By Adam Swietek
In recent years, we have observed a remarkable level of homogenization of compensation practices for non-employee directors, even as what is expected from board members of public companies continues to evolve and – generally speaking – expand. In our client work, we have also noted a great deal of diversity in the role that the board … Continued
By Adam Swietek
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 the goal is to understand what is competitive pay to attract and retain and motivate … Continued
By Adam Swietek
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 scrutiny of incentive pay metrics, goal rigor and policy transparency only intensifying. CBM recently spoke … Continued
By Adam Swietek
This article offers some useful context and information for compensation committees and management teams of chemical companies to consider when designing and managing their executive pay programs. In particular, we cover key attributes of the industry and their impact on setting goals and designing incentives to help manage the impact of volatility resulting from: Commodity … Continued
By Adam Swietek
Directors should take a close look at how their companies can use compensation to advance an environmental, social, and governance (ESG) strategy. A key to ESG oversight is the board’s examination of how compensation reflects and advances the company’s commitment to ESG goals. Investors and other stakeholders package a broad range of nonfinancial topics under … Continued
By Adam Swietek
The bill includes six procedural restrictions for the SEC to study for consideration as potential amendments to Rule 10b5-1. The proposed restrictions prescribe a reasonable approach for administering plans based on sound governance practices. One might wonder why companies would wait for Congress (and the SEC) when they could consider these changes now. The SEC … Continued
By Adam Swietek
While initially the EVA material will be provided purely for information, it seems inevitable that ISS will continue to push to include EVA as a formal part of its pay for performance analysis. There are general concerns about ISS using EVA – a complicated analytical framework that uses highly adjusted financial data – to make … Continued
By Adam Swietek
This potential wave has generated questions about Change-in-Control (CIC) severance protections, amplified by the significant coverage of Anadarko’s last minute enhancements to its CIC severance programs (see article). The Anadarko enhancements included elevated severance benefits and the re-insertion of excise tax gross-ups. Most companies, including Anadarko, eliminated the use of excise tax gross-ups in new … Continued
By Adam Swietek
Over the past ten years or so – since the widespread adoption of shareholder ‘say on pay’ votes on executive compensation at public companies in the US and elsewhere – arguably no single idea has animated the analysis and design of CEO compensation programmes as much as the goal of ‘paying for performance’. For a … Continued
By Adam Swietek
In 2018, shortly after its acquisition of equity research firm EVA Dimensions, Institutional Shareholder Services (ISS) announced that it will include Economic Value Added (EVA) measures in advisory reports[1]. ISS believes EVA measures provide a clear and more complete picture of value creation. The challenge for financial companies is that EVA is a difficult metric … Continued
By Adam Swietek
It is a quantifiable, objective way for a compensation committee to gauge how an executive is positioned versus the market, and helps the committee to understand what competitive pay is and if compensation arrangements are adequate to attract, retain and appropriately motivate executives. When proxy season ends, many companies will review market benchmark pay data … Continued
By Adam Swietek
Given its strong alignment with shareholder value creation, earnings per share (EPS) is a common performance metric selected for short-term incentive and long-term incentive plans. A company’s generally accepted accounting principles (GAAP)-based EPS is equal to its after-tax net income divided by the number of common shares outstanding (either on a basic or fully diluted … Continued
By Adam Swietek
For well over 50 years, there has been the same three general design categories of long-term incentives for US-based CEOs. These have been full-value share grants, which vest over time and focus on retention; stock appreciation vehicles, such as stock options and stock appreciation rights, which focus on driving share price over the long term; … Continued
By Adam Swietek
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. But is it? A notable number of large-cap companies are now not so sure. Meridian … Continued
By Adam Swietek
Introduction This is Meridian’s fifth year tracking executive compensation practices at U.S. banks with assets above $10 billion. One theme remains consistent: programs continue to evolve. As we entered the 2018 year, companies invested much time and energy calculating the CEO pay ratio and preparing for its disclosure. The Tax Cut and Jobs Act eliminated … Continued
By Adam Swietek
Employers are generally focused on maximizing productivity and facilitating smooth transitions, while employees are generally focused on timing – not only about when will they have enough money for a comfortable retirement, but also what will they forfeit when they do retire. These different perspectives often create a tension that goes unresolved, resulting in employees … Continued
By Adam Swietek
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 may feel pressured to approve recommended one-time LTI grants, particularly in today’s strong economy (lowest … Continued
By Adam Swietek
Relative total shareholder return (relative TSR), the most commonly used performance share unit (PSU) measure, has recently been challenged by institutional investors. Earlier this year Ontario Teachers’ Pension Plan (OTPP) released an article entitled “Is Management Compensation Rewarding the Right Behavior?”, which focuses on incentive design in the oil and gas industry. OTPP criticized relative … Continued
By Adam Swietek
As the global economy remains strong, the pace of mergers and acquisitions will remain robust. As such, this is a good time for compensation committees to review change-in control (CIC) protections, including arrangements for severance, payments, and other special benefits that may be tied to displacement caused by mergers, hostile takeovers, or asset liquidation. While … Continued
By Adam Swietek
Executive compensation is complex and institutional investors and proxy advisors are increasingly aggressive and prescriptive in their views of executive compensation. This makes the role of a public company compensation committee complex and demanding. It is now more important than ever that the Committee process is effective and efficient. While great process does not guarantee … Continued
By Adam Swietek
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 43% does not account for Compensation Committees using discretion to adjust awards for individual performance. … Continued
By Adam Swietek
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 the company performed over a discrete one-year period. Due to this visibility, compensation committees spend … Continued
By Adam Swietek
Until recently, outside director compensation has not been subject to similar scrutiny primarily due to the narrow range of pay practices for directors, in both pay value and design/delivery. However, a new heightened level of scrutiny is now being applied to outside director pay. This has prompted many companies and their boards of directors to … Continued
By Adam Swietek
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 to invest in long-term growth remains an issue of paramount importance for BlackRock’s clients, most … Continued
By Adam Swietek
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 team that specializes in serving financial services organizations. Susan O’Donnell and Daniel Rodda, partners at … Continued
By Adam Swietek
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 to company performance. The main components of CEO compensation for large US-based companies are base … Continued
By Adam Swietek
High-performing banks define and execute their strategic vision by clearly articulating what they want to achieve and how they will do it. The old adage, “what gets measured, gets done”, is true when it comes to incentive plans. Companies that define specific measures and create accountability for achieving them are more likely to achieve the … Continued
By Adam Swietek
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 to the design of their executive compensation program. As a result, companies may not conduct … Continued
By Adam Swietek
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, but will performance against these new benchmarks create better alignment between pay and performance? Should … Continued
By Adam Swietek
Determining CEO pay is one of the most visible decisions the compensation committee and board will make. CEO pay decisions communicate the board’s perspective on both the CEO’s and the company’s performance to employees, shareholders, and other external observers. Shareholders and proxy advisory firms primarily focus on CEO pay when evaluating whether to support the … Continued
By Adam Swietek
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 narrow range, value-wise. Looking back over the past five to seven years, it’s averaged about … Continued
By Adam Swietek
While the use of stock options as a primary vehicle for executive equity awards has tapered recently, the common belief that stock options are worth about one-third of face value has remained. Although this rule of thumb held true for many years, for reasons described below, that may no longer be the case, especially for … Continued
By Adam Swietek
Are you satisfied with the design and operation of your company’s performance-based longterm incentive program for top executives? Chances are you are not. In chasing that ever-elusive pay-for performance vehicle design, you may have gone from stock options to performance units and performance shares, or some combination thereof, over the last 30 years. You also … Continued
By Adam Swietek
A wave of lawsuits surrounding director compensation surfaced a couple of years ago, often alleging “excessive” pay for boards of directors on a variety of grounds. Because boards set their own pay levels, there are potential legal ramifications due to the “self-dealing” nature of director compensation. While lawsuits were settled and subsequent litigation has subsided, … Continued
By Adam Swietek
There is no more contentious, complex or difficult issue for boards than setting up the right incentives for executives. With companies in cyclical businesses that may have commodity costs as a large portion of performance, the challenge gets even more complex. Corporate Board Member recently talked with Jim Wolf, managing partner at Meridian Compensation Partners, … Continued
By Adam Swietek
As the Dodd-Frank-mandated CEO pay ratio looms large this proxy season, many boards and compensation committees have already completed their calculations and are awaiting the impact. Added as a last-minute mandate to the Dodd-Frank Act in 2010, the CEO pay ratio was established in response to mounting discontent with the widening gap between executive and … Continued
By Adam Swietek
Savvy investors understand the value of a strong management team and are willing to pay handsomely—if company performance warrants. It’s important to design executive pay to reward great performance and penalize poor performance. In our experience, most directors strive to do just that. Unfortunately, investors and other stakeholders sometimes struggle to recognize the link between … Continued
By Adam Swietek
Consolidation in the banking industry continues, with more than 200 bank mergers in 2017. Whether your institution is a potential buyer or seller, there are several compensation matters that will need to be addressed proactively. Change-in-Control (CIC) Protections CIC arrangements are particularly important in the banking industry due to the significant consolidation activity. CIC arrangements … Continued
By Adam Swietek
From an executive compensation perspective, boards have an important duty to pay executives appropriately in line with the underlying performance of the company. The age-old issue of paying for performance seems more complex than ever—and more highly scrutinized! The design of short-term and long-term incentive programs needs to align with a company’s business strategy, and … Continued
By Adam Swietek
The key highlights from Meridian’s 2017 Outside Director Compensation study among Fortune 100 companies include: In 2016, total compensation increased modestly at 1.2% Annual cash retainer values were flat for the second consecutive year, but equity values increased at approximately 2.9% per year. Equity comprises 60% of total compensation, while board meeting fees now comprise … Continued
By Adam Swietek
As published in BankDirector.com By: Susan O’Donnell, Daniel Rodda| SEPTEMBER 13TH, 2017 Since 2010, banks have followed the Interagency Guidance on Sound Incentive Compensation Policies and reviewed their incentive plans to ensure they do not motivate inappropriate risk taking. However, incentive compensation in the retail business lines was often perceived as inconsequential and unlikely to … Continued
By Adam Swietek
From the July/August 2017 issue of NACD Directorship Visit NACDonline.org Meridian Compensation Partners has deep experience working with companies throughout the typical PE ownership life cycle—from public to private and back into the public markets through an initial public offering (IPO). In a recent interview, Meridian’s PE experts—Ryan Harvey, Matthew Isakson, Tom McNeill, and Marc … Continued
By Adam Swietek
Approximately 25 percent of U.S. public companies will be asking shareholders to approve a new or amended share plan this proxy season. Since most companies do not revise share plans on an annual basis, boards may want a refresher on issues to consider when seeking shareholder approval. When asking for approval of a share plan, … Continued
By Adam Swietek
Find this article and more in the NYSE Governance Services Corporate Board Member Magazine – nyse.com/governance Over the last 10–15 years, we have observed a sea change in long-term incentive (LTI) award design. The role of stock options has dramatically declined, generally replaced by performance share or unit (PS/U) awards. Factors driving this change included … Continued
By Adam Swietek
There has been a lot of attention (both from the media and investors) focused on whether E&P companies are using the right metrics in their annual incentive programs. E&P companies have been criticized for a heavy focus on production and other volume measures without a corresponding link to whether that volume is profitable or generating … Continued
By Adam Swietek
While we wait to see what deregulation might come out of the new administration regarding Dodd-Frank or other executive compensation regulations, the Texas legislature might take a huge step in favor of corporate boards and management. A bill currently pending in committee in the Texas legislature would impact any company headquartered in Texas, which includes … Continued
By Adam Swietek
This interview originally appeared in Corporate Board Member magazine. Corporate Board Member spoke to Bob Romanchek, partner and consultant with Meridian Compensation Partners, about the expected use of stock options going forward. At one time, the use of stock options for executive pay purposes was a strong majority practice. What changed and why? If you … Continued
By Adam Swietek
Find this article and more in the most recent issue of Equilar C-Suite magazine. Find past issues of C-Suite at Equilar.com. Boards walk a fine line to align director pay with shareholder value By Ryan Villard Boards of directors bridge the gap between investors and their executive teams, providing guidance and holding management accountable … Continued
By Adam Swietek
This article originally appeared on BankDirector.com. Mergers and acquisitions (M&A) can create significant value for shareholders. Accordingly, bank executives should be rewarded when completing and integrating successful transactions. However, in today’s environment of heightened executive pay scrutiny, some approaches to providing additional compensation for M&A can result in criticism from shareholders and advisory firms such … Continued
By Adam Swietek
Looking at larger companies’ practices for compensating outside directors, lead directors are typically provided a cash retainer of approximately $30,000 for performing this role in addition to the regular outside director pay package. This retainer is oftentimes the same or slightly higher than the extra retainer provided to the audit committee chair. In comparison, the … Continued