Chipotle Fails Say on Pay with High TSR

May 27, 2014

Last week we saw the news come out of Chipotle failing the Say on Pay vote, and it was NOT because of performance.  In fact, the company saw 1, 3 and 5-year TSRs in the 83rd, 77th and 95th percentiles as compared to peers, yet they received a "no" vote recommendation from ISS.  It is fascinating how influential ISS has become this year.  The reasoning behind the "no" vote recommendation was due to a high pay compared to the peer group at approximately a 3x multiple of peer group CEO median. In other words, ISS has made o matter how good your TSR is, if you are more than 3x the ISS peer median, you will get a fail from…

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Not-for-Profit Board Best Practices from NACD Program

March 18, 2014

Our group attended the NACD Tri-Cities event last week in Houston, where the topic was not-for-profit board best practices.  The panel discussion touched on some really great points on what the modern not-for-profit boards should look like and be focused on.  The speakers stressed that not-for-profits MUST start thinking more like for-profit businesses in order to achieve their goals.   A key point that was made that stuck with the crowd was the concept of "Impactful Philanthropy," and how increasing your revenue through other streams rather than just relying on grants and donations has a direct correlation to how great that impact will be. Other points that were big take aways for board members of not-for-profits to think about: -…

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The GM CEO Issue & the Misunderstanding of Executive Compensation

February 18, 2014

The past three weeks has been a roller coaster for General Motors in the news.  The reason: the media doesn't understand executive compensation structures…again.  The issue of the gap between genders is a big one, and we do not mean to discredit it as being that on average women are making approximately 75% of what men make is a real issue for our future workforce.  This issue aside, the media hyped this story up without a full understanding of what the CEO's potential "realized" compensation would be at the end of 2014 including annual and long-term incentives.  Now we know according to this article  in the NYTimes that Ms. Barra will actually have the potential to earn over 60% of what…

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Why Caps on Executive Pay Won’t Work

February 6, 2014

We have all heard the argument for caps on executive compensation.  Although we here at L&A believe that compensation should be targeted at appropriate levels, tied to performance, and sustainable, the idea to cap executive compensation has a lot of holes in it. The argument was most recently made by Mr. Douglas Smith in the NY Times here with the concept of capping federal wages, therefore setting the example of what needs to be done in corporate America.  There are several points made in this opinion piece that are made every time this issue arises that we would like to put to sleep. First, the premise that the US President’s ratio to minimum wage is way off. $400,000 in salary is…

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What Directors Should Know: Preparations for Compensation Decisions in 2014

December 4, 2013

Compensation has become a larger issue in the past three to five years, and the directors of public, private and not-for-profit companies have to spend more time and effort on these decisions. Although this can be viewed as a negative, it does give the directors an opportunity to re-evaluate the compensation decision process and systems within the Company and the Board to ensure compliance and efficiencies. Longnecker & Associates has provided the following key issues for the board of directors and the Compensation Committee members to consider going into the 2014.  Click here for the full article.   written by the Longnecker & Associates Team share

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Yet Again the Media Distorts Executive Pay

October 24, 2013

USA Today created another amazing twist of CEO pay realities.  In an article released on Oct. 21 gives us one more example of magazines and newspapers distorting truths to sell in a more competitive online news environment. Here is a link to the article: http://www.usatoday.com/story/money/business/2013/10/21/ceo-pay-soars-stock/3003155/ This time around, the paper took CEO shares held over a number of years, and reported the sale of those shares along with base salaries as “pay days”. These seemingly eye popping numbers get reported by the paper as compensation earned this year. In fact, in 2 of the top 5 companies, the CEOS are the founders of the companies; Facebook and Kinder Morgan. Without these two CEOs these companies, including all of the jobs, taxes…

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10 Ways to Calculate Pay Disparity (Since the SEC said you can)

September 23, 2013

It’s official. The SEC has followed through with pay disparity disclosures. This is one of those rules that bureaucrats picked up from the media and turned it into a law, without any real thought as to the cost of calculating this number versus the value it provides investors. In short, disclosing the CEO’s pay to the median employee’s pay will provide no new clarity of the top executive’s total compensation, rather it will just create more media fuel.  If the thought is that CEO pay should be established by internal indexing to the median or lowest paid employee, the rule makers should go back and review the success of Ben & Jerry’s experiment with pay caps. This is not a…

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Join us on October 1st!

September 18, 2013

Join us for a joint presentation with Vinson & Elkins entitled: "Executive Compensation Compliance and Trends in the Energy Industry: Insights from both Consultants and Attorneys". It is here in Houston on October 1, but is also available via webcast. Click here for more info. Hope to see you there!  share

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