Pay Governance LLC is an independent firm that serves as a trusted advisor on executive compensation matters.
Our work helps to ensure that our clients' executive rewards programs are strongly aligned with performance and
supportive of appropriate corporate governance practices.
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 →
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 →
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 →
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 →
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 →
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 →
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 →
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 →
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 →
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
Pay Governance Gives Back
Very happy and rewarding day for the Pittsburgh crew. Today the Pay Governance Pittsburgh office contributed 12 frozen Turkeys to the Washington County City Mission in support to its drive to feed local families in need. This follows the team’s volunteering of time to serve meals to the Mission’s residents, contributing extra firm computers to the Mission’s Education and Training Center, and working to enhance this non-profit’s governance structure on a pro-bono basis.
2017 Leading Minds of Compensation, East featuring Diane Lerner, Managing Partner at Pay Governance
A new Equilar report featuring commentary from Pay Governance and Donnelley Financial Solutions analyzes the compensation discussion and analysis (CD&A) section of S&P 100 proxy statements over the last five years. With the average CD&A reaching nearly 10,000 words, the report revealed key strategies in how companies design and communicate pay practices by using alternative pay graphs, checklists and other visualizations that help draw investors to the most important information.
To be redirected to Equilar and download a copy of this important report, click here.
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October 4, 2016
Pay Governance Adds New West Coast Partner
Matt Quarles has joined the firm as a Partner. In this role, Quarles is responsible for working with clients across industries on a wide range of executive compensation issues. He will be based in Los Angeles and has nearly 20 years experience in the executive compensation consulting industry.
Pay Energy®, a new proprietary assessment tool developed by Pay Governance
Pay Energy®, a new proprietary assessment tool developed by Pay Governance LLC, helps companies consider the “drive, discipline and speed” inherent in current programs and in alternative designs that may be evaluated.
“The fundamental philosophy of executive compensation is to ‘attract, retain and motivate’ a talented management team. So it’s concerning when you hear incentive awards are just put in desk drawers until plans mature,” said Pay Governance managing partner John England.