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Compensation Philosophy & Programs

Browse the latest articles on pay philosophy, including articles on pay prominance, strategic valuation of pay, talent retention methods, framing the compensation discussion and analysis (CD&A) portion of the proxy statement, and non-direct compensation matters such as SERPs and employee benefits.

2016 Executive Stock Ownership Guidelines

Public companies are beholden to align long-term interests of executive officers with those of their shareholders, and this balance often manifests in how executives are paid in relation to company performance. Many companies address this through use of equity packages, but because executives can still sell or hedge these shares, their incentives to make long-term decisions for the company are not always clear. To avoid this, many companies implement stock ownership guidelines, requiring executives to own a certain amount of equity in the company. Read more

A Compelling Alternative to Stock Options

Today, compensation committees seem to have fewer tools in their arsenal to directly incentivize a company’s stock price growth. Increasingly since 2007, stock options have been replaced by various performance-based vehicles. As a result, long-term incentive plans (LTIPs) may be paying for achievement of operational or financial performance goals while shareholders fail to benefit from a similar growth in share value. Read more

Say on Golden Parachute: A Look at Say on Pay’s Lesser-Known Cousin

Golden parachutes became common in the hostile takeover years of the 1980s, when executives worried about losing their jobs to corporate raiders. The golden parachutes provided executives with lump sum payments, immediate vesting of equity awards and continued participation in benefits following a change in control. Media reports and debacles about failed financial service companies in the 2000s raised public ire over these arrangements. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 advanced a mandate for shareholders to review these parachute arrangements prior to completion of a corporate merger or change in control. The mandate became known as say on golden parachutes and complemented say on pay, a mandate for routine shareholder pay program reviews. Both mandates are advisory and nonbinding. Read more

Pay for performance or pay for results?

For the last few decades, the focus of executive compensation has been to align pay with performance.Nearly every company includes “pay for performance” as a core principle of the executive compensation design, and compensation committees consider managing the pay for performance relationship as one of their primary governance responsibilities. But what exactly does “pay for performance” mean? For most companies, pay for performance has traditionally meant the following: identify key business metrics; set challenging but attainable performance objectives; and deliver pay for achieving those objectives. Read more

Executive Compensation—What Matters Most to Activists?

Executive compensation is a perpetual hot-button topic and one that activist investors frequently use to court shareholder support for their proposals. In a recent BoardVision video, Semler Brossy managing directors Roger Brossy and Blair Jones talk with Ken Bertsch, partner at CamberView Partners, about the following questions. Read more

Goal Setting: Meeting Stakeholder Expectations in an Increasingly Dynamic and Complex World

The perennial challenge of setting meaningful, yet realistic, incentive-plan goals has become ever more difficult in an increasingly complex and rapidly changing business world. Companies now must also accommodate the growing importance of a range of stakeholders. Read more

Staying Ahead of Pay Practices

Public conversations about executive compensation tend to be spurred by the media and other entities that don’t have direct involvement in the creation and implementation of payment programs. The National Association of Corporate Directors’ (NACD) annual Leading Minds of Compensation event sought to hand directors the reins to guide and shape a smart dialogue on sensitive compensation questions. The Grand Hyatt Hotel in New York City was the setting on March 3 for a slate of experts to speak to and answer questions about the latest compensation trends. Read more