Semler Brossy's Contributions to Directors & Boards

Boards have a growing interest in special equity awards to fend off recruiters and partially compensate executives for target pay that was not fully realized. Are special awards a good solution?

Many business thinkers have criticized corporate “short-termism” that discourages crucial long-term investments in intangible capabilities. Executive pay programs get much of the blame, as even “long-term incentives” last only three years, with the goals for each year’s tranche reset annually.

Investor demands, societal pressures and competition for employees are pushing boards to be intentional about where and how they focus on human capital management (HCM). Leading companies view HCM as a value driver and strategic differentiator.

With long-term success increasingly depending on attracting, retaining and engaging talented people, HCM has become a concern not just for senior executives, but also for the board of directors.

How can a board member evaluate if DEI incentive metrics would be meaningful? As with any key initiative, the dialogue surrounding performance management can give clues as to what does or doesn’t make

Blair Jones and Vanguard's former Chairman and CEO F. William McNabb III, and Directors & Boards Publishing Director, David Shaw as they focus on best practices for human capital management.

One visible way some companies are showing their commitment to diversity, equity, and inclusion is by linking DEI progress to executive pay. 

More robust conversations with management about HCM are needed as the board purview expands. The intent is to ensure the board has adequate oversight into risks and strategic opportunities.

The Great Resignation has put retention on the agenda of many boards. Rather than simply reacting — prioritizing pay raises or special packages to stay competitive  — directors can engage management toward a proactive approach.

Human capital management (HCM) disclosure is evolving rapidly, and the proxy is quickly becoming the most prominent area for boards to tell their HCM story.

What does finalizing these last significant compensation-related portions of Dodd-Frank mean in light of the dramatic changes to the compensation and governance landscape experienced since the legislation was initially adopted?

We recommend boards and directors ask these questions to help understand their role in process oversight, emergency planning, transition dynamics, and more.

Many companies are facing significant challenges developing and implementing compensation programs for 2023 owing to market volatility and continued macroeconomic uncertainty. Retaining your best talent may require adjusting for market volatility.

In certain cases, many enduring principles of executive compensation should be applied to ESG metrics, including considering the alignment to company strategy and values and the incentive value that a broader view of performance can provide.

Directors with human capital expertise can be invaluable at a time when the “war for talent” is raging.

While cybersecurity is an untraditional risk, there are learnings and principles from the financial crisis that boards would be wise to reflect on and incorporate into a more robust and systematic approach to cybersecurity risk.

Market volatility and downward pressure on valuations will affect board-level discussions of executive stock ownership.

Will outgoing CEOs stay as a mentor to the new CEO, transition to a board role or depart entirely? Regardless of the role, each path will affect the organization's stability and strategic direction.

Boards must acknowledge exec comp's impacts and take steps to mitigate effects on the company.

Executive compensation can be a sensitive issue at the best of times, but particularly when governance failures allow executives to realize substantial rewards in cases of gross misconduct or shortsighted decision-making.

Whether sparked by technological innovations, geopolitical events or leadership transitions, most companies will undergo a major transformation at some point. During such transformational periods, incentive programs are a powerful tool that can help organizations align toward new goals, motivate employees, and drive performance.

Compensation committees can benefit from understanding the target-setting practices of S&P 500 companies.

Boards must ask the right questions, focus on financial metrics and align workforce decisions with the company's growth and profitability goals.

Helpful tips for the board’s compensation experts include adapting compensation practices to support strategic priorities and staying ahead of the latest trends. 

In uncertain times, compensation committees must root their decisions in the broader growth strategy and create room for flexibility.

In an evolving governance environment, expressions of strong corporate character — exemplary corporate governance, responsible stewardship of the environment and positive contributions to society — are no longer nice-to-haves. They are increasingly becoming explicit expectations.

The turbulent events of 2020 have heightened many American corporations’ sense of political and social responsibility. With the pandemic exacerbating income inequality and climate change still a long-term threat, investors and critics are calling on companies to care for all stakeholders, not just investors. Many boards are attending to their long-standing interests in environmental, social and governance issues more than ever before.

Setting goals for incentive compensation has long been one of the compensation committee’s biggest responsibilities, made especially difficult by the Covid-19 pandemic.

With widespread protests over persistent racism, many boards of directors are looking for their companies to do more to support racial equity. Here are considerations for different approaches that boards and management teams might pursue.

Only by supporting all major stakeholders, through calibrated and balanced incentives, will companies achieve sustained success.

When and how should directors adjust executive incentive payouts?

Some considerations for companies and Boards during this unprecedented situation.

Integrating ESG metrics into pay plans.

Conventional three-year performance share programs have limits.

Do you monitor your leaders' skills and capabilities?

Time to take stock of executive pay and perks programs.

The Business Roundtable's declaration should lead to new comp committee goals.

Time for directors to oversee "the most important asset."

Be clear on the objective of your incentive plan design and setting performance goals that meet those objectives.

Across all industries, technology has become a key driver of growth and profitability for many organizations.

Non-financial metrics may become a bigger part of the incentive calculation.

Board pay has always been an interesting — and sometimes uncomfortable — topic for outside directors.

Passive money managers, finding wins on ESG, turn to say on pay. What boards need to do.

Here are three baseline learnings from the first wave of pay ratio disclosure and why boards and management need to pay attention to it going forward.

Redesigning pay bolsters growth.

With companies starting to release CEO pay ratio data for the first time, boards and management teams are bracing for a wave of reactions.

A financial services firm with revenues in excess of $1 billion utilized a price-vested options approach with rigorous goals to align with the company's high-growth strategy.

A mid-sized consumer products company introduced a relative total shareholder return (TSR) measure to its long-term incentive program.

The U.S. equity markets may become in the short-term, a poor marker for long-term value creation.

As useful as such grants can be in some situations, they should be approached with skepticism.

The oil environment over the past 18 months has raised a stiff challenge to energy-company compensation committees. In 2015, typical industry pay plans that were neatly crafted to reward executives for increased production and exploration paid off when executives delivered on their promises. But the payoff was often misaligned with share price performance, which fell dramatically across the industry.

Executive pay has long been in the spotlight for shareholders, boards, management teams, and commentators alike. More recently, the connection of executive pay outcomes with company performance has taken center stage.

Corporate America has increasingly relied on share repurchases to fuel earnings per share (EPS) growth in recent years. A study by Reuters found that nearly 60% of nonfinancial, publicly traded companies have bought back shares in the last five years, and share repurchases and dividends exceeded capital spending in 2014.

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.

Is your company's IPO on the horizon? Among many things you'll have to think about, one is pay program design and equity usage as you go public. If you're wondering what best practice is, the results from recent research give some general guidelines to follow.

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...

Why activists are concerned with executive pay and what boards and their compensation committees should be doing now to respond to these concerns.

The most effective executive compensation programs today strike the balance across key stakeholders — boards of directors, management teams, and shareholders. For many companies, performance-based equity has become the principal component of executive pay.

The annual performance review. Many boards don't take full advantage of them as a leadership- development mechanism for the CEO. But CEOs are no different from other employees: they need honest, direct and timely feedback. In the CEO's case, getting unfiltered feedback from most people can be especially tricky, so a rigorous review by the board matters all the more.

Comparing the compensation and financial picture of three actual companies illustrates how three "tests" can help companies get a handle on the reasonableness of CEO pay. The tests check for correlation between pay and performance, value sharing, and peer alignment. The analyses provide a compelling story about the aspects of design that contribute to an appropriate alignment of pay and performance.

The success of a merger or acquisition transaction rests in large part on the strength and accuracy of the pre-M&A legwork.

Establishing principles to address specific pay program amounts and components will help the Board to ensure that decisions regarding director pay are made thoughtfully, holistically, and accurately.