In the current issue of IAM magazine (Vol 48, Jul/Aug 2011), Steel City Re's Nir Kossovsky observes that a strong reputation creates freedom to operate. No where is this more important to many managers than in the area of executive compensation. As IAM summarizes, although it is intangible, reputation allows businesses and executives operational freedoms that lead to very tangible results.

Now we have this from the National Association of Corporate Directors newsletter, the NACD Director's Daily (1 July 2011):

"Companies may not have to abide by shareholder advisory say-on-pay votes mandated under the Dodd-Frank Act," the Wall Street Journal (June 30, Chasan) notes, "but lawyers specialized in securities class action suits have already brought a half dozen suits against directors and executives for ignoring their results." A number of firms have tried to settle the claims quickly. Among the companies that have settled include KeyCorp and Occidental Petroleum. Others facing suits are Beazer Homes, Hercules Offshore, and Umpqua Holdings. Law firms also have investigations pending at Dex One, Masco Corp, and Stanley Black & Decker, among others. "In addition to legal fees," the Journal states, "the suits could impact companies more widely in areas like the cost of director and officers liability insurance, and how much compensation consultants charge."

Huygens suggested previously (1 July 2010) that low reputational rankings might have explained the say-on-pay verdicts at KeyCorp. Taking now all into account, perhaps executives will find the arguments to enhance corporate reputation that much more compelling?