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How Should Environmental, Social and Governance (ESG) Performance be Reflected in Executive Compensation?

Companies are responding to increasing pressure from shareholders, proxy advisors, employees, and even local and state governments to consider environmental, social and governance (ESG) issues as part of business strategy and performance.

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Many of the public company boards and corporate executives (very notably, 181 CEOs signing the Business Roundtable Statement avowing Stakeholder primacy1) that are eager to demonstrate this responsiveness cite compensation as an existing, meaningful and highly visible tool that is…

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…

Executive Pay Outreach

From the Volume 2 2019 issue of CEO Magazine...The continued scrutiny of executive compensation coupled with the rise of shareholder activism has prompted many US companies to consider specific strategies around shareholder communications. In response, Bob Romanchek and Tom Ramagnano, partners at Meridian Compensation Partners, provide effective solutions and independent advice for executive compensation and corporate governance.

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Historically, a company’s communication with investors has been centred around the quarterly tion of financial business results and forward-looking guidance, along with year- end results. However, developments over the past several years have led companies to engage with major institutional…

ISS Issues Final Policy Updates for 2020

On November 11, 2019, Institutional Shareholder Services (ISS) issued final updates to its proxy voting policies for 2020 and on November 21, 2019, ISS issued further guidance in its preliminary FAQs for 2020 compensation policies. The updates represent an incremental change to existing ISS policies and the implementation of phased-in policies related to non-employee director compensation and board gender diversity.

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Final Policy/Process Updates for 2020 ISS has made the following modifications to its U.S. pay-for-performance assessment for 2020: ■ Easing the quantitative concern thresholds under its initial three-part comparative quantitative analysis of CEO pay and company performance, and ■ Using…

Managing Disclosure on Personal Use of Corporate Aircraft

Personal use of corporate aircraft remains a popular perquisite among many of the largest public companies.

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In addition to getting executives to important business destinations and enabling them to work proactively while traveling, many companies provide top executives the opportunity to use the corporate aircraft for non-business purposes, including travel to outside company board meetings, spousal…

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…

Council of Institutional Investors (CII) Overhauls its Policy on Executive Compensation

On September 17, 2019, the Council of Institutional Investors (CII) announced an overhaul of its policy on executive compensation, urging public companies to reduce the complexity of their executive compensation plans and set longer service-based periods for time-based equity awards.

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CII is an influential advocacy group for institutional investors. Its membership includes a wide range of asset managers with over $35 trillion in assets under management. To advance the interests of its members and reflect changes in the corporate governance…

Summary of Key Results from ISS 2019 Annual Policy Survey

ISS’s recent Policy Survey previews potential changes in to 2020 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…

Managing Executive Incentive Programs for Chemical Companies

Designing and managing effective compensation programs is challenging for chemical industry companies due to the highly cyclical and global nature of the business.

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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…

Use Compensation to Advance ESG Initiatives

From the July/August 2019 issue of the NACD Directorship magazine.

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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…

Pay for Performance

From Volume 1 Chief Executive Officer Magazine...Partner Andrew McElheran and Lead Consultant Andrew Stancel explain what pay for performance should mean to corporate boards and management teams.

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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…

2019 Executive Compensation Trends and Developments

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.) In 2018, numerous factors…

Market Data in Context

Benchmarking compensation is the process of comparing pay levels and incentive design practices to the “market.”

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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…

2019 Federal Budget: Changes to Tax Treatment of Stock Options

One of the proposed legislative changes in the Liberal government’s 2019 Federal Budget directly affects executive compensation.

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The government has proposed to limit the preferred tax treatment for stock options. Currently options are eligible for a deduction the effect of which is to tax them at one-half the ordinary income tax rate (similar to capital gains treatment).…

IPOs and Executive Pay

Reprinted from Ethical Boardroom Autumn 2018 Issue

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As the equity markets have recovered and continued to grow since the financial crisis, many private companies are considering an initial public offering (IPO) of their stock as a way to raise capital and create liquidity for their existing investors…

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…

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.…