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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Headwinds and Tailwinds for Oil & Gas

March 12, 2015

We thought we'd share this great article, "Headwinds and Tailwinds for Oil & Gas"  written by Chris Reinsvold, Vice President at Pearson Partners International.   Reinsvold wrote, "Longer term drivers of opportunity (tailwinds) and challenges (headwinds) can shape an industry, create winners and losers, and reward those leaders and organizations that develop effective strategies to deal with future possibilities. We asked over 200 senior leaders from across the oil & gas industry to look ahead five years to identify the key factors, both positive and negative, that might affect their industry segments. In this article we take a closer look at those long-term tailwinds and headwinds, comparing the responses from oil & gas company executives with those from the supplier…

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Tailor Incentive Compensation to Strategy

March 9, 2015

Because incentive compensation structure is one of the tools top management uses to pursue corporate goals, it must be made consistent with strategy. When designing the structure, a company's top executives should think of it in terms of four aspects of corporate policy: short run versus long run, risk aversion versus risk taking, interdivisional relationships, and company-division relationships. This article considers all of these aspects in the context of six elements of incentive plans: financial instruments, performance measures, degree of discretion in allocating rewards, size and frequency of awards, degree of uniformity, and funding. To read the full article, click here.     share

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The M&A Lynchpin: Success or Failure Starts with HR

February 27, 2015

Written by: Brent Longnecker, Kevin Kuschel, & Jordan Welch   The market for merger and acquisition ("M&A") activity increased sharply in 2014, largely as a result of the abundance of available cash and zero interest rate policies.  According to a recent Proxy Mosaic analysis, the US market announced 9,814 deals amounting to over $1.5 trillion in value.  Even more surprising is projections point to an uptick in M&A activity in 2015.  So, while the desire for M&A is obvious, why is it that more often than not deals end up being considered a failure?   A significant amount of time and effort is put into the front side of every deal, including research, meetings, due diligence, and did we mention…

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