June 12, 2012
– Broc Romanek, CompensationStandards.com
I’ve added 10 more companies to our failed say-on-pay list for 2012! We are now at 49 companies that have failed to garner major support – with Nabor Industries becoming the fourth company to fail for two consecutive years (and the first company to fail a proxy access by-law vote). Hat tip to Karla Bos of ING Funds for keeping me updated!
June 11, 2012
– Broc Romanek, CompensationStandards.com
Sure, people in the US are angry about excessive executive pay. And even though there are more failed say-on-pay votes already this year compared to all of last year, it still isn’t a wave of failures as might be expected. In comparison, it has been quite a show in the UK this year, with CEOs resigning after an adverse say-on-pay vote. I can’t imagine that happening in the States.
The latest in the United Kingdom is the WPP saga. Last week, WPP’s CEO – Sir Martin Sorrell – wrote an op-ed in the Financial Times defending his pay and calling the controversy over his compensation “deeply disturbing.” As could be expected, WPP shareholders are now even more up in arms.
Although some write that Sir Sorrell was brave to speak out, it seems that B-School Lesson # 1 would be “do not write op-ed pieces defending your pay.” WPP’s shareholder’s meeting is on Wednesday and it should be a hoot…
June 7, 2012
– Broc Romanek, CompensationStandards.com
I know I’ve blogged before about this topic, but it’s an important item – so I refer you to this Davis Polk blog which includes a link to the March consultation paper from the UK’s Department of Business Innovation & Skills (BIS).
June 4, 2012
– Broc Romanek, CompensationStandards.com
I’ve added 7 more companies to our failed say-on-pay list for 2012! We are now at 39 companies that have failed to garner major support – with Digital River garnering support only in the teens (19.2%; going even lower than Chiquita Brands)! And Safety Insurance Group became the first company to fail after receiving a ‘For’ recommendation from ISS, as noted in this Semler Brossy blurb. Hat tip to Karla Bos of ING Funds for keeping me updated!
June 1, 2012
– Broc Romanek, CompensationStandards.com
I’m still in the camp that peer group surveys aren’t an inherently evil thing in isolation – but that the heavy reliance on boards on them to pay CEOs in the top quartile over many years has unfortunately tainted the pay databases so much that the data is useless unless there is some sort of reboot. That’s why this blog by Steven Kittrell about how some New York agencies have proposed the use of benchmarking to limit pay made me smile. The proposal is that if pay exceeds $199,000, the total pay cannot be greater than the 75th percentile of comparable executives of comparable companies (as to size and services) in a comparable geographic area. The slippery slope downwards.
I imagine that if this type of proposal was ever floated for public companies, many of those that blindly follow benchmarking today would suddenly find religion and claim that boards should have the discretion to set pay levels based upon their own circumstances and that benchmarking should barely even be considered…
May 31, 2012
– Broc Romanek, CompensationStandards.com
Last year, I was shocked to read Mike Melbinger’s blog that a major insurance broker plans to begin offering “policies that would cover financial firms against both their legal costs in the event that they underwent investigation by the FDIC and any compensation that their executives had to hand back as a result of action by the agency.” Yesterday, as noted in this article, Rep. Barney Frank introduced a bill that would bar executives at financial firms from being able to buy insurance to protect themselves against compensation clawbacks or civil penalties. Here’s analysis of the bill from the D&O Diary Blog.
May 30, 2012
– Broc Romanek, CompensationStandards.com
We are very excited to announce that Corp Fin Director Meredith Cross will be part of our “7th Annual Proxy Disclosure Conference” on October 8th in New Orleans (and by video webcast). Just look at this beautiful baker’s dozen of panels for this Conference:
1. An Interview with Meredith Cross, Director of the SEC’s Division of Corporation Finance
2. Say-on-Pay Disclosures: The Proxy Advisors Speak
3. The Executive Summary & Other Ways for Disclosure to Facilitate Solicitation
4. The Latest SEC Actions & CD&A Developments: Compensation Advisors, Clawbacks, Pay Disparity & More
5. Refining Your Pay-for-Performance Message & Addressing the Impact of Your Vote
6. Getting the Vote In: The Proxy Solicitors Speak
7. Dealing with the Complexities of Perks
8. Conducting – and Disclosing – Pay Risk Assessments
9. Overcoming Form 8-K Challenges
10 Handling the Golden Parachute Requirement
11. Challenges for Smaller Companies: Their First Year
12. How to Handle Preliminary Proxy Statements
13. How to Handle the ‘Non-Compensation’ Proxy Disclosure Items
Register Now for Early Bird Rates – Act by May 31st: For the early bird discount rate, register by May 31st. This Conference is paired with “Say-on-Pay Workshop: 9th Annual Executive Compensation Conference” and they will be held October 8-9th in New Orleans and via Live Nationwide Video Webcast.
May 29, 2012
– Broc Romanek, CompensationStandards.com
I’ve added 14 more companies to our failed say-on-pay list for 2012! We are now at 32 companies that have failed to garner major support – with Chiquita Brands garnering support only in the teens (19.8%; see Mark Borges’ analysis of this failure)! Hat tip to Karla Bos of ING Funds for keeping me updated!
And Hercules Offshore became the first (41% support in ’11 and 48% in ’12) – and Kilroy Realty became the second (49% support in ’11 and 30% in ’12) – company to fail two years running…
And this list doesn’t include the recent voting results from Cablevision Systems – a company which did not have say-on-pay on its ballot this year because the frequency is triennial (per page 26 of their proxy statement; triennial was the choice of shareholders last year) – whose members of the compensation committee received less than majority support presumably due to pay issues. The company has a plurality vote standard so there is no direct impact of this vote. So this result doesn’t get picked up in the “failed SOP” count even though I would consider it to be a more serious failure than a nonbinding SOP vote…
May 24, 2012
– Broc Romanek, CompensationStandards.com
A while back, Frederic W. Cook’s 2011 Top 250 executive compensation report came out:
Key findings from the study include the following:
– For the first time in the history of this report, the use of long-term performance shares now is more prevalent than the use of stock options, while the prevalence of time-vesting restricted stock awards appears to have stabilized.
– Stock options continue to decrease in prevalence, but are not expected to go away, as they are by nature a performance based long-term incentive vehicle and a common complement to full-value share awards.
– Variations of basic grant types (like “premium” or “performance accelerated” stock options), common in years gone by, have dwindled and are on the brink of extinction, perhaps casualties of greater transparency and simplicity in a say on pay environment.
– Vesting periods of awards, and performance periods for performance awards, remain stable at 3 years.
– The use of profit measures and total shareholder return in long-term performance plans continues to be the most widely used performance categories, and the prevalence of types of measures used for performance awards has stabilized.
May 23, 2012
– Broc Romanek, CompensationStandards.com
Here is a 20-minute video podcast, featuring Daniel Abrams of FAS123 Solutions and Arthur Kohn of Cleary Gottlieb. The presentation covers:
1. The use, in connection with 2011 equity awards, of routine option valuation methods and historical measurements of volatility will, for many companies, overstate the value of option awards for compensation and disclosure purposes.
2. Volatility and other factors, including in particular the degree of difficulty of vesting conditions, affect the value of equity compensation awards other than options in ways that should be considered in the design of executive compensation programs that use a “portfolio approach” to long-term incentive grants.
3. Decomposing the value of equity compensation awards in a way that gives insight into the amount of value delivered in different factual scenarios will help to properly design such awards from an incentive and value perspective.