Tag Archives: Executive Pay

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

Did Say-on-Pay Reduce and/or “Compress” CEO Pay?

In the Dodd-Frank Act legislation after the 2008 Financial Crisis, the inclusion of shareholder SOP voting was driven by bipartisan Congressional support to “control executive compensation…” at corporations. In 2009, a former SEC chief accountant said, “Executive compensation at this point in time has gotten woefully out of hand… The time to adopt ‘say on pay’ type legislation is certainly past due.” Politicians, regulators, and some institutional shareholders clearly thought that, “The impetus for passage of Dodd-Frank’s say-on-pay requirement in 2011 focused on remedying ‘excessive’ CEO pay.”
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S&P 500 CEO Compensation Increase Trends

CEO pay continues to be a widely debated topic in the media, within the government, and in the boardroom among investors and proxy advisors. As the U.S. was in the heart of the financial crisis in 2008 – 2009, CEO total direct compensation (TDC = base salary + actual bonus paid + value of long-term incentives) dropped for two consecutive years. As the U.S. stock market sharply rebounded and the economy started to slowly grow again, CEO pay also rebounded. Large pay increases occurred in 2010, primarily in the form of larger long-term incentive (LTI) grants. Since then, year-over-year increases have been fairly moderate – in the 2% to 6% range for the period 2011-2015. Continue reading

We are pleased to announce: “Pay Governance has Released an Essential New Book on Executive Compensation”

Pay Governance releases an Essential New Book on Executive Compensation. Continue reading

ISS Releases U.S. Executive Compensation Policies and U.S. Equity Compensation Plans FAQ Documents

ISS released their U.S. Executive Compensation Policies and U.S. Equity Compensation Plans FAQ documents. These documents are intended to provide greater detail on the updates ISS has implemented to their executive compensation and equity plan policies for annual meetings occurring after February 1, 2017. This alert provides a summary of the key updates as disclosed in the FAQ material. Continue reading

Lower Performance for Target Pay? How Companies Address Pay-for-Performance Alignment in Times of Declining Performance

Ensuring alignment between pay and performance is challenging enough when a business is performing well. But what about during times of an industry or economic downturn, waning company performance, a shift in strategic business focus, or a period of investment when performance expectations are not as high as in recent years? Today, institutional investors and proxy advisors are hyper-focused on pay-for-performance alignment and, by extension, the rigor of performance goals. Any indication of declining incentive goals year-over-year can bring heightened scrutiny, negative commentary, and can increase the likelihood of an “against” Say-on-Pay (SOP) vote recommendation from proxy advisors. What alternatives exist for a company facing the prospect of performance expected to be lower than the prior year? What should be considered in setting incentive plan goals and what can be expected from shareholder watchdogs who closely examine performance goals and alignment with shareholders? Continue reading

Ensuring the Executive Pay Program is on a Strong Foundation

In the current environment with Say on Pay votes and intense media scrutiny, it can be difficult to stay centered on the foundation of the executive pay program. While it is important to be aware of external views and commentary on “best practices”, companies must ensure that their executive pay program is built on a rock-solid foundation. In terms of the building blocks of the pay program, most companies apply a “market median” compensation philosophy, but there are a wider range of practices for the peer group, performance metrics and assessing pay-for-performance alignment. Continue reading

Recent OSHA Ruling May Impact Ability to Use Safety as an Incentive Metric

Some companies in the oil and gas, energy, utility, and manufacturing industry sectors have included safety compliance and/or improvement as a performance metric in their incentive compensation plans. Safety as a performance criteria appears frequently in incentive compensation plans for both executives as well as broad-based employee groups. Now, regulators have raised a potential problem with the use of safety as a performance metric. Continue reading

Resisting Homogenization of the Executive Pay Program – Update Motivating the executive team while satisfying shareholders and achieving successful Say on Pay votes

In today’s environment, with annual Say on Pay (SOP) votes, intense external scrutiny and the need to strongly align pay with performance, it is increasingly important for companies to be confident in their executive pay program. The foundation of a sound executive pay program is built on the company’s business strategy and talent needs, which, collectively, must be achieved in order to create shareholder value. Continue reading

The SEC’s Mandated CEO Pay Ratio in the Context of Income Inequality:Perspectives for Compensation Committees

At a recent Compensation Committee meeting, a director remarked, “As we discuss our CEO’s target compensation for next year, we need to remember that there is an ongoing debate about income inequality.” Income inequality and executive compensation are two of the most controversial issues in modern American economic and political discourse. The forthcoming mandated disclosure of the CEO pay ratio will link these two issues directly in the boardroom.

How much of the increase in inequality has been caused by CEO pay, and is this a failure of corporate governance?

This Viewpoint will provide some insights for directors and others into the answers to these questions in the context of the SEC’s mandated disclosure of the ratio of CEO to median employee pay. Continue reading

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