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%.
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.
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.
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”…
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…
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.
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…
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…
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…
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: