frequently interviewed and cited as an expert in major media including Fortune, The Wall Street Journal, and National Public Radio. He also recently testified before the U.S. Senate and the FASB on the hotly debated issue of stock option expensing. Delves’ book, Stock Options and the New Rules of Corporate Accountability: Measuring, Managing, and Rewarding Performance (McGraw-Hill, 2003), is considered a “must-read” for board members, executives, and investors.





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