The deferral is over. For the past two proxy seasons, public companies have had to abide by SEC rules regarding shareholder approval of executive compensation -- so called "say on pay" votes -- under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The exception was smaller reporting firms, those whose 2010 public float was less than $75 million.

It's time to say goodbye to the bye. For annual meetings that occur on or after Jan. 21, 2013, smaller public companies subject to federal proxy rules must comply with the same provisions as their larger brethren. That means under Security and Exchange Commission rules, even smaller firms must provide shareholders with an advisory vote on executive compensation at least once every three years.

The vote is non-binding. However, it is important, says Gregg Passin, partner and U.S. executive compensation practice leader at consulting firm Mercer. "It's an incredibly important part of governance," he says. "Boards [of directors] take it seriously." 

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And not just boards. So, too, do proxy advisory firms and institutional investors. Poor outcomes can have implications for other votes, adds Stephen C. Zoellick, senior director and executive compensation consultant at BDO USA. 

That said, a large majority of companies have received significant levels of shareholder support in their say-on-pay votes. For more than two-thirds of the companies that held votes in the past two proxy seasons, the percentages of shareholders who approved the compensation packages were 90% or greater, according to Equilar, an executive compensation data firm. Fewer than 2% of say-on-pay votes failed, which means they garnered less than 50% of shareholder support. International Game Technology (IW 500/367) and Actuant (IW 500/441) were among manufacturers with failed votes in 2012. 

Mercer's Passin says he has not observed an impact on executive pay levels as a result of the say-on-pay vote. However, companies have made changes to compensation programs either as a result of shareholder votes or in anticipation of shareholder votes, he adds. Non-core elements of compensation packages, such as perquisites, are an area under greater scrutiny, as are change-in-control provisions of employment contracts, Zoellick says. 

The experts identified best practices for companies participating in their first say-on-pay vote. Several boil down to this: Communicate better. Tell the story of the compensation package clearly and concisely in the proxy statement's compensation discussion and analysis, and make the case for why and how the pay program supports business strategy. Zoellick advises emphasizing the link between pay and performance. 

Pay heed to the guidelines of institutional investors and advisory firms, they say.

And for a more investor-friendly executive pay program, link annual bonuses and long-term incentives to goals that drive growth, Zoellick says. Minimize pay for tenure.