Forum participants generally agreed that the role of the compensation committee should be strengthened and that board compensation committees should pay more attention to pay practices to ensure the delivery of value to shareholders.
In addition, participants discussed evaluation of board compensation committees and suggested developing guidelines for best practice.
Speakers expressed concern that some companies rely too heavily on stock options because they do not have to account for the cost of fixed-price options in their earnings statements.
It was noted that under the optional Financial Accounting Standard 123, stock option costs appear on earnings statements, though few companies use this accounting method that increases transparency for investors.
Another key issue discussed was the need for stronger stock market listing requirements for shareholder approval of option plans.
Some companies issue new stock options with exercise prices at recent lows to shield executives from lower stock prices. In this situation, companies are particularly motivated to avoid shareholder approval requirements and so the potential for dilution increases.
Under current New York Stock Exchange (NYSE) and Nasdaq listing standards, companies can implement plans that do not require shareholder approval. The NYSE is willing to address this issue, but stipulates that the Nasdaq must also comply.
– Camilla Klein firstname.lastname@example.org