The Advisors' Blog

– Fred Whittlesey, Compensation Venture Group

I’m back running my own firm and I have resumed posting thoughts in my “Pay & Performance Blog,” with the latest being this: In the 1990’s and into the 2000’s, employee stock options glittered. When the glitter faded due to market downturns and increasing volatility, new forms of equity compensation emerged to restore the sheen – option exchanges and repricing and restricted stock units. This past week’s market volatility, economic uncertainty, and the contributing factors took away a bit of the remaining glitter.

With widespread concern about equity investments, what has been the newest shining light? Gold. But we can, and in many cases must, compensate employees with equity and we can’t do that with gold…can we?

Beyond the surging price of gold in response to global economic, financial, debt, and currency issues, there are some trends underway not gaining the attention of mainstream media that point to a growing influence of gold as a currency. Does this open an opportunity for considering gold as a form of employee compensation?

While this may appear to be a “fringe” idea, such a view would place the world’s most prominent countries, most sophisticated investors, and a dozen US states on this fringe.

This, of course, is all intended to stimulate discussion.

– My accounting and valuation colleagues will point out the technical issues (with pay linked to a commodity)
– My tax colleagues will poke holes in the court cases and cite the Code
– My legal colleagues will undoubtedly identify all of the reasons that this is a poor idea and the possible liabilities resulting
– My equity plan administration colleagues will curse me for recommending a non-equity form of compensation (can the software platform handle a “restricted gold” award?)
– My survey and proxy data colleagues will wonder where gold would be categorized on a data input questionnaire and in the database. A full value award? Bonus? Other LTI?
– And of course, my corporate governance colleagues will cite the horrendous outcome of decoupling compensation from shareholder value.

Not unlike issues we’ve faced with other “new” pay vehicles, like cash long-term incentive awards.

I’ve provided a few links in this blog that set the stage for what I believe will be a discussion over the next year that will move from what may appear to be a humorous alternative, perhaps even satirical, view to a central discussion point in employee compensation planning – designing, delivering, and measuring pay value if and when the bottom falls out of both the global economy and the US currency.

Some of these links are on sites that are clearly pro-gold, anti-US currency, and even a bit anti-government, but some are a bit more credible. All are factually true. Sources of these excerpts are available at the links.