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More Proxy Disclosure Won't Mean Less Pay
Pearl Meyer & Partners Survey Also Finds "Plain English" Standard Remains Elusive

NEW YORK – April 8, 2008 – More detailed proxy disclosure of executive pay programs is unlikely to reduce the size of executive pay packages, according to a survey of 124 public companies by independent compensation consultancy Pearl Meyer & Partners (PM&P). The complete study findings are published in PM&P’s second annual Proxies that Make the Grade report (www.pearlmeyer.com).

"Rather than dramatically transforming the compensation landscape, the SEC’s expanded disclosure rules are accelerating ongoing changes in corporate pay programs," says Jannice Koors, Managing Director of Pearl Meyer & Partners. "Boards are looking much more closely at exactly how programs are put together to satisfy demands by investors that compensation for corporate leaders be tied directly to real shareholder value."

Respondents said the biggest result from the expanded proxy rules that went into effect last year will be giving investors a better understanding of pay programs, followed closely by the likelihood of more shareholder activism. Changes in the level of executive pay were ranked third most likely to occur, with respondents divided evenly between whether pay will go up or down.

The firm’s second annual survey of the proxy process also reveals a lack of progress toward the SEC’s goal that compensation disclosures be written in "Plain English." On average, respondents indicated a readability score that puts their companies' filings at about the reading level of a college junior – slightly more difficult than last year’s survey respondents, when the disclosures came in at the reading level of a college sophomore. More than 40% of the companies responding also said their proxies were longer than a year earlier.

Disclosing plan details tricky

Companies have struggled to balance concerns about corporate confidentiality and competitiveness with the SEC’s disclosure mandates. "Reporting performance goals" was rated by survey participants as the most challenging aspect of the proxy process, followed by "a lack of clarity about what the SEC wants" and "disclosure of factors that went into pay decisions." Nearly 20% of companies surveyed said they did not disclose individual or corporate performance goals for bonuses, although 85% did disclose the specific peer companies against which pay was set.

"Companies generally are being held to a high standard by regulators, and performance targets in particular are likely to remain a controversial area of disclosure," says Koors, who noted that the SEC in 2007 went back to many companies after the proxy season and asked for more information.

No "piece of cake"

Developing compensation disclosures in 2008 did get somewhat easier than a year ago, respondents said. On a scale of 1 to 5 — 1 being "a piece of cake" and 5 "horribly painful"— respondents gave the process an average grade of 3.5. That compared to an average rating of 4.2 for 2007, the first year under the new requirements, and 2.2 under the previous reporting rules.

One-third fewer companies graded their own CD&As "excellent" in 2008, a significant decline from the 2007 survey. This year 7.6% rated their CD&As "excellent" while last year 24.4% graded this section of their proxies "excellent."

About the survey

Proxies that Make the Grade includes survey responses from 124 publicly traded organizations. The full report is available at www.pearlmeyer.com.

About Pearl Meyer & Partners
Since 1989, Pearl Meyer & Partners (www.pearlmeyer.com) has served as a trusted independent advisor to Boards and their senior management in the areas of compensation governance, strategy and program design. The firm provides comprehensive solutions to complex compensation challenges for companies ranging from the Fortune 500 to not-for-profits as well as emerging high-growth companies. These organizations rely on Pearl Meyer & Partners to develop programs that align rewards with long-term business goals to create value for all stakeholders: shareholders, executives, and employees. The firm maintains offices in New York, Atlanta, Boston, Charlotte, Chicago, Houston and Los Angeles.

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