Broc blogged in 2018 about predictions that Elon Musk’s $56 billion incentive compensation package would revolutionize CEO pay at other companies. The pay consisted of a mega-grant of stock options that vested if ambitious performance targets – including market cap growth – were achieved. Despite the litigation that followed, the award remained in place – and due to Tesla’s cult-like following and soaring stock price, most of it has now vested! The company recaps the terms beginning on page 51 of its recently filed proxy statement.

Four years in, we also may be seeing the “Elon Effect” impact pay decisions at other companies, according to this NYT article and related Equilar analysis. Here’s the data from Equilar that traces a big jump in award values back to 2018:

Massive Pay Packages are Becoming More Common. This year’s study saw 12 CEOs receive compensation valued more than $100 million in 2021, an uptick from eight CEOs from last year’s study. In fact, eight of those CEOs were awarded pay packages valued above $200 million, with two landing packages above $500 million. Prior to 2018, there had never been more than two $100 million-plus awards in a given year in the study’s history.

Over the last two years, many companies elected to award their CEOs for staying in their role and guiding their companies through the uncertainty with large stock awards. In 2021, Equilar 200 CEOs were awarded a median $14 million in stock awards — a 14.4% increase from last year’s study where the median stock award was $12.2 million in 2020.

The NYT article notes that the goals that govern recent mega-grants at other companies may not be as aggressive as the ones set by the Tesla board. But, they have been stamped with approval via say-on-pay votes. One company even granted an uncapped equity award – no doubt creating brain teasers for anyone involved with disclosure and plan documents. However, as we head into the second half of 2022, the faltering stock market may put a damper on the rising CEO pay that was the story of 2021.

– Liz Dunshee

The Center On Executive Compensation recently published this 16-page guide on the expanded role of the compensation committee – including human capital management, talent strategy, and DEI. The guide acknowledges that each company is unique in how it approaches the evolving compensation committee. Yet, prevailing practices and innovative approaches from leading companies could give other companies ideas about how to move forward.

Here are a few of the forward-looking “best practices” gleaned from the 24 interviews that informed the guide. These relate to “talent management & succession planning below the C-suite” – which is one of the most common “new” responsibilities for committees, along with DEI, culture, pay equity, safety & well-being and retention:

– One company developed a two-page talent scorecard for the Committee. One page was devoted to the entire company’s workforce while the other focused on top talent; both showed statistics around hiring, retention, promotions and diversity.

– Consider the use of “HR Dashboard” including items such as and inclusion progress against goals, results of pulse surveys on engagement, success in hiring with key populations, wellness scores and employee hotline statistics.

– The Committee should consider the changing requirements of critical roles and how that changes their view of the talent pipeline. What will the workforce look like 5-7 years from now? Does the company have the development plans to meet the needs?

The guide also includes 4 sample committee calendars and a sampling of expanded committee names – e.g., Accenture’s “Compensation, Culture and People Committee.” For more analysis, benchmarking and instructions on the comp committee’s growing responsibilities, visit our “Compensation Committees” Practice Area. If you’re a member of TheCorporateCounsel.net, we have also posted a multitude of benchmarking surveys about governance practices in our “Corporate Governance Surveys” Practice Area on that site.

We’ll be diving into the latest steps that compensation committees need to take at our “19th Annual Executive Compensation Conference” – happening virtually on October 14th. Semler Brossy’s Blair Jones, Davis Polk’s Kyoko Takahashi Lin, American Water’s Jeffrey Taylor and Pay Governance’s Tara Tays will be sharing practical insights on “The Evolving Compensation Committee” that you don’t want to miss. Here are the full agendas for the “Proxy Disclosure & 19th Annual Executive Compensation Conferences” – 18 action-packed sessions over the course of 3 days – October 12-14th. Register today – sign up online, by email sales@ccrcorp.com or call 1-800-737-1271.

– Liz Dunshee