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U.S. companies will respond to proxy advisor voting recommendations, if allowed by SEC

Compensation committees will place greater emphasis on “people” issues in the future, Willis Towers Watson poll finds

ARLINGTON, Va., Jan. 15, 2020 (GLOBE NEWSWIRE) -- The majority of U.S. publicly traded companies say they won’t remain silent if given the opportunity by the Securities and Exchange Commission (SEC) to respond to proxy advisor voting recommendations, according to a poll by Willis Towers Watson (WLTW), a leading global advisory, broking and solutions company. The poll also found that companies and their compensation committees will place greater emphasis on “people” issues over the next few years.

In November, the SEC proposed amendments to its proxy solicitation rules to improve the accuracy and transparency of proxy voting advice. The proposed rule changes would require proxy advisors to disclose any potential conflicts of interest to clients, allow companies to provide feedback on proxy advice (including factual errors) before it is disseminated to institutional shareholders, and permit companies to attach their own hyperlinked statement to the proxy advisors’ recommendations.

A large majority of companies (83%) believe the regulations, if finalized, will cause proxy advisors to be more transparent, and 40% would communicate directly to institutional investors with hyperlinked statements to proxy advisor recommendations if they want to provide further communication on their executive pay philosophy. More specifically, 81% would speak up if they found a factual error; six in 10 (59%) companies consider this to be a big problem. Additionally, if companies disagreed with proxy advisor testing methodology, or if they received against voting recommendations, nearly half (46% and 47%, respectively) said they would provide feedback.

“We expect companies will welcome the rule changes, if enacted, and take advantage of the opportunities to improve their communication with proxy advisory firms,” said Don Delves, North America head of Executive Compensation, Willis Towers Watson. “These proposals are, above all, about greater transparency and clarity around pay issues and recommendations. They could go a long way toward eliminating errors and ultimately help shareholders make informed proxy voting decisions.”

The poll also revealed that companies and their compensation committees will be placing greater emphasis on people issues over the next few years. This comes following an earlier SEC proposal to expand Form 10-K disclosure of human capital measures to enhance shareholder understanding of their importance. More than nine in 10 respondents (92%) say managing human capital resources will be important to their success over the next three years, compared to 71% over the past three years. Additionally, nearly three in four respondents (72%) believe their compensation committees will oversee fair pay and gender pay issues in the next three years, compared to 52% who do so currently. More than half (54%) also say their compensation committees will be responsible for inclusion and diversity issues in the next three years, up from 45%, currently.

“The ongoing push to embrace inclusion and diversity initiatives and other critical human capital issues, such as fair and gender pay, is clearly having an impact at all levels of organizations. And this includes compensation committees. While they historically oversee Total Rewards and succession planning programs, some will broaden their focus to include additional human capital elements of culture, reskilling and wellbeing — and their impact on organizational performance,” concluded Delves.

About the survey

The Willis Towers Watson poll was conducted in December 2019 and reflects responses from compensation and human resource professionals at 105 publicly traded U.S. companies.

About Willis Towers Watson

Willis Towers Watson (WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

Media contact

Ed Emerman: +1 609 275 5162