– Broc Romanek
Here’s the intro of this blog by FW Cook’s George Paulin:
We recently presented an executive compensation program review to the board compensation committee of a successful, long-standing S&P 500 industrial company. The peer group had 20-or-so comparable companies. A primary conclusion was that after six years of say-on-pay and proxy advisor voting rules, both the pay levels and program structures in the peer group were never more alike.
In the discussion that followed, there was clear concern by committee members that the “one-size-fits-all” trend among peers (and more broadly) may be overlooking areas where differentiation could provide competitive advantage. This led us to ask whether our conclusion would be different if newer, innovative, high-growth companies were substituted for traditional peers.
We responded by comparing practices that were now generally shared by the traditional S&P 500 peers to five large companies widely recognized for growth and innovation in products, applications, and markets over the last decade: Apple, Amazon, Alphabet, Facebook, and Tesla. For simplicity and objectivity, we used proxy data covering the CEOs and other named executive officers (NEOs).
– Broc Romanek
Here’s an interesting chart that compares CEO pay in five developed countries, courtesy of Willis Towers Watson…
– Broc Romanek
Following up on my blog from a few days ago, here’s a blog from Gibson Dunn that summarizes the pay ratio disclosures so far. Here’s an excerpt:
As of March 9, 2018, 61 S&P 500 companies have reported required pay ratios, most commonly in a definitive proxy statement. The average pay ratio among these companies is 204:1, ranging from a high of 935-to-1 to a low of 12-to-1.
Also see this pay ratio checklist from Orrick…
– Broc Romanek
This Davis Polk memo does a nice job of summarizing the pay ratio disclosures so far…
Also see this Bloomberg article entitled “Less Is More for Companies Reporting CEO-to-Worker Pay Gap”…
– Broc Romanek
I’ve been running an executive pay conference for over 15 years now – and I’ve always been loathe to program about “pay-for-performance” because I don’t quite understand it. I’ve always been a hard worker – so I’m the type who gives “my all” in exchange for a salary. That’s all the incentive I really need.
But I certainly can be dis-incentivized. And if that happens, my reaction is to find a new job. And the memo that the United Airlines CEO recently sent to employees – described in this article – would fall into the category of things that dis-incentivized me.
First, there is the tone of the memo – aptly described in the article as tone-deaf. And then there is the subject of the memo: taking away quarterly performance bonuses from many employees (who expected them in the regular course as they hit certain benchmarks) – and instead pooling together that money to give much larger bonuses to those that win a lottery of the bonus money. To capture the essence of that, I’ll use this excerpt from the article:
It’s a curious logic, one that says: “How do we get them to improve? How about taking away their bonus?” To be followed by “heh. heh. heh.”
Can you imagine what the United CEO would say if his compensation was subject to a random drawing. I guess we’ll never know because employee backlash already led to the company shelving this horrible idea…
– Broc Romanek
As noted in the summary provided in this Torys memo, Ontario has joined the UK (see these memos) in trying to tackle gender pay equity:
On March 6, Ontario introduced “Then Now Next: Ontario’s Strategy for Women’s Economic Empowerment,” which includes a proposed “pay transparency” bill. The strategy sets out a three-year plan to increase gender equity, and makes recommendations for removing the gender wage gap in the province. If passed, the legislation—which is not currently publicly available—will have significant implications for employers in Ontario, and Ontario will become the first province in Canada to legislate pay transparency.
– Broc Romanek
We have posted the transcript for the recent webcast: “The Top Compensation Consultants Speak.”
– Broc Romanek
In his blog on this site, Mark Borges is providing full analysis of pay ratio disclosures as they come in – and this Andrews Kurth memo does a nice job of summarizing the disclosures so far…
– Broc Romanek
Dig this updated “Compensation Committee Handbook” from Skadden Arps. Written in a style that is easily understood & 110 pages long…
– Broc Romanek
Here’s the teaser for this Pay Governance memo:
PSUs at many companies have now been in place for ≥10 years, which provides an opportunity to thoroughly review the historical trend in PSU payouts in order to assess critical questions regarding program success:
1. What has been the historical payout trend in PSU awards over the 10 most recently completed performance cycles (2005-2014 grants)?
2. How did the payouts for PSU awards that included relative total shareholder return (TSR) metrics compare to that of plans based entirely on operating financial results?
3. Were PSU payout trends aligned with company TSR performance over the 3-year performance period?