L-Blast | May 2019
Dear All,
It’s hard to believe school is almost out and summer is around the corner! Work has been intense here at NFPCC but as proxy season winds down we have some time to refocus our energies for what lies ahead. This month we bring you an original NFPCC article regarding CEO pay in the energy sector. We analyzed 35 Exploration & Production companies to answer the question: Did CEOs earn what the proxy statement said? The results are interesting to say the least, and surprising to some.
The second article from our friends at NACD shares key takeaways from their 2018–2019 Director Compensation Report, which indicates an increase in board of director pay but a decrease in non-wage benefits and committee meeting fees. A great read with recommendations on how to align shareholder and director interests.
The next piece is on managing risk in family-owned businesses. For most family businesses, governance and risk management often gets dismissed due to years of “tradition” in doing things a certain way. This article sheds light on the effects weak governance can have, as well as the strong operational and competitive benefits that can result when sound governance practices are put in place.
We are always here to help, don’t hesitate to reach out to us for assistance with your shareholder outreach initiatives. We appreciate each and every one of you and as always, let us know if there is a particular subject you’d like to learn more about.
Sincerely,
The NFPCC Team
A Proxy Statement is Not a Bank Statement
If you do an internet search for “CEO pay”, you get 807 million hits, and most of those are “hits” on CEO pay. Some are warranted, and many are not.
Nowhere is this truer than CEO pay in the energy business in 2019. Many investors rotated out of public energy investments over the past several years, in spite of the fact that 2018 was an all-time record high for free cash flow generation by E&P companies1. The result is E&P stock prices have dropped significantly the past three years.
BOARD LENS
Report Shows Steady Increase in Board Pay, Decrease in Specialized Fees (April 27, 2019)
Compensation for directors across all public company market caps increased 2 percent between 2017 and 2018. This according to the 2018–2019 Director Compensation Report, the 20th annual report published in collaboration with leading compensation consultant Pearl Meyer, which found that compensation is rising steadily for directors, but not by as much as it increased from the previously studied term. Elsewhere, the offering of special non-wage benefits, for instance, and of committee meeting fees, has shown a weakened front.
For Family Businesses, Strong Governance is the Secret to Managing Risk
In my experience, family-owned businesses generally view governance like castor oil: While it must be swallowed to keep you healthy, it’s still unpleasant. For many owners of family businesses, governance and risk management seem more of an issue for their larger counterparts like Cargill, Kohler and S. C. Johnson, global giants held accountable to a wide array of stakeholders.
A frequent comment by family business owners – “We’ve always done it this way” – goes a long way to explain this casual attitude. But that viewpoint ignores the significant operational and competitive benefits that good governance and strong risk …
A little motivation…
Words of Wisdom
“Success is the sum of small efforts, repeated day in and day out.”
– ROBERT COLLIER
Contact Us for Help with Your Shareholder Outreach Initiatives
Our Say on Pay specialists are ready to assist you in shareholder outreach to educate investors about the strategy and reasoning behind executive compensation plans and clear any confusion and misconceptions. A properly structured outreach plan can help ensure positive voting outcomes while strengthening your governance practices overall.
GET THE MOST OUT OF YOUR 2019 SHAREHOLDER OUTREACH ENGAGEMENTS.
281.378.1350 GET HELP NOW
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