Talking Points – Changes in Pay Practices

Pearl Meyer, Steven Hall & Partners

1. The Blame Game
    
   • Role of Consultant
   • Real and perceived abuse popularized by the media and cited by critics
     • Continuation of practices, programs and agreements adopted in prior times under different standards (Disney opinion)
     • Recent excesses
        
2. Confluence of Events
    
   • Unintended consequences of regulatory, legislative and activist intervention in executive compensation process
     • SEC disclosure rules, 299, 162m, SOX, 123R. etc.
     • Pay for performance based on stock price or TSR
     • Introduction of annual total remuneration valuation and surveys including stock options
   • Impact of compliant committees, greedy CEOs, cowed HR executives, misuse of peer groups, surveys/marketplace positioning and piecemeal administration
      
3. New Responsibilities of Compensation Committee/Board and All Participants in Pay Process
    
   • Require diligence in new era of corporate governance
   • Re-examine assumptions underlying current executive compensation program (Grasso case)
     • Evolving standards of reasonableness
   • Test compensation philosophy and policies based on corporate mission strategy and performance
   • Assure sound decision-making process
   • Evaluate/review results (effectiveness in attracting, retaining, motivating and rewarding for creation of real value)
   • Add it all up under varying scenarios - Tally Sheet
      
4. New approach to dilution and dilemma of unlimited annual equity grants
    
   • Career equity stake ("Back to the Future")