Tag Archives: Executive Compensation

SEC Takes Back Comfort Letters Provided to Two Proxy Advisory Firms

In 2004, the Securities and Exchange Commission’s (SEC) Division of Investment Management issued letters to two proxy advisory firms, Egan-Jones Proxy Services and Institutional Shareholder Services (ISS), that assured mutual fund managers they could rely on the vote recommendations of the two firms. On September 13, 2018, the SEC Investment Management staff decided to rescind the two letters. Continue reading

IRS Issues Section 162(m) Guidance

Section 162(m) was added to the Internal Revenue Code (IRC) in 1994 in what was seen as a reaction to escalating executive pay. Commonly referred to as the “$1 million pay cap,” Section 162(m) denied subject companies the corporate tax deduction for compensation paid to the CEO (referred to as the Principal Executive Officer or PEO) and other proxy-named executive officers (NEOs) that exceeded the $1 million statutory limitation. Exceptions to the amount of covered compensation pursuant to Section 162(m) were permitted if such compensation was deemed “performance-based” under shareholder-approved plans. Continue reading

Share Buybacks and Executive Compensation – A New SEC Commissioner Offers a Perspective

Robert J. Jackson, Jr. is a new member of the United States Securities and Exchange Commission (SEC), having been appointed by President Trump in January 2018. Commissioner Jackson previously served as a New York University School of Law professor, where he taught in the areas of corporate law, corporate governance, corporate finance, and executive compensation. Continue reading

The CEO Pay Ratio: How Should Compensation Committees Evaluate Their Ratios? Measuring the Impact of “Median Employee Pay”

In our study of 389 S&P 500 companies, the median CEO pay level is $12.1 million, consistent with many other studies. The median of the “median employee pay” level, as disclosed in the ratio section of the proxies, is $70,129. This latter value has surprised many observers, as it is much higher than expected and — more importantly — 39% higher than the average U.S. private sector salary of $50,620 (142 million employees). This employee pay level was previously unknown. Continue reading

CEO Pay As Governed by Compensation Committees: The Model Works!

Last year, two articles in the Wall Street Journal and Harvard Business Review criticized the overall CEO pay model at U.S. companies. The authors of both articles, Robert Pozen and S. P. Kothari, link their criticisms to shortfalls in executive compensation governance (e.g., poor disclosure, misleading metrics, and selecting inappropriate peer groups) that have been allowed and/or encouraged by Board Compensation Committees. In this article, we address these critiques. Continue reading

Optimizing the Retention Impact of the Executive Pay Program

Talent retention is one of the executive pay program’s most important objectives. In order to minimize situations when retention is an issue with the pay program-rather than one of its characteristics-it is important to ensure the core elements are well designed and operating effectively. A strong pay program foundation includes target pay opportunities at market-competitive levels, incentive plans understood by participants, and payouts commensurate with performance. Continue reading

In Certain Jurisdictions, Companies May Be Prohibited from Requesting or Providing an Employee’s Salary History

New York City is the latest legal jurisdiction to prohibit companies from inquiring about a prospective employee’s compensation history during the recruiting process, joining 2 other cities (San Francisco and Philadelphia), 4 states (California, Delaware, Massachusetts, and Oregon), and 1 other jurisdiction (the Commonwealth of Puerto Rico) in implementing such legislation. Continue reading

Tax Cuts and Jobs Act Would Significantly Impact Executive Compensation Arrangements

On November 2nd, the House Ways and Means Committee introduced its tax reform bill, referred to as the ‘Tax Cuts and Jobs Act.’ Our initial review of the bill identified a few provisions which could have significant implications for organizations’ compensation and incentive programs. Continue reading

Does Your Pay Program Balance Pay Energy™ and Pay Risk?

Incentive plans have the potential to drive executives towards achieving superior results for their companies and investors. At the same time, real and perceived risks in these programs can either blunt the potential drive of management or encourage excessive risk taking. A key goal in well-designed executive incentive programs is to motivate executives to take the actions necessary to achieve strong results for shareholders while mitigating the motivation to take excessive risks. Continue reading

Ethical Boardroom | Activist shareholders and executive compensation

Patrick Haggerty and Ira Kay authored an article in this quarter’s Ethical Boardroom. The article can be read by clicking on the link. https://ethicalboardroom.com/activist-shareholders-and-executive-compensation/ September 28, 2017

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