We recently released our latest reports on stock ownership guidelines for officers and directors. For officers, we found that 80.6 percent of Fortune 250 companies disclosed ownership guidelines, alone or in combination with holding requirements, in 2009. That’s a small rise from 2008, when 78.3 percent of companies disclosed them. In addition, 40.1 percent of F250 companies disclosed holding requirements, alone or in combination with ownership guidelines, in 2009. It’s a big jump from 2008, when 35.5 percent of companies disclosed them. Most of this rise is attributable to plans that use ownership guidelines and holding requirements in tandem. And the median value of target stock ownership for CEOs was approximately $6 million in 2009, roughly the same as in 2008.
On the director side, our new study found that 84.0 percent of Fortune 250 companies have some kind of ownership policy–an increase from 2008, when 82.1 percent had one. At companies with an ownership policy, the prevalence of ownership guidelines rose from 77.5 to 79.3 percent, while the prevalence of holding requirements rose from 19.2 to 19.8 percent. The median value of the target stock ownership level for directors was $262,850 in 2009.
For those seeking CLE credit, here’s a list of states in which credit is available for watching the Conferences live in Chicago and by video webcast. Note that the list is broken out for each of the Conferences – and note that a few states are listed as “pending” (check back to determine if the Conferences are approved in those states as we will be updating the list).
Act Now: As happens so often, there is now a mad rush for folks to register for these Conferences that begin on Monday, September 20th. With an aggregate of over 50 panels (including the “18th Annual NASPP Conference”), if these Conferences don’t help get you prepared for the upcoming proxy season of change, nothing will. You can either register for the three days of the “18th Annual NASPP Conference” (in Chicago) – or the two days of the “5th Annual Proxy Disclosure Conference” & “7th Annual Executive Compensation Conference” (in Chicago or by video webcast) or a combination of both. Note that we just extended the length of the last panel of the” 5th Annual Proxy Disclosure Conference” to cover proxy access in more depth. Register Now.
The September-October Issue of The Corporate Executive includes pieces on:
– A Legacy of the Bush Administration Comes to an End: Planning Now for 2011 Tax Rate Increases
– Which Tax Rates Are Really Changing (and for Whom)?
– Paying 2011 Bonuses in 2010?
– Accelerating Vesting for Restricted Stock and Unit Awards
– Section 83(b) Elections for Restricted Stock
– Possible Actions for Non-Qualified Stock Options
– Internal Pay Equity–Getting a Head Start
– Institutions and Proxy Advisors Will be Focused on Internal Pay Equity
– Respected CEOs Weighing In
– How Should Internal Pay Equity be Used by a Compensation Committee?
– What Is the Right Ratio – Why the Historical Analysis Is So Important
– Your Upcoming Proxy Disclosure – An Opportunity for the Company to Tell Its Own Story
– How to Make the Calculations – How to Craft the Proxy Disclosures
A few months ago, the SEC issued this litigation release to note that the US District Court for the Northern District of California had, among other things, ordered forfeiture of bonuses and stock sales pursuant to Section 304(a) of the Sarbanes-Oxley Act against Carl Jasper, the former CFO of Maxim Integrated Products, for his role in a fraudulent stock options backdating scheme.
I swear I blogged about this Railpen Investments Research report last year but can’t find the entry – so you should check out what Jim McRitchie recently blogged about it to get an insight into the UK experience with say-on-pay. And below is something that Subodh Mishra of ISS’ Governance Institute wrote a few months back:
Shareholders of SIG voted against the specialist construction supplier’s remuneration report at a May 13 annual meeting, citing concerns over pay increases along with a decline in share price. The tally is the second majority vote against a U.K. remuneration report this year, according to ISS records, and contrasts with 2009 when six companies saw the defeat of such advisory votes.
Investor opposition likely stemmed from a 14.6 percent increase in CEO Chris Davies’s base salary following a year when revenues and share price significantly declined and the company decided not to pay a dividend to its shareholders. Acknowledging the concerns underlying the vote, Chairman Les Tench said the board would give sufficient weight to the opposition voiced by investors and consult with them to address concerns.
“I am extremely concerned about this result and take it very seriously,” Tench said in a statement released after the meeting, adding that he understood the vote related to the increase in Davies’s salary though he did not believe it was excessive. However, Tench noted, “I recognize the strength of shareholder opinion on this issue and intend to consult further with our shareholders to understand their concerns fully.”
Meanwhile, shareholders in industrial materials firm Cookson voted narrowly to approve the remuneration report, with just 50.98 percent investor support, according to the Reuters news service.
Investors in Australia this week similarly lodged the market’s second majority vote against an advisory remuneration report resolution when shareholders of Boart Longyear opposed the drilling products manufacturer’s pay policies and practices at a May 11 meeting. Most of Australia’s annual meetings are held in October and November, meaning that votes against remuneration reports later this year may trump the five evidenced in 2009.
Yesterday, the NY Times ran this opinion piece, which is repeated below:
The Financial Times reported this week that lawyers for corporate America are warning of a “logistical nightmare” from a provision in the new financial reform law that requires companies to disclose the ratio between a chief executive’s pay package and that of a typical employee. The lawyers say that the ratio would be unfairly complex to calculate and could encourage false comparisons. But the real problem is that C.E.O.’s and corporate boards would have to justify — to shareholders, employees and the public — what are sure to be some very large gaps between pay at the top and pay for everyone else.
Federal filings already tell investors how much top executives make. The median salary of a Standard & Poor’s 500 chief executive last year was $1.025 million, and the median total pay package including bonuses and nonsalary income was $7.5 million, according to Equilar, an executive compensation research firm. The median pay of private-sector workers in the United States was about $30,000 in 2008, the most recent year of data. With benefits added in, that comes to roughly $36,000.
Without company-specific data, however, it is impossible to measure and judge the effect of pay structures on companies and the broader economy. It is clear that C.E.O. pay has skyrocketed while workers’ pay has stagnated; it is also clear that skewed pay and rising income inequality correlate to bubbles and crashes.
How does the pay gap between the boss and the workers figure into performance? Are companies efficiently providing goods and services or are they being run for the enrichment of the few? Disclosure of the gap could help provide answers and in the process, help investors, policy makers and the public understand the forces that are shaping business and the economy.
It is up to the Securities and Exchange Commission to develop rules to calculate employees’ total compensation, including whether to include workers outside the United States. The best approach would be to measure the pay gap both against the global work force and the American work force, because company performance — and the impact of corporate decisions on investors and the economy — are tied to each number.
Corporate opponents of the law insist that pay-gap disclosures would be misleading. A company that outsources its low-wage work, for example, could have a smaller gap than a company that employs low-wage workers, even though the outsourcer is not necessarily a better-run company. That misses the point. The point is to calculate, disclose and explain the gaps as they exist for the way a company does business.
This recent memo from Towers Watson – entitled “Are Golden Parachutes Losing Their Luster?” – analyzes how use of golden parachutes has changed pretty dramatically for a hefty 25% of those companies in the Fortune 500 that started the past year with a parachute. Check it out.