The Advisors' Blog

This blog features wisdom from respected compensation consultants and lawyers

Monthly Archives: August 2016

August 31, 2016

CFO Pay Trends: Higher & More “At-Risk”

John Jenkins

A recent Equilar blog reviewing S&P 500 CFO pay trends notes rising overall compensation and a strong push for performance based awards. Median CFO compensation has grown substantially in recent years, reflecting the growing responsibilities of senior financial executives:

The chief financial officer (CFO) role has evolved alongside overall economic growth, political dynamics and corporate governance reform, and these financial executives are paramount to every company’s success. In response to these growing responsibilities, median CFO reported total compensation in the S&P 500 increased 18.7% from $2.9 million in 2011 to $3.4 million in 2015.

As overall CFO compensation has grown, so has the portion of pay that’s at-risk:

A stronger push toward pay for performance brought on by shareholder scrutiny, Dodd-Frank and Say on Pay has led to more CFO pay being at-risk, as opposed to fixed. Overall, 78.7% of S&P 500 companies granted performance awards to their CFOs in 2015, up from 64.1% in 2011. Meanwhile, time-based options awards became less prevalent over the study period, with the number of companies offering this type of equity decreasing by nearly 20%.

August 29, 2016

Our Executive Pay Conferences: 10% Reduced Rate – Only Two Weeks Left!

Broc Romanek

Here’s the registration information for our popular conferences – “Tackling Your 2017 Compensation Disclosures: Proxy Disclosure Conference” & “Say-on-Pay Workshop: 13th Annual Executive Compensation Conference” – to be held October 24-25th in Houston and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days.

Discounted Rates – Act by September 9th – Only Two Weeks Left!: Huge changes are afoot for executive compensation practices with pay ratio disclosures on the horizon. We are doing our part to help you address all these changes – and avoid costly pitfalls – by offering a reduced rate to help you attend these critical conferences (both of the Conferences are bundled together with a single price). So register by September 9th to take advantage of the 10% discount.

August 26, 2016

Holy Cow! The SEC Requests Comment on Item 402!

Broc Romanek

Yesterday, as the latest in Corp Fin’s disclosure effectiveness project, the SEC posted an 8-page “request for comment” on the disclosure requirements in Subpart 400 of Regulation S-K. The scant press release named three topics in particular – management, certain security holders & corporate governance – but it didn’t use the buzz word of Item 402’s executive compensation (probably because the title of Subpart 400 in S-K is “management, certain security holders & corporate governance”).

Item 402 is indeed open for comment! In fact, Item 402 was already open for comment as the SEC made clear in the S-K concept release that it welcomed comments on all aspects of S-K (even though that release focused on business & financial information). Some from the SEC have been saying that Item 402 is a lower priority for the disclosure effectiveness project.

Maybe if enough folks request changes in the 402 area, the SEC will propose something there – but I doubt it given the magnitude of that undertaking & the fact that Item 402 got its last overhaul a mere decade ago (which is why Item 402 is a lower priority for this project). The “request for comment” notes that the comments received will assist the SEC in “carrying out the study of Regulation S-K required by Section 72003(a) of the FAST Act” – that’s probably why the SEC decided to issue this “request for comment” on top of the earlier S-K concept release (as Ning Chiu explains in her blog).

As I have blogged before, we have no idea why this is a “request for comment” – and not a “concept release” – but given the short length of the “request for comment,” the difference must allow the SEC to avoid the regulatory trappings of a full-blown concept release.

August 25, 2016

Shareholder Approval: NYSE Revises Bunch of Its “Equity Compensation Plan FAQs”

Broc Romanek

As Mike Melbinger blogged yesterday, the NYSE revised its “Equity Compensation Plan FAQs” recently for the first time in nearly a decade. The revised FAQs are the ones that have “Clarified August 18, 2016” written beneath them. As Mike notes, FAQ C-1 clarifies the NYSE’s position that an amendment of an equity incentive play to allow for maximum tax withholding is not necessarily a “material amendment”…

August 24, 2016

Private Companies & Executive Pay

Broc Romanek

Not much is written about executive pay at private companies – probably because those pay levels are not publicly disclosed, so I found this memo by Willis Towers Watson to be interesting…

August 23, 2016

Pay Ratio: Have You Started Doing the Math?

Broc Romanek

After an initial flurry of questions last fall, things have really died down since the first of the year. In speaking with colleagues, I believe that most companies have yet to really begin to focus on this disclosure requirement. Given that it doesn’t apply until the 2018 proxy season, it just hasn’t been as high a priority as more pressing immediate issues. I expect that we will see a significant uptick in questions beginning this Fall – as companies turn their attention to the rule and prepare a “dry run” to ensure that they have an effective process in place prior to the end of fiscal 2017.

So far, very few companies have voluntarily disclosed pay ratios – and the handful that have used a format & approach selected by the company, not the SEC (eg. Ionis Pharma just comparing cash comp; this PayScale report just compares cash comp too). Here’s this blog from Mark Borges entitled “The Initial SEC-Compliant CEO Pay Ratio Disclosure?” You can keep track of pay ratio disclosures as they come in via this search box

Our Executive Pay Conferences: 10% Reduced Rate – Only Two Weeks Left!: Here’s the registration information for our popular conferences – “Tackling Your 2017 Compensation Disclosures: Proxy Disclosure Conference” & “Say-on-Pay Workshop: 13th Annual Executive Compensation Conference” – to be held October 24-25th in Houston and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days.

Discounted Rates – Act by September 9th: Huge changes are afoot for executive compensation practices with pay ratio disclosures on the horizon. We are doing our part to help you address all these changes – and avoid costly pitfalls – by offering a reduced rate to help you attend these critical conferences (both of the Conferences are bundled together with a single price). So register by September 9th to take advantage of the 10% discount.

August 22, 2016

Say-on-Pay: Growth in High “No” Votes Spells Trouble

Broc Romanek

This NY Times column by Gretchen Morgenson notes how Hain Celestial had increasing levels of “no” votes on its say-on-pay over the past four years – growing from 31% to 59% over that period – and the fact that the company didn’t seem to care might have been a good harbinger of the accounting problems that came to light last week. The company had other red flags too – such as its peer group composition…

August 19, 2016

A New PFP Approach: Behavioral & Neurological

Broc Romanek

In this brief paper, Dr. Stephanie Thomas examines the behavioral and neurological connections between pay & performance as she cites a new experiment that indicates a decrease in performance when a monetary reward is removed – but no change in performance when a monetary reward is introduced, suggesting that the effect of performance-based pay is not so straightforward…

August 18, 2016

Whistleblowers: What Should You Do Now With Your Agreements? (Let’s Call It a Trend)

Broc Romanek

Here’s news from Scott Kimpel of Hunton & Williams: As described in this press release, the SEC brought yet one more settled administrative case on Monday against a public company – Health Net – based on confidentiality & waiver provisions contained in employee severance agreements – paying a $340k penalty. Like in the BlueLinx action brought last week, the SEC determined that these provisions violated the anti-whistleblower rules it adopted under Dodd-Frank – and again, there is no indication that the company actually sought to enforce the offensive provisions. Here’s the SEC order, which contains excerpts of the impermissible contractual language.

Toni Chion, an Associate Director in the SEC’s Enforcement Division, supervised both cases – which may suggest that the cases are the product of a broader enforcement sweep…

August 17, 2016

Cap’n Cashbags: The SEC Loves Teamwork

Broc Romanek, CompensationStandards.com

In this 30-second video, Cap’n Cashbags & his director pals team together to spoof the SEC’s 1-minute video about teamwork:

I recommend that you watch my quasi-parody before you watch the SEC’s video. When I fed my buddies their lines before we taped, I didn’t inform them that this was a spoof. They thought I had written the lines as a joke. After we taped – in just one take! – I showed them that they actually came from the SEC’s real video. Someone wrote those lines in all seriousness! I call my video a “quasi-parody” because I think we showed more teamwork in creating the thing. Let us know your feelings about them in the poll below…

Poll: Which Teamwork Video Is Better?

Please take a moment to participate in this anonymous poll:

online surveys