As lawyers, we might think that our painstakingly-detailed proxy disclosure is straightforward. But many feel that the required “grant-date fair value” reporting of performance awards obscures what CEOs actually earn – which has led to controversy over pay structures & amounts.
In response to this perceived information gap, activist fund ValueAct Capital created a framework to evaluate “realizable pay” scenarios. This article from the Stanford Business School & ValueAct examines the methodology. Here’s an excerpt:
Taken together, this framework provides a foundation for analyzing the scale and structure of CEO pay. It provides a rigorous and systematic method for evaluating critical issues,
such as the:
– Degree to which pay is “guaranteed” or “at-risk”;
– Degree to which payouts are driven by operating versus stock price performance;
– Sensitivity of CEO compensation to stock-price returns;
– Importance and rigor of performance metrics;
– Potential risk embedded in the CEO pay package.
Compare this to the static target grant-date fair value framework, which highlights only a single question: Is the target value of the CEO pay package larger or smaller than peers?
Based on the data they looked at, the authors conclude that the outputs of ValueAct’s analysis are very different from those disclosed in proxy statements. I’d love to know if you have seen companies that calculate & report compensation according to this type of formula.
Pay Ratio Conference: Discounted Rate Ends Today, Friday
Last chance to register at a reduced rate for our comprehensive “Pay Ratio & Proxy Disclosure Conference.” The discount expires at the end of today, Friday, July 28th. New Corp Fin Deputy Director Rob Evans will open the event.
It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. And in addition to the October Conference, you gain access to three pre-conference webcasts. And a set of “Model Pay Ratio Disclosures” in both PDF & Word format.
Register Now – Discount Ends Today, Friday: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register by July 28th to take advantage of the 10% discount.
Pay Ratio Conference: Discounted Rate Ends Tomorrow, Friday
Last chance to register at a reduced rate for our comprehensive “Pay Ratio & Proxy Disclosure Conference.” The discount expires tomorrow, Friday, July 28th. New Corp Fin Deputy Director Rob Evans will open the event.
It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. And in addition to the October Conference, you gain access to three pre-conference webcasts. And a set of “Model Pay Ratio Disclosures” in both PDF & Word format.
Register Now – Discount Ends Tomorrow, Friday: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register by July 28th to take advantage of the 10% discount.
This recent report from Compensation Advisory Partners examines trends in director pay levels & practices. Here are six key findings:
1. Total Fees: continued to increase in low single digits.
2. Meeting Fees: paid by only 11% of companies – most companies have moved to a retainer pay structure. Some use a “hybrid approach” where directors are paid if the number of meetings far exceeds the norm.
3. Pay Mix: typically a combo of cash & equity. Full-value awards are most common.
4. Fees for Committee Members & Chairs: some companies pay fees to committee members – but most rely on board-level pay. Over 90% of companies provide additional pay to committee chairs via an additional retainer. These chair retainers increased incrementally from the prior year.
5. Independent Chair Fees: all companies provided additional pay to independent chairs, and nearly all pay extra fees to lead directors.
6. Pay Limits: 47% of the largest 100 companies now have pay limits in equity plans – and the majority of companies submitting new plans have incorporated this feature. Here’s one of our prior blogs – explaining why these limits are useful and how to draft them.
Also check out this Korn Ferry blog which also notes these trends.
Last chance to register at a reduced rate for our comprehensive “Pay Ratio & Proxy Disclosure Conference.” The discount expires this Friday, July 28th. New Corp Fin Deputy Director Rob Evans will open the event.
It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. And in addition to the October Conference, you gain access to three pre-conference webcasts. And a set of “Model Pay Ratio Disclosures” in both PDF & Word format.
The first webcast was last week & that 75-minute audio archive is available now – a transcript of that program is coming soon. The second webcast is on August 15th; the third webcast is September 27th.
Register Now – Discount Ends This Friday: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register by July 28th to take advantage of the 10% discount.
Normally – as Broc has blogged many times (here’s one) – the SEC’s Reg Flex Agendas tend to be “aspirational.” But perhaps this time is different.
As part of a federal agency-wide reveal of the new Administration’s plans for rulemaking, the SEC posted the latest version of its Reg Flex Agenda last week. This agency coordination is the Administration’s “unified agency regulatory agenda.”
This Reg Flex Agenda is notable for what it omits – get a load of what’s not on the list:
– Pay-for-performance
– Clawbacks
– Hedging
– Universal proxy
– Clawbacks of incentive compensation at financial institutions
Does this mean that the SEC doesn’t intend to ever proceed with adopting any of the outstanding Dodd-Frank rules that are still in the proposal stage? We don’t know. As this Cooley blog notes, the Preamble indicates that it reflects “only the priorities of the Acting Chairman [Michael Piwowar], and [does] not necessarily reflect the view and priorities of any individual Commissioner.” Since the information in the Reg Flex Agenda was accurate as of March 29th – and SEC Chair Jay Clayton wasn’t confirmed until May – it’s unknown how Chair Clayton feels about all this.
But it might be a sign – because as noted in this article from “The Hill”: “OMB said agencies for the first time will post a list of “inactive” rules to notify the public of regulations that are still being reviewed or considered.”
This all doesn’t impact the implementation of the pay ratio rule – because that rule was already adopted a few years ago. It just had a delayed effectiveness date. So it would never show up on a Reg Flex Agenda unless there was rulemaking to delay or repeal it…which there is not…
Pay Ratio Conference: Discounted Rate Ends This Friday
Last chance to register at a reduced rate for our comprehensive “Pay Ratio & Proxy Disclosure Conference.” The discount expires this Friday, July 28th. New Corp Fin Deputy Director Rob Evans will open the event.
It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. And in addition to the October Conference, you gain access to three pre-conference webcasts. And a set of “Model Pay Ratio Disclosures” in both PDF & Word format.
The first webcast was last week & that 75-minute audio archive is available now – a transcript of that program is coming soon. The second webcast is on August 15th; the third webcast is September 27th.
Register Now – Discount Ends This Friday: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register by July 28th to take advantage of the 10% discount.
For those registered for the upcoming “Pay Ratio & Proxy Disclosure Conference,” tune in today – at noon eastern (audio archive goes up when the program ends; transcript available in a week or so) – for the first in a series of three monthly webcasts that serve as a pre-conference: “Pay Ratio Workshop: What You Need to Do Now.” That landing page is where you go to access the three types of “webcast links” to listen to the webcast.
Our “Annotated Model Pay Ratio Disclosures”: Now Posted
Register Now – Discount Ends July 28th: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register by July 28th to take advantage of the 10% discount.
– Mark Borges, Principal, Compensia
– Mike Kesner, Principal-in-Charge, Human Capital Advisory Services, Deloitte Consulting LLP
– Dave Lynn, Editor, CompensationStandards.com and Partner, Jenner & Block LLP
– Maia Gez, Of Counsel, Gibson Dunn & Crutcher LLP
Register Now – Discount Ends July 28th: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register by July 28th to take advantage of the 10% discount.
Our “Annotated Model Pay Ratio Disclosures”: Now Posted
Oodles of Pay Ratio Panels: Comprehensive Coverage
It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or by video archive at your convenience. We’ve clarified that in the box at the top of our Conference FAQs.
Among the panels for the October 17-18th Conference are:
1. Corp Fin Speaks (speaker from the Staff to be announced)
2. The SEC All-Stars: A Frank Pay Ratio Conversation
3. Parsing Pay Ratio Disclosures: US-Only Workforces
4. Parsing Pay Ratio Disclosures: Global Workforces
5. Pay Ratio: Sampling & Other Data Issues
6. Pay Ratio: The In-House Perspective
7. Pay Ratio: How to Handle PR & Employee Fallout
8. The SEC All-Stars: The Bleeding Edge
9. The Investors Speak
10. Navigating ISS & Glass Lewis
11. Keynote: A Conversation with Nell Minow
12. Proxy Access: Tackling the Challenges
13. Clawbacks: What to Do Now
14. Dealing with the Complexities of Perks
15. The Big Kahuna: Your Burning Questions Answered
16. Hot Topics: 50 Practical Nuggets in 60 Minutes
Register Now – Discount Ends July 28th: This is the only comprehensive conference devoted to pay ratio. Here’s the registration information for the “Pay Ratio & Proxy Disclosure Conference” to be held October 17-18th in Washington DC and via Live Nationwide Video Webcast. Here are the agendas – 20 panels over two days. Register by July 28th to take advantage of the 10% discount.
This is why it may be wise to question the value of a study before you put much stock on it. Read the thing before you comment. This CFO.com article highlights a new “American Accounting Association” study that claims – even when controlling for the portion of pay linked to stock performance – the relationship between a CEO pay ratio & stock price remains strong.
The study isn’t out yet, so we can’t really analyze how this conclusion was reached. But given that pay ratios aren’t yet publicly disclosed (and even when they are, it ain’t gonna be apples & apples), I am dubious. Not to mention that I hate seeing the first attempt to externally benchmark what is supposed to be an internal look! The proper benchmarking of pay ratios is that companies should be watching to see how their own ratios fare over time – not comparing their ratios to other companies…
As part of the mad rush to register for our comprehensive “Pay Ratio & Proxy Disclosure Conference”, we’ve fielded questions from a number of members who want to attend this Thursday’s webcast – but who can’t make it to Washington DC for the October 17-18th Conference. It doesn’t matter whether you can make it to DC – because the October 17-18th Conference is available to watch online by video webcast, live on those specific days or at your convenience by video archive. We’ve clarified that in the box at the top of our Conference FAQs.