– Broc Romanek
Here’s the intro from this blog by Globoforce’s Derek Irvine:
During the last couple of years, I’ve had the opportunity to host executive forums with CHROs, EVPs, and other senior leaders looking to evolve (and sometimes revolutionize) the foundations of HR – compensation structures, performance processes, and more. In many ways, it’s been enlightening to be a facilitator of these sessions to hear how some of the most innovative minds in human resources, talent management, compensation and benefits think about a process that has been in place for decades – the annual performance review, especially the performance rating.
Performance management is evolving. That evolution is taking many forms and directions as organizational leaders are seeking the most effective ways to give employees the feedback they need (both positive and constructive) to grow their careers. As part of this evolution, the performance rating is coming under deeper scrutiny. Most companies have some kind of rating scale for employees. Some have thrown it out entirely. Others tried to eliminate it, only to add it back again. Many hedge the discussion on performance ratings, believing that process to be the best justifier of pay raises or distribution of annual merit increases.
– Broc Romanek
This pay ratio disclosure is on page 10 of Gencor’s proxy statement:
Mr. John Elliott had fiscal 2017 total compensation of $463,138, as reflected in the Summary Compensation Table included in this Proxy. We estimate that the median annual compensation for all Gencor employees, excluding our CEO, was $50,975 for 2017. As a result, Mr. John Elliott’s 2017 annual compensation was approximately 9 times that of the median annual compensation for all employees.
– Broc Romanek
In this article, Steve Kline & Tatjana Ricketts of Willis Towers Watson summarize best practices to help companies take the guesswork out of setting performance targets and ranges and addresses head-on the rising demand for proper pay-for-performance alignment – providing five key steps on this crucial topic…
– Broc Romanek
Here’s the teaser for this Semler Brossy report about say-on-pay during 2017:
2,357 Russell 3000 companies held say-on-pay votes in 2017 and the average say-on-pay support in 2017 (91.7%) was the highest observed rate since voting began.
35 companies (1.5%) failed say-on-pay in 2017, resulting in the lowest failure rate since the first year of say-on-pay in 2011. The four new companies that have failed since our last report are Bofl Holding, Oracle, United Natural Foods, and Western Digital.
– Broc Romanek
We continue to post memos about ISS’ updated policy guidelines in our “ISS Policy Guidelines” Practice Area – including this new one from Compensia that covers a lot of ground, including ISS’ burn rates…
– Broc Romanek
It will be interesting to see if Equilar’s new ‘pay ratio’ survey proves accurate after the proxy season – the survey predicts that companies will disclose a ratio of 140:1 on average. Here’s the intro from the blog by Cooley’s Cydney Posner about the survey results (see this related WSJ article):
Equilar has just released the results of an anonymous survey of public companies, with 356 respondents, which asked these companies to indicate the CEO-employee pay ratios they anticipated reporting in their 2018 proxy statements. As you would expect, there was a lot of variation among companies based on industry, market cap, revenue, workforce size and geography. In addition, because the rule provided significant flexibility in how companies could identify the median employee and in how they calculate his or her total annual compensation, variations in company methodology likely had a significant impact on the results.
These variations in the data underscore the soundness of the SEC’s view, expressed at the time it adopted the pay-ratio rule, that the rule was “designed to allow shareholders to better understand and assess a particular [company’s] compensation practices and pay ratio disclosures rather than to facilitate a comparison of this information from one [company] to another”; “the primary benefit” of the pay-ratio disclosure, according to the SEC, was to provide shareholders with a “company-specific metric” that can be used to evaluate CEO compensation within the context of that company.
– Broc Romanek
The annual “Corporate Governance & Executive Compensation Survey” of the 100 largest companies from Shearman & Sterling is always a “hot ticket” item, perhaps because its one of the oldest. 15th annual…
– Broc Romanek
If you’re planning to submit an equity plan for shareholder approval in 2018, now’s the time to start the process. Liz blogged a while back about whether shareholders are more likely to approve a new omnibus plan over an amended one. This Morgan Lewis blog dives further into what you can do now and during proxy season to get approval.
Here’s a teaser – and check out Part 2 for the remaining steps about board approval, proxy drafting, etc.:
1. Review your shareholder base to determine the voting guidelines that key holders follow when reviewing equity plans.
2. Whether or not you subscribe to ISS’s proxy review services, sign up for the ISS Equity Plan Data Verification portal (no charge). If you sign up for this portal, ISS will send a confirmation of the data on which their recommendation will be based.
3. When considering share authorization, review share overhang (outstanding equity grants as compared to outstanding shares), burn rate (share usage) over the past several years (usually three years), the company’s projected need for shares over the next several years (usually three to four years), and, if applicable, ISS’s assessment of the allowable share authorization. In determining whether to include ISS’s favored plan terms, it is important to balance the need to maximize the share authorization against the importance to the company of retaining flexibility, especially with respect to vesting.
4. Compare your draft plan to ISS’s current methodology for reviewing equity plans, the Equity Plan Scorecard, which gives “points” based on plan cost (share authorization), plan features, and grant practices. For more detail, see our “White Paper.”
5. Update the plan to reflect current best practices and legal requirements, and, if applicable, ISS requirements.
– Broc Romanek
Here’s the intro from this blog by Cooley’s Cydney Posner:
In 2016, the AFL-CIO submitted several shareholder proposals designed to curb the impact of stock buybacks on executive compensation. (See this PubCo post.) The question at the time was whether we would see many more of these proposals. However, amid significant media and academic criticism, as well as relatively high stock valuations, the levels of stock buybacks declined, and the anticipated wave of proposals on buybacks did not materialize.
However, the new tax act is expected to trigger a new spike in the levels of stock buybacks. (See this MarketWatch article.) Perhaps with that in mind, one of the most prolific proponents of shareholder proposals has submitted a proposal to eliminate the impact of stock buybacks in determining executive compensation. Will these proposals now become a thing?
– Broc Romanek
Hats off to Cooley’s Amy Wood – who turned “Master Blogger” Mark Borges onto the first pay ratio disclosure of 2018. Here’s Mark’s blog about it…