CLAWBACKS—IS TOMORROW Dodd-Frank DAY, our D-Day?

June 30, 2015

“The interval between the decay of the old and the formation and establishment of the new constitutes a period of transition which must always necessarily be one of uncertainty, confusion, error, and wild and fierce fanaticism.”—John C. Calhoun CLAWBACKS—IS TOMORROW Dodd-Frank DAY, our D-Day? written by Brent Longnecker, Chris Crawford, and Josh Henke of Longnecker & Associates. After speaking with the SEC, L&A inferred that tomorrow, Wednesday, the SEC will propose the clawback rules required by the Dodd–Frank Wall Street Reform and Consumer Protection Act. If true, this will bring an end to an issue boards have wrestled with for five years. As you’ll recall, the Dodd-Frank rules came out in 2010. Here is the SEC's announcement and information about the…

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Why Do Companies Share Less With Employees?

June 24, 2015

Written by Chris Crawford, Ian Keas, and Brent Longnecker of Longnecker & Associates. Towers Watson recently compiled an analysis detailing the equity award trends of public companies in the U.S. One conclusion is that companies have dramatically reduced the amount of shares awarded to employees.  Another conclusion is that companies are using more restricted shares than in the past. The analysis begs the question, why? Reading through any newspaper or magazine that cites the problems with CEO pay, would likely lead you to conclude that companies are providing less equity to employees because they are providing more to the CEO and have less for employees. Very simply, this is not the case. One very central reason U.S. public companies have continued to provide…

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Chipotle Shareholder Overreach

June 16, 2015

Written by Brent Longnecker, Chris Crawford, & Kevin Kuschel of Longnecker & Associates. It doesn’t always feel like it, but shareholder votes on executive compensation are actually non-binding. Today, it seems that shareholders’ voices are growing more and more influential and their “non-binding” votes are wielding more and more power. And unfortunately, the responses the shareholders receive to their influence are setting precedents and solidifying their power to steer the direction of compensation decisions made in the boardroom. This is a problem in and of itself, but the fact that boards can be influenced in this manner often sets the stage for further investor intrusion into what should ultimately be board decisions. Shareholders get their say when they vote for…

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Is the SEC Getting Ready to Finalize More of Dodd Frank?

June 9, 2015

Written by Brent Longnecker, Chris Crawford, & Alissa Martin of Longnecker & Associates. “Sometimes we stare so long at a door that is closing that we see too late the one that is open.” Alexander Graham Bell   We think a door is about to close with respect to the SEC and the Dodd-Frank Act passed five years ago.   The Securities and Exchange Commission will soon propose long-awaited rules forcing companies to claw back, or revoke, some of their top officials’ incentive pay if they have to restate the financial results that led to it, according to insiders familiar with the agency’s internal deliberations.   Unlike existing rules, in which claw-backs are only triggered in circumstances involving misconduct at companies…

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IS THE SEC FORGETTING THEIR ROOTS?

June 2, 2015

“The purpose of government is to enable the people of a nation to live in safety and happiness. Government exists for the interests of the governed, not for the governors.” – Thomas Jefferson Longnecker & Associates has a great relationship with the Securities and Exchange Commission. Over the years, we have worked with them on several different issues, and often, we will call our contacts at the SEC to discuss situations we see and get their perspectives. They are a true – and greatly appreciated – ally. But, like any government agency, they are obviously funded by – who else? The government. As such, to get funding, the SEC has to be in step with the politicians who fund them….

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Oh, The Irony! 6 of 10 Highest-paid CEOs Worked in the Media Industry

May 28, 2015

Six of the 10 highest paid CEOs in 2014 ran multimedia entertainment companies like Discovery, Viacom and Disney, according to a new study released by the data firm Equilar. It strikes us as ironic that these CEO’s have the nation’s largest media outlets at their fingertips, yet they spend little, if any, time and energy educating the general population about the realities of executive pay versus the myths and conspiracies propagated by naysayers. It’s not that we think these CEOs aren’t worth every penny of their salaries – they are. We just wish they would use their expansive resources to explain why they make what they do. For example, these media CEOs work with some seriously high paid individuals –…

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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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