PotashCorp (TSE, NYSE:POT) is tackling the touchy topic of executive pay with a web-based communication campaign that includes a shareholder survey, a series of videos, and pay disclosures you can easily tweet or Like on Facebook.
The Canadian company, which voluntarily adopted an annual say-on-pay vote two years ago, yesterday announced the availability of a new shareholder survey and director videos explaining the company’s pay practices. It did so in a note that was posted on its website and distributed to its Twitter account and Facebook page.
via PotashCorp wants you to “Like” its pay disclosures | IR Web Report, 3/4/2011.
Dominic Jones walks readers through one of the most innovative efforts I’ve seen to date to educate shareowners about a company’s compensation practices. I think I’ve seen the near-term future of CD&A’s, HTML proxy statements, online surveys and use of social media to better ensure favorable say on pay votes for management.
I took Potash’s survey (you have to say your a shareholder or else it kicks you out). Although I didn’t click on enough links to satisfy myself that executives at Potash are paid reasonably, I did note that they hit the right buttons and presentation was great. Drilling down further might yield issues though. For example, as I recall, they had a clawback policy that calls for the recoupment of unearned compensation that results from misconduct by an executive that causes the company to restate its financial statements.
That doesn’t go far enough, as far as I’m concerned. I would recommend a “no-fault” clawback provision, which would require recoupment following a determination that the prior achievement of performance goals was based on incorrect data. Like clawback provisions triggered by any restatement, a “no-fault” provision addresses the argument about the unfairness to shareowners that results from allowing executives to keep compensation awarded on the basis of performance targets that were not actually met. However, a “no-fault” provision would also require recoupment in circumstances where incorrect data result from an innocent mistake, not fraud or misconduct or where applicable accounting standards would not require a restatement of financial statements. Why should an executive get a bonus for a target not actually met?
Although I can’t fully endorse Potash’s pay plans (primarily because I haven’t done the analysis), they certainly deserve credit for presentation. I’ve seen the future. It is in Canada.
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