What is the Appropriate Amount of Compensation for CEOs

Practice Pointers from the Task Force

a. Total Compensation

• Tallying Top Executives’ Total Compensation
  —Fred Cook, Frederic Cook & Co.
• The Challenges of Tallying It Up
  —Anonymous Task Force Member
• The Need for the Compensation Committee to Fully Understand the Compensation Arrangements it is Approving
  —Althea Day, Morgan, Lewis & Bockius LLP
• Ways to Reign in CEO Pay: Increase Holdings by Largest Outside Shareholder or Have Comp Committee Hold More
  —Anonymous Task Force Member
• A Sample Tally Sheet – And Analysis of How to Use It
  —Richard Wagner, Strategic Compensation Research Associates (SCRA)
• A Simple Approach to Understanding How Components of CEO Pay Fit Together
  —Richard Wagner, Strategic Compensation Research Associates (SCRA)
• Comprehensive Tally Sheet (Excel Spreadsheet)
  —Matt Ward, Aon Compensation Consulting & Joshua Lurie, eComp Data Services Groups
• Model Compensation Committee Report
  —Courtesy of CompensationStandards.com
• $800 Million in CEO Pay - Is That Reasonable?
  —Paul Hodgson, The Corporate Library

b.  Compensation Policies/Philosophies

• Understanding Pay-for-Performance
  —Mark Van Clieaf, MVC Associates International
• Incorporating Performance and Trends into Compensation Planning
  —Beverly Aisenbrey, Frederic W. Cook & Co.
• How Much Pay For How Much Performance?
  —Don Delves, The Delves Group
• Solving the Pay Gap Crisis
  —Matt Ward, Aon Consulting
• Rethinking Executive Pay: Don’t Create Another Giveaway
  —Claude Johnston, Pearl Meyers & Partners
• Compensation Hot Topics Survey
  —Robbi Fox, Hewitt Associates
• Companies With "Hold 'Til Retirement" Guidelines
  —Robbi Fox, Hewitt Associates
• Reconciliation of Performance Data for Incentive Purposes to GAAP Financials
  —Fred Cook, Frederic W. Cook & Co., Inc.
• The Institutional Investors' Point of View
  —Paul Hodgson, Senior Research Associate of The Corporate Library
• Best Practices from Institutional Investor Perspective
  —Paul Hodgson, Senior Research Associate of The Corporate Library

c. SERPs, Perks, Severance, Options, Etc.

• What Compensation Committees Should Consider When Reviewing a Change in Control Package
  —Anonymous Task Force Member
• A Lesson in Stock Option Plan Drafting
  —Mike Melbinger, Winston & Strawn LLP
• How to Understand the Benefits Provided by SERPs
  —Marian Tse, Goodwin Procter LLP
• Executive Pay Trends and Golden Parachute Tax
  —David G. Johnson, Ernst & Young LLP
• De-Mystifying SERPs
  —Anonymous Task Force Member
• The Risks of SERPs
  —Anonymous Task Force Member
• The Problem with Today’s Severance Payments: Conflicts of Interest and More
  —Paul Hodgson, The Corporate Library
• Know The Cost Of Golden Parachute Gross-Up Provisions
  —Linda Griffey, O'Melveny & Myers LLP
• SERP Design and Value/Cost Considerations
  —Bill Gerek, Hay Group
• The Hidden Costs of SERPs & Deferred Compensation Arrangements - And What to Do About It!
  —Diane Doubleday, Mercer Human Resources Consulting
• Use of Corporate Aircraft and the Method for Determining Value Attributed to That Use
  —Beverly Aisenbrey, Frederic W. Cook & Co.
• Plane Perks
  —David Cay Johnston, NY Times Reporter
• Timing and Proxy Disclosure of Stock Option Grants
  —Fred Cook, Frederic W. Cook & Co., Inc.

d. Contract Issues

• The Problem with Evergreen Agreements
  —Anonymous Task Force Member
• Taking from the King: The Mutual Need and Practical Tips for Rolling Back or Modifying Excessive CEO Compensation
  —Eric Keller, Paul Hastings Janofsky & Walker, LLP
• Reexamine Circumstances Under Which Compensation May Be Denied or Withheld
  —Anonymous Task Force Member
• Consider Whether Definition of "Cause" Should Include Failure to Cooperate With Governmental Investigation
  —Anonymous Task Force Member
• The Use of Clawback Provisions: Putting a Price on Disloyalty
  —Louis Rorimer, Jones Day

e. Liability Issues

• IRS Cracks Down on Corporate Deductions Taken for Executive Compensation in Excess of $1 Million
  —Karen Krueger and Jeremy Goldstein, Wachtell, Lipton, Rosen & Katz LLP
• Understanding Shareholders’ "Pay-for-Failure" Complaints
  —IRRC’s Corporate Governance Highlights (August 6, 2004 edition)
• Executive Accountability and Excessive Compensation: A New Test For Director Liability
  —Mark Van Clieaf, MVC Associates International
• Calpers Launches Multi-Faceted Assault on Excessive Executive Compensation Practices
  —IRRC’s Corporate Governance Highlights (November 19, 2004 edition)

g. Internal Pay Equity

• Dupont Compensation Committee Report excerpt (2005)
• Fifth Third Compensation Committee Report (2005)
• Intel Compensation Committee Report (2005)
• Morgan Stanley's Compensation Committee Report (2005)
• Scientific Applications International Corporation Compensation Committee Report (2005)
• Whole Foods Market Compensation Committee Report (2005)
• El Paso’s 2003 Shareholder Proposal

h. Media Articles [Conference07/html/materials/docs/Media/02-inc.htm]

Firm Memos

1. Equity and Deferred Compensation
   • "Best Compensation Ideas, Features, Packages," Part I and Part II George Paulin, Frederic W. Cook & Co., The Corporate Counsel and The Corporate Executive
   • "Freezing the Golden Parachute," Baker & Hostetler (12/05)
   • "Fair Value Transfer: Alternative Approach to Measuring Aggregate Long-Term Income Grant and Value," Frederic W. Cook & Co. (2/05)
   • "Regulatory Update," Frederic W. Cook & Co. (8/12/04)
   • "Novel Ways to Structure Pay Packages," Joe Bartlett, Fish & Richardson LLP (6/23/04)
   • "Are Boards and CEOs Accountable for the Right Level of Work?" MVC Associates International (5/04)
   • "Directors' and Officers' Liability The SEC's Temporary Escrow Authority," Simpson Thacher & Bartlett (4/14/05)
   • "Stock Plan Design," Wachtell Lipton Rosen & Katz (1/21/04)
   • "Changing Equity Compensation Rules – Is Your Company Ready?" Palmer & Dodge (10/9/03)
   • "Long-Term and Stock-Based Grant Practices for Executives," Frederic W. Cook & Co. (9/03)
   • "Stock Ownership Policies," Frederic W. Cook & Co. (9/03)
   • "Option Expensing Update: FASB’s Preliminary Decisions and Strategies for Cost Mitigation," Mellon Human Resources & Investor Solutions
   • "Reconsidering Long-Term Incentive Vehicles," FPL Associates

   
    

2. Proxy Guidelines on Compensation
   • "Perquisite Disclosures Under Fire," McGuire Woods (5/6/05)
   • "Important Lessons from the SEC Enforcement Action Against Tyson Foods Regarding Disclosure of Perquisites" Preston Gates Ellis (5/4/05)
   • "Tyson Foods and Former Tyson Chairman Settle SEC Action," Shearman & Sterling (5/2/05)
   • "Executive Compensation - Perquisites," Wachtell Lipton Rosen & Katz (5/2/05)
     
   • "SEC's Beller's Perspective on Role of Compensation Committee and Proxy Disclosure Requirements," Watson Wyatt (12/04)
   • "ISS Adds Pay for Performance to Proxy Voting Guidelines," Mercer Human Resource Consulting (1/24/04)
   • "ISS 2004 Policy Changes," Frederic W. Cook & Co. (1/16/04)