Compensation is sure to be among the biggest issues during this year’s proxy season.

True, there aren’t a lot of new disclosure requirements boards need to worry about right now. There are several new provisions mandated by Dodd-Frank, but they were delayed until later this year, after proxy season most likely. Still, there will be quite a bit of fallout stemming from last year’s say-on-pay votes. In fact, companies will be required to spell out in their CD&A’s how they evaluated the results of the vote in 2011 and how that evaluation played into the formulation of executive compensation policies in 2012.

It’s fair to say that shareholder activists are girding for war, especially when it comes to financial services companies. Despite the fact that pay has been drastically cut, some institutions will press for more, such as tougher clawback provisions and other changes.

So what’s a company to do? We can only hope compensation committees diligent on this issue all year. But even if you were, it’s hard to call how shareholders will vote in this season of discontent. It’s doubtful we’ll see any plans rejected outright. But a high number of no votes will be bad news and cause for more pressure on directors and compensation committees. A good place to start is with the updated guidance from proxy advisory firm ISS, which you want on your side.

In a nutshell, ISS intends to recommend yeah or nay on compensation committee members (or, in some cases, the full board) and the management say-on-pay proposal on a case by case basis if the company's 2011 say-on-pay proposal received less than 70 percent of votes cast, taking into account the company's response to the low support, including:

• Disclosure of engagement efforts with major institutional investors regarding the issues that contributed to the low level of support.
• Specific actions taken to address the issues that contributed to the low level of support.
• Other recent compensation actions taken by the company.

Other big issues include whether the issues raised are recurring or isolated, the company's ownership structure, and whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness

Hopefully,  you’ve thought all this through already. If not, get ready! -Jim