April 17, 2014
With mandatory say-on-pay votes in their fourth year, issuers are actively advocating to justify their compensation structures and convince shareholders to vote “yes” to the company’s executive compensation. Through proxy supplements, many companies are asking shareholders to support their say-on-pay proposals either in response to negative vote recommendations from proxy advisors or in anticipation of potential criticism of the company’s pay structure.
MGIC responds to proxy advisor criticism
On April 15, MGIC Investment Corp. responded to negative vote recommendations from leading proxy advisors Institutional Shareholder Services and Glass Lewis & Co. regarding its executive compensation. MGIC argued that the proxy advisors’ concerns “are misplaced.”
In particular, MGIC took issue with ISS’s and Glass Lewis’s conclusions that the discretionary aspect of the company’s annual bonus program does not provide enough transparency to permit “shareholders to determine if pay is reasonably aligned with performance.” According to MGIC, the company clearly disclosed the factors that the compensation committee can consider in exercising its discretion to determine bonuses in its 2014 proxy statement.
The company also stated that its CEO’s bonus has been strongly correlated to MGIC’s performance and that his long-term incentives are aligned with the interests of shareholders. As evidence that its executive compensation is not excessive, the company noted that its CEO’s total direct compensation was in the 23rd percentile of the company’s peer group in 2013.
Looking to counter the negative recommendations by the proxy advisors, which can be highly influential in say-on-pay voting decisions, MGIC urged its shareholders to vote “for” its say-on-pay proposal at the company’s April 24 annual meeting.
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