SEC Sets New Rules

May 19, 2015

“You have to learn the rules of the game. And then you have to play better than anyone else.” – Albert Einstein SEC SETS NEW RULES: This new rule will require companies to disclose the relationship between executive pay and the company’s financial performance. On April 29th,  the Securities and Exchange Commission voted to propose rules requiring companies to disclose the relationship between executive compensation and the financial performance of a company. The proposed rules, which would implement a requirement mandated by the Dodd-Frank Act, are intended to  provide greater corporate transparency. The rule also allows shareholders to be better informed when electing directors, and in connection with advisory votes on executive compensation. “These proposed rules would better inform shareholders and…

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Taking the Politics Out of Proxy Season — That Would Be Nice!

May 12, 2015

“We dispute their numbers. We don’t have hard, concrete numbers, but we dispute them.”— Former White House press secretary Jay Carney   The Wall Street Journal recently published the attached article by James Copeland, entitled “Getting The Politics Out of Proxy Season.” It is an excellent piece and it’s last two paragraphs are of critical importance. They state:   “Using proxies as a political soapbox has costs beyond those directly incurred by companies to respond to the proposals.  Social-activist shareholders of companies that produce oil, pharmaceuticals, military equipment, cigarettes and agricultural products regularly leverage this process to generate press attention inimical to the companies’ core interests. Public-employee pension funds headed by elected partisan officials- most notably, those for New York…

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ON A COLLISION COURSE

May 6, 2015

“If you can’t explain it simply, you don’t understand it well enough.”  Albert Einstein We often wonder how many of us relate to Albert Einstein’s quote when dealing with the complexities of executive compensation. It’s one thing to know compensation philosophy is to attract, retain and motivate the best talent possible; and it’s another to actually achieve it. However, it is a completely different field to not just see linearly, but around the “corners of the corners” to position your company strategically for events ahead. At Longnecker & Associates, we work hard to tie a company’s strategy and culture to governance and compensation. Sometimes, we are surprised at what’s around the corner. One of those recent surprises is when a…

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What Executives Value in Their CEOs

April 29, 2015

“You can accomplish anything in life, provided you do not mind who gets credit.” – Harry S. Truman Harvard Business Review recently had an article (link below) by Leslie Gaines-Ross of Weber Shandwick titled, “What Executives Value In Their CEOs.” Last week we discussed the “value” of a CEO from a mathematical perspective in our blog. The article below adds to the fact that a good CEO is incredibly valuable. Specifically, the research showed: 1.    That nearly one half (50%) of a company’s corporate reputation is linked to the reputation of the CEO;  2.    That nearly one half (50%) of the company’s market value is also linked to the reputation of the CEO;  3.    Seventy-seven percent (77%) of those surveyed…

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EXECUTIVE COMPENSATION – One Large Problem, Comparing Apples to Watermelons

April 21, 2015

One of the hardest issues during this time of proxies and compensation reporting is the ability to separate truth from fiction; to compare an apple with an apple. To do so depends a lot on how one defines “pay”. Is it the amount reported on the SEC filings, those numbers that usually are used by the media to create outrage? Or is it what the executives could potentially earn—what they are “targeted” to earn if they meet all their performance criteria? Or is it the amount they take home at the end of the year—what is actually “realized”? How well people understand these numbers—and communicate—is of absolute importance. Back in 2013, we authored an article for The Corporate Board entitled…

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The Value of a CEO

April 14, 2015

CEO VALUE. The SEC will be forced to enact this 2010 legislation from the Dodd Frank Act, where CEO pay versus the median employee pay will be a forced disclosure by next April – just in time for the primaries of the 2016 election! Rest assured this is NO coincidence.   This CEO pay ratio will likely be a central theme of “have and have not” discussions we have seen pushed into U.S. Presidential debates. Using this ratio to somehow establish CEO value/pay is old news. A number of companies have unsuccessfully attempted to derive an artificial pay ratio cap like 10:1 or 20:1 to determine CEO pay. While appearing noble in it’s cause, it is truly politically driven and…

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Dodd-Frank Co-Author Disappointed on Pay Votes, Cites Fund Managers

April 7, 2015

I read this article, "Dodd-Frank Co-Author Disappointed On Pay Votes, Cites Fund Managers", that Barney Frank is disappointed with Say on Pay, and that it has not made more changes in the board room regarding compensation. However, he isn’t living in the board room, and more to point he is just looking for a sound bite and book promotion. The timing, pattern, decision making, forms and amounts of executive pay have dramatically changed over the past five years. Added, here's an article that says shareholder approval of director elections is decreasing again this year, and much of this is related to executive compensation and corporate governance approvals by those board members. Whether these shareholder rejections of directors are founded or not, Say on Pay is…

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Minding the Minder Initiative

March 31, 2015

I just returned from a business trip from Switzerland—one of the world’s most beautiful countries.  It’s people; culture, scenery and cuisine are some of the finest around. It is very hard for me to ever not have an enjoyable time while visiting.  But when it comes to executive pay—they are the only country I know that makes making  the wrong call by a board, a criminal offense that includes prison time. The popular initiative "against rip-off salaries" was approved by a majority of voters a few years ago. Prison sentences of up to three years and fines of up to six times the amount of annual remuneration are provided for in the event that a member of the board of…

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Shareholders Focus on Pay Practices

March 24, 2015

In this article we're sharing, "Shareholders Focus on Pay Practices," Andrew McIlvaine details how activist shareholders are calling on several large companies to focus on issues such as the pay gender gap and employee motivation. According to Chris Crawford, our President here at L&A, "This is all part of the pay divide issue that will continue to grow right up to the 2016 elections. The snowball will only get bigger." You can read the article here. As always, let us know if you have any comments or questions!   share

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Corporate Sustainability: The Board’s Role in Oversight

March 19, 2015

In this article we're sharing, MCC (Metropolitan Corporate Counsel) interviews Robyn Bew, director of research, National Association of Corporate Directors (NACD), which recently published its Director’s Handbook on Oversight of Corporate Sustainability Activities.   Some of the questions addressed in this interview include:   1) People often think of corporate sustainability activities in terms of environmental, energy or corporate philanthropy-related issues. How does NACD define sustainability?   2) Why is sustainability a board-level issue?    3) Do boards typically place these oversight responsibilities in a dedicated sustainability committee?    4) What is the impact of increased investor attention to sustainability practices on company disclosures, and what are the particular implications for audit committees?   5) What information do directors want from…

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