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Emerging Topics for Compensation Committees

Partner Virginia Rhodes spoke with TK Kerstetter of Diligent's Inside America's Boardrooms and outlined several emerging compensation committee issues.

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Executive compensation continues to be a major focus for institutional investors, yet the conversation is shifting. Compensation committee agendas have expanded to include topics like human capital management, company culture, ESG, and succession planning—all factors that are increasingly tied to…

Compensation Committees: Good Governance Process Leads to Effective Decision-Making

Compensation Committees (“Committees”) are held to the highest legal standard when setting the compensation of executive officers.

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That is, Committee decision-making must pass muster under fiduciary standards to be defensible and withstand judicial scrutiny. To meet these fiduciary standards, Compensation Committees should have in place a robust governance process from which to develop sound compensation determinations and…

Planning CEO Transitions: Compensation Committee Best Practices

Partner Jared Berman spoke with TK Kerstetter of Diligent's Inside America's Boardrooms and outlined best practices for boards that have the luxury of time.

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When it comes to CEO transitions, boards should be prepared for the “hit by a bus” scenario. But what about the other side of the spectrum (i.e., a planned departure of a long-tenured CEO)? If you have the luxury of…

Prepping Your Clawback Policy for Prime Time

As seen in the November/December 2019 issue of the NACD Director Advisory

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In the wake of corporate scandals and high-profile executive misconduct, compensation committees are reviewing the adequacy of their clawback and forfeiture policies. Board members want to be assured they have the tools needed if they find themselves in the headlines.…

Time to Check Your Equity Incentive Plan Share Reserve

With depressed energy stocks, more shares are now needed to maintain recent levels of employee equity awards.

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This increase in share use also means that equity incentive plan reserves will drain at a faster rate, and may run out sooner than expected. Companies often ask for more shares when there is roughly enough left in the plan…

Why Pre-IPO Peer Groups are (or at least should be) Different

External benchmarking provides critical information for executive pay decisions.

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Most compensation committees review information gathered from a customized peer group of companies as part of compensation program development and relative performance reviews, and peer group construction is often a matter of significant debate. Common sense would suggest that if…

Compensation: Quiet Before the Storm?

Why now is the right time for an executive compensation audit. As seen in Corporate Board Member Fourth Quarter 2019.

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Compensation committees fared well in the 2019 proxy season, with the vast majority of Russell 3000 companies receiving support on their compensation programs from proxy advisors and shareholders. Yet, compensation programs continue to be a hot=button issue for stakeholders, with…

How Should Boards Handle Involuntary CEO Retirement?

Meridian Lead Consultant Jon Szabo spoke with Corporate Board Member in the video below about how boards can navigate the uncharted territory of involuntary retirements from CEOs and how to craft their exit packages.

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In the first quarter of 2019 alone, more than 20 CEOs of large public companies announced their resignations. This uptick in C-level departures, which included several “involuntary retirements,” has compensation committees rethinking their approaches to officer-level severance pay. CBM recently…

Economic Value Added—New Governance Considerations

Starting this proxy season, Institutional Shareholder Services (ISS) will be disclosing in U.S. and Canadian company proxy reports Economic Value Added (EVA) metrics. These metrics will be shown for informational purposes only. However, we believe it is likely that ISS will incorporate EVA metrics into its CEO pay-for-performance analysis within the next two proxy seasons, subject to investor feedback.

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ISS’s introduction of EVA metrics is likely to foster discussion among compensation committees about the nature, merit and implication of these metrics. EVA may also be of interest among institutional investors as an additional lens to assess pay and performance…

How to Structure a Fair Executive Severance Agreement

From Boardroom Resources...Ryan Harvey frames the importance of a well-structured severance arrangement and outlines several best practices for today’s boards and compensation committees.

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Few things cause shareholder or media outrage like a poorly structured executive severance agreement. When a CEO is terminated for poor performance and walks away with tens of millions in severance payments, it’s understandably a hard pill for company stakeholders…

Compensation Committee Issues in 2019: From Discretion to Down Cycles

From Boardroom Resources...In this episode, Partner Annette Leckie discusses the impact of the latest tax reform on executive incentives.

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When the latest tax reform was introduced, companies immediately began calculating what it meant for their business. Compensation committees and their outside consultants went through a similar process to identify new rules that may affect how they structure executive compensation…

In What Circumstances do Special Equity Grants Make Sense?

As executive compensation consultants, we often receive questions from Compensation Committee members regarding the possibility of “one-time” equity grants for senior executives. There are various important considerations when contemplating such awards.

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Based on our experience, it is important to understand the many inputs and ensure the Committee is making informed decisions with “eyes wide open” to avoid surprises. Awards should focus on specific intended objectives. From time to time, Compensation Committees…

Trends in Compensation: Committee Chairs & Lead Directors

From Boardroom Resources...In this episode, Bob Romanchek discusses current trends in director compensation.

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Compensation trends for lead directors and committee chairs have been interesting to follow in the years after Sarbanes-Oxley. Audit committee chairs were the first to be rewarded with higher pay; compensation committee chairs quickly followed suit as issues like Say…

Pay Trends in the Financial Services Industry

Reprinted from the July/August 2018 issue of NACD Directorship magazine

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The financial crisis and recession may be history, but the impact these events have had on the financial services industry remains. Meridian Compensation Partners LLC, a consulting firm that serves clients on executive compensation and governance matters, has a dedicated…

Long-Term Incentives: Compensation Committee Challenges

Inside America’s Boardrooms is a weekly web show that features board members and governance experts with varying perspectives and board committee experience hosted by TK Kerstetter.

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While the Tax Cuts and Jobs Act has brought some positives to the economy and certainly to select individuals, it has also brought some challenges to compensation committees as they try to figure out the correct balance for long-term incentives…

Vesting Doesn’t Make Sense

From Corporate Board Member - "Board Governance Series," Second Quarter 2018

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It usually perks up the ears of most corporate directors when you say “board compensation.” What’s happened recently in this area, particularly with equity grants? If you take a step back, outside director compensation has generally been in a pretty…

Five “Must Know” Aspects of the Compensation Committee Process

From Inside America's Boardrooms - The Premier Board of Directors Informational Webshow, hosted by TK Kerstetter

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Episode Summary Serving on the compensation committee has become a formidable challenge for most directors regardless of one’s background or career. Not only do compensation committees have to navigate a host of regulations and complex terminology, but over the last…

Bob Romanchek on Inside America’s Boardrooms

In this episode, Bob Romanchek outlines five critical steps or subject-matter issues that all committee members should know if they are joining or serving on a public company’s compensation committee.

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Serving on the compensation committee has become a formidable challenge for most directors regardless of one’s background or career. Not only do compensation committees have to navigate a host of regulations and complex terminology, but over the last several years,…

Best Practices for Restructuring Your Incentive Pay Plan

Watch Meridian Partner Marc Ullman on TK Kerstetter's Inside America's Boardrooms.

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In this episode, Partner Marc Ullman joins host TK Kerstetter to discuss best practices for rethinking the incentive pay structure. With the goal of aligning pay and performance, Ullman outlines eight DOs and DON’Ts for today’s compensation committees. In addition…