Many Companies Still Unlikely to Disclose Performance Goals in Their 2008 Proxy Statements, Watson Wyatt Poll Finds

Most Companies to Make Other Changes to Their Proxy Disclosures for 2008

WASHINGTON, D.C., January 24, 2008 – A significant number of large U.S. companies do not plan to disclose performance goals for their executive pay programs in their 2008 proxy statement, according to a poll by Watson Wyatt Worldwide, a leading global consulting firm.

Watson Wyatt found only 42 percent of companies plan to disclose on their 2008 proxy the specific goals used in their executive compensation plans for the 2007 fiscal year. Thirty-one percent of companies have no plans to reveal the goals. The remaining 27 percent are unsure. The Securities and Exchange Commission (SEC) adopted new disclosure rules, effective for the 2007 proxy season, as part of an effort to provide investors with a clearer picture of how a corporation’s executives are compensated. The rules request companies disclose their performance goals, unless providing them would result in competitive harm.

The findings are based on a Watson Wyatt poll of legal, compensation and HR executives at 135 large, publicly traded companies.

“Setting sufficiently challenging performance goals and appropriate corporate performance metrics is an extremely important part of the executive pay process,” said Ira Kay, global director of executive compensation consulting at Watson Wyatt. “The SEC has put significant pressure on companies to disclose their goals so that shareholders can determine if programs are paying for performance. However, companies are still struggling with the decision of whether to disclose this information.”

In addition to demonstrating their reluctance to disclose performance goals, most companies (68 percent) do not plan to change their approach to goal setting. However, a small but growing number of companies (21 percent) intend to modify their compensation programs in response to the SEC rules, a big increase from just 5 percent in a similar 2006 poll. Sixty-three percent of companies have no plans to make changes. The remaining 17 percent are unsure. Also, most companies — 89 percent — say they will alter the compensation discussion and analysis section of their proxy.

The poll also found that a majority of companies continue to believe the rules will not improve company performance. Most of the companies (77 percent) polled say the disclosure rules will not have much effect on corporate performance, a slight increase from last year. However, the number of companies that think the rules will improve performance nearly doubled, from 11 percent in 2006 to 21 percent in 2007.

“While the rules may not have a large impact on overall corporate performance, they are causing companies to rethink and, in some cases, adjust their executive compensation programs,” said Kay. “As the scrutiny of severance, change-in-control provisions and large executive pensions intensifies, companies are likely to continue their focus on more shareholder-friendly ‘core’ pay elements such as performance-vested shares, stock options and short-term incentives with difficult but attainable performance goals.”

For more information on the SEC’s executive compensation proxy disclosure rules, visit www.watsonwyatt.com/execcomp and www.watsonwyatt.com/CDAscorecard.

About Watson Wyatt Worldwide
Watson Wyatt (NYSE, NASDAQ: WW) is the trusted business partner to the world’s leading organizations on people and financial issues. The firm’s global services include: managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; advising pension plan sponsors and other institutions on optimal investment strategies; providing strategic and financial advice to insurance and financial services companies; and delivering related technology, outsourcing and data services. Watson Wyatt has 7,000 associates in 32 countries and is located on the Web at www.watsonwyatt.com.

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Ed Emerman
609-275-5162
eemerman@eaglepr.com