A member recently said this about my “Cap’n Cashbags” videos: “I will say this for you – you have a singular cinematic style. The Cap’n Cashbags films are a unique combination of post-World War I German Expressionism & mid-1970s “Superfriends” cartoons.”
In this 25-second video, Cap’n Cashbags is just hanging out with his fellow CEO pals who serve on his board’s compensation committee – talking about wage cuts for all workers (except himself):
As noted in this Davis Polk blog, ISS recently released its “preliminary” updates to its compensation policies – which consists of 8 FAQs. Check out the Davis Polk blog for some analysis…
This is the hardest blog I’ve written in my 17 years of blogging. My love letter to you. After pouring my heart & soul into our community for 17 years, I’m heeding the many signs that it’s time for a change. My last day in this job will be the end of this month.
So as hard as it is to leave y’all, I know in my ‘heart of hearts’ that it’s time to go. And that change starts with a nice, long break before I decide where my journey takes me next. The next few months are what I’m calling my “Epic Time of Yes.”
What will I miss the most? You. I will miss the daily dialogue – mainly by email – with so many of you. I cherish our friendship, our kinship, our love for securities law & corporate governance. I’m hesitant to name any names because there are many hundreds I would mention specifically. I hope we stay in touch. Either via LinkedIn or my gmail account (broc.romanek@).
I want to thank Jesse Brill for believing in me (his family owns the company; not me). Back in 2002, he hired someone who didn’t realize he had the skill set he apparently had. Until a year ago, I was responsible for our marketing, led our strategic direction, engaged in quiet sales efforts & participated in many other behind-the-scenes functions that helped made this job so enjoyable. Of course, the “in-front-of-the scenes” stuff was fabulously rewarding too. In this job, I have worn so many hats – journalist, event planner, publisher and of course, corporate lawyer – that whenever I filled out a form that asked for my occupation, I always paused before deciding which label to assign to myself.
I particularly like to cultivate creativity. I’m proactive in the way that I accomplish that – and I’m happy to share if you’re ever curious about how you can do so too. I recently received what I consider the kindest compliment – that I have a knack for building community. That’s the motto upon which I built the websites for this company from the first day I arrived. I’m proud of the innovations that I have brought to our events – I employed novel ways to make conferences not only bearable, but enjoyable. I think my “Blue Justice League” – a business casual game – is still ahead of its time. And I have heard nothing but rave reviews about the practical way I’ve put together our treatises, handbooks, checklists & paperbacks. Not to mention the sheer number of pages I’ve drafted for those things. Throw in the crazy total of blogs, podcasts, webcasts. The statistics are staggering.
Of course, I couldn’t have done it without the assistance & inspiration of our wonderful team. Dave Lynn and Alan Dye have been invaluable, both as colleagues and friends. Randi Morrison, Julie Hoffman, Linda DeMelis and Susan O’Reilly before they left us. The founder of course, Jesse Brill (and his son Nathan) – and his cohort Mike Gettelman. Barbara Baksa, Mark Borges and Mike Melbinger.
And in our HQ, too many to name – but I will give props to the ones that have been around the longest: Karen, Adam, Mike, Serge, Jacob, Denise, Sun Mi, Raychelle, Ron, Brian and Albert. I have sent more emails to Anne Triola than anyone in the world, our terrific webmaster – I’ll be visiting her in Seattle soon enough. And I will sorely miss the delightful Nona who does our typesetting.
Knowing that I am leaving Liz and John has been the hardest part of this difficult decision. They say good managers hire people that are smarter than they are. I certainly got that right. Working with them the past few years has been truly special. You are in good hands.
Anyway, after my extended holiday, I’m sure I will be wide-eyed & primed for a new adventure. I’m not sure yet whether that will be something that falls within our community – it might, it might not. Luckily, my wife & I recently cut our last tuition check so I’m in no rush to figure that out. I know that I bring passion and a yeoman’s effort to whatever I put my mind to – so hopefully I’ll find a situation that can help bring out the best in me.
In every end, there is a new beginning. Namaste.
“If Not For You”
I’m into all sorts of music. I like to think that I live through “theme songs” that I hear in my head each day. Today’s theme song is George Harrison’s “If Not For You” (written by Bob Dylan). Here’s an excerpt:
If not for you
Babe, I couldn’t even find the door
I couldn’t even see the floor
I’d be sad and blue, if not for you
If not for you
Babe, the night would see me wide awake
The day would surely have to break
It would not be new, if not for you
If not for you, my sky would fall
Rain would gather, too
Without your love I’d be nowhere at all
I’d be lost, if not for you
Here’s a summary of this study from the “Economic Policy Institute”:
The increased focus on growing inequality has led to an increased focus on CEO pay. Corporate boards running America’s largest public firms are giving top executives outsize compensation packages. Average pay of CEOs at the top 350 firms in 2018 was $17.2 million—or $14.0 million using a more conservative measure. (Stock options make up a big part of CEO pay packages, and the conservative measure values the options when granted, versus when cashed in, or “realized.”) CEO compensation is very high relative to typical worker compensation (by a ratio of 278-to-1 or 221-to-1).
In contrast, the CEO-to-typical-worker compensation ratio (options realized) was 20-to-1 in 1965 and 58-to-1 in 1989. CEOs are even making a lot more—about five times as much—as other earners in the top 0.1%. From 1978 to 2018, CEO compensation grew by 1,007.5% (940.3% under the options-realized measure), far outstripping S&P stock market growth (706.7%) and the wage growth of very high earners (339.2%). In contrast, wages for the typical worker grew by just 11.9%.
Here’s something that our colleague John Jenkins recently blogged on TheCorporateCounsel.net: Okay, that title is a very lame Canadian joke, but if you were made to look like a fool on a hockey rink by your Canadian pals as frequently as I am, you’d be looking for a little payback too. Anyway, according to this Blakes memo, recent amendments to the Canada Business Corporation Act may result in a mandatory “say-on-pay” regime for federally chartered Canadian public companies.
Details are in the memo, but what’s more interesting to me is that the memo points out that say-on-pay has already become pretty widespread in Canada among larger cap companies on a purely voluntary basis:
Shareholder Say-on-Pay advisory votes on the compensation practices of public companies in Canada started in 2010 when the major Canadian banks gave their shareholders an advisory Say-on-Pay vote. By 2011, 71 reporting issuers in Canada had adopted Say-on-Pay advisory votes, representing approximately 7% of Canadian listed issuers by number, excluding structured-product issuers and non-listed issuers.
That number has steadily grown each year, such that a total of 220 companies in Canada have now adopted an annual Say-on-Pay advisory vote, including more than 71% of companies in the TSX Composite Index and 52 of the TSX60 Index companies. The adoption of this practice has been completely voluntary thus far, in many cases in response to pressure from institutional investor groups, such as the Canadian Coalition for Good Governance (CCGG), or non-binding votes on shareholder proposals.
Directors with global experiences & backgrounds are in high demand – but is it fair to expect them to travel to in-person meetings across the world? This Pearl Meyer blog offers a few “outside the box” ways that companies could consider handling that:
– Bifurcated pay structure – increase pay for directors who live more than eight (pick your number) time zones from company headquarters
– Offer first-class travel for the board director and spouse or significant other
– Cover the cost of staying a few extra days at the hotel used for board meetings
– Discuss in advance and agree on whether a director can participate in several board meetings by phone or video conference
– Agree to hold several board meetings at locations that may better accommodate board members who live outside of the US (aka, the “spread the pain” solution)
Executive compensation continues to get more political. Broc blogged a while ago about a Bernie Sanders campaign initiative to tax large companies (public or private) that have a pay ratio of 50x or more – and some other “radical ideas.” Last week, Senator Sanders introduced a bill that looks a lot like that campaign initiative – it would raise corporate taxes by 0.5-5% on high-revenue public & private companies that have a pay ratio of 50 to 500+. Rep. Barbara Lee (D) introduced companion legislation in the House.
One interesting nuance – highlighted in this FAQ – is that the ratio would be based on the pay of the highest-paid employee, not necessarily the CEO. So in the unlikely event that this ever became law, a second pay ratio calculation would be necessary for companies that pay their CEO a nominal amount – and they’d still be on the hook for the tax.
We’ve been blogging quite a bit on TheCorporateCounsel.net about the Business Roundtable’s recent statement on corporate purpose – and the ensuing “stakeholder v. shareholder” debate. This “Directors & Boards” article from Semler Brossy suggests systematic ways for compensation committees to incorporate stakeholder values into executive pay decisions.
Of course, there are caveats! One being, the last thing shareholders want right now is murkier pay disclosure. But the article offers a few potentially tolerable ways to reflect “stakeholder goals” in annual incentives (for even more ideas, see this blog, also from Semler Brossy’s Seymour Burchman – and mark your calendars for our February 12th webcast – “Tying ‘ESG’ to Executive Pay“):
Individual goals:
• HR—establish new hiring protocols; training in using hiring protocols, customer service and sales training, training managers in coaching skills
Recently, a member asked this in our “Q&A Forum” (#1268):
Does the adoption by the board of a severance plan that is applicable to all employees, including all NEOs, trigger an 8-K filing requirement?
John gave this answer:
Yes, unless the plan meets the requirements of Instruction 3 to Item 5.02. That instruction requires not only that compensation under the plan be available generally to all salaried employees, but also requires the plan not to “discriminate in scope, terms or operation, in favor of executive officers or directors of the registrant.”
The Corp Fin Staff has construed this requirement narrowly, and it wouldn’t cover a plan in which executives were eligible for more extensive severance arrangements than other plan participants. As noted in the discussion on page 206 of the 8-K Chapter of the Treatise on this site, our view is that Instruction 3 principally contemplates broad-based health plans and other types of welfare benefits where the benefits are going to be the same across the spectrum of all salaried employees.
– Profitability and revenue measures are the most commonly used financial measures among the Top 250 companies, and are also the most heavily weighted financial measures when used.
– Non-financial measures (i.e., strategic and individual performance measures) are used as discrete metrics and/or modifiers by 70% of companies with formulaic plans, but are not as heavily weighted as financial performance measures.
– Approximately one-quarter of companies with formulaic plans disclose using at least one ESG goal as part of their strategic performance measures, either as a pre-defined objective or as a consideration in arriving at the strategic performance score (excludes companies that use ESG goals as an individual performance consideration).
– Few companies using profitability and/or revenue measures disclosed setting their target goals below prior year actual performance. These companies risk criticism from proxy advisory firms and institutional investors, particularly when above-target bonuses are earned for performance that has declined year-over-year, presenting challenges for companies in cyclical industries and companies in turnaround situations.
– Companies using profit metrics utilize a wider performance range than companies using revenue metrics because revenue is typically less challenging to forecast than profitability, and therefore the range of likely outcomes is narrower. At the median, the threshold to maximum performance range is 8% below target to 9% above target for profit metrics and 5% below target to 4% above target for revenue metrics.
– Operationally, 2018 was a strong year for Top 250 companies, contributing to median CEO payouts of 128% of target.
