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The Demise of TSR as the Primary Executive Pay Performance Measure

Reprinted from NACD Directorship November/December 2018 Issue

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During the past decade, the use of total shareholder return (TSR) has risen rapidly in prevalence as a performance metric in executive long-term incentive plans. Many compensation committees believed this was a direct way to align executive pay and performance.…

2018 Study of Executive Severance Arrangements Not Related to a Change in Control

Data for fiscal 2017 executive severance arrangements is derived primarily from 2018 definitive proxy statements filed by 160 major public companies (“Study Group”).

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This is only a summary of the full 2018 Study of Executive Severance Arrangements Not Related to Change in Control. To obtain the full report, please contact Donald Kalfen. About Meridian Compensation Partners, LLC Meridian Compensation Partners, LLC (“Meridian”) is…

Summary of Key Results from ISS 2019 Annual Policy Survey

ISS’s recent Policy Survey previews potential changes in its 2019 proxy voting policies.

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Each year, Institutional Shareholder Services (ISS) surveys institutional investors, public companies (“issuers”) and the consulting and legal communities on emerging corporate governance and executive compensation issues as part of its annual policy formulation process (the “Survey”). Issuers and their advisors…

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…

2018 Meridian Corporate Governance and Incentive Design Survey

For the eighth straight year, Meridian has conducted an extensive survey based on the public filings of 200 large cap companies (“Meridian 200”). This survey seeks to capture trends on a variety of executive compensation and corporate governance topics of interest to major companies today.

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As companies review their executive compensation program designs and related corporate governance policies, current market practices and recent trends can provide competitive benchmarks that are helpful in understanding “best practices,” as well as facilitate productive boardroom discussions. Highlights of Meridian’s…

Should Companies Use Individual Performance Measures in Executive Annual Incentive Plans?

When evaluating whether including an individual performance component is appropriate, companies may want to consider some questions.

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According to the Meridian 2017 Governance and Incentive Design Survey1, 43% of Meridian 200 companies use an individual performance component in their executive annual incentive plan, typically as a supplement to financial measures. Actual usage may be higher as the…

Long-Term Incentives and Stock Ownership Ensure Alignment with Shareholders

Annual incentive metrics serve an important purpose: communicate a company’s priorities and provide incremental annual feedback on performance.

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Much of the commentary on energy industry pay programs has focused on annual bonus metrics. Annual incentives are easier to analyze because the payouts are clearly disclosed each year in the Summary Compensation Table, and those payments can communicate how…

2018 NACD Directorship 100 Released—the Annual List of the Most Influential Leaders in Boardrooms and in Corporate Governance

Michael Powers and Jim Wolf were named to the NACD Directorship 100 list for 2018, making it the sixth consecutive year for both Partners.

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The National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 19,000 corporate board members, announced the 2018 NACD Directorship 100, an annual recognition of the leading corporate directors, corporate governance experts, policymakers, and influencers—leaders who…

Is it time for longer-term performance awards?

A variety of factors has escalated short-termism, including proliferation of technology and Wall Street’s relentless demand (and apparent rewards) for short-term profits.

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Short-termism: Acknowledging a Trend In his 2016 annual letter to CEOs, Larry Fink wrote: “I have written to the CEOs of leading companies urging resistance to the powerful forces of short-termism afflicting corporate behavior. Reducing these pressures and working instead…

CEO Compensation in the Largest US Companies

Reprinted from Chief Executive Officer Magazine - Volume 1 2018

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Are US CEOs overpaid? Bob Romanchek, senior partner at the executive compensation consulting firm Meridian Compensation Partners, adds clarity to the issue by looking at the components of pay, the historic levels of total pay opportunity and the critical relationship…

Compensation Advisors Deliver Advice on Taxes, Culture, and Big Investors

Reprinted editorial coverage from Leading Minds of Compensation–South, which is running in the May/June 2018 issue of NACD Directorship magazine.

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Regardless of how complex the process for setting and reporting on executive pay becomes, or how simple some critics believe the process should be, one truth reigns: money motivates. That was the theme when a panel of directors and compensation…

Preventative Care for Executive Compensation Programs

Reprinted from the May/June 2018 issue of NACD Directorship magazine

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In many cases, U.S. public companies receive a high level of support from shareholders for their annual advisory vote on the executive compensation program. Based on these results, companies often conclude there is no need to make any material changes…

NACD Leading Minds of Compensation – South

NACD's Leading Minds of Compensation program is a forum for engaged compensation committee chairs, members, and directors to exchange insights with the nation's top thought leaders.

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Meridian was proud to be a sponsor of this unique opportunity discussing the latest executive and director compensation challenges and trends. The country’s leading compensation experts including Lead Consultant, Virginia Rhodes, provided an invaluable outlook on compensation, and then opened…

2018 Trends and Developments in Executive Compensation

Meridian provides an overview of the current executive compensation and corporate governance landscape.

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In the past year, several factors have driven change in the executive compensation landscape in the U.S. Each year, Meridian identifies key developments regarding how companies respond to these ever changing conditions. (Read last year’s survey here.) This year share price…

Relative TSR Still Delivers Real Pay-for-Performance Alignment in the Oil & Gas Industry

Among the ten largest Oil & Gas production companies that have reported 2017-2018 compensation actions, each has either implemented or enhanced a financial returns metric for 2018 incentive compensation.

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The menu of industry annual incentive metrics (and some long-term incentive metrics) now includes several instances of ROCE, Cash ROCE, ROIC, estimated wellhead returns, and other non-GAAP measures of investment returns. Investors may welcome the incentive accountability to financial returns,…

Status of Proposals to Link State and Local Corporate Taxes to CEO Pay Ratio

As we reported last March, several jurisdictions have proposed (and one has enacted) tax surcharges, higher corporate income tax rates or fees tied to a public company’s CEO pay ratio. Since then, these proposals seem to have gained little legislative traction. This Update examines whether the ongoing public disclosures of CEO pay ratios have proven to be a catalyst for legislative action and whether other jurisdictions have proposed similar taxes.

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New Proposal – California Proposes Scaled Corporate Income Tax Rate Tied to a Public Company’s “Compensation Ratio” California is the sole jurisdiction to propose linking corporate income tax to a public company’s compensation ratio since last March. Submitted to the…

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…

ISS Guidance on Proxy Reports and Company Engagement

Institutional Shareholder Services (ISS) recently issued updated guidance related to the publication of its U.S. proxy research reports and the process for company engagements. These are timely topics for a company to consider with the 2018 Proxy Season well underway.

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Generally, ISS issues its U.S. proxy research reports between 13 and 18 calendar days prior to the shareholder meeting date during peak U.S. proxy season from April through June. At other times of the year, ISS aims to publish its…