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Determining Annual Incentive Pay in a Pandemic

As seen in the 4th Quarter 2020 issue of Bank Director

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While banks with incentive plans based on formulaic financial goals are particularly challenged, even those with more discretionary plans are asking how to evaluate and reward performance in light of the pandemic. Many compensation committees will need to assess how…

How and Why Pre-Commercial Biotech CEO Pay is Different

Part Two: Founders vs. Non-Founders

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In this four-part series, we examine the current state of pre-commercial biotech CEO pay, how it is tailored to the sector, and what drives differences between companies. We will explore: Part One: Tailoring Pay to the Business Part Two: Founders…

Drafting a Modern Equity Incentive Plan

With the 2020 proxy season approaching, many public companies are readying new or amended equity plans for shareholder approval.

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These plans are a ubiquitous feature of public companies’ compensation programs. They allow companies to grant various types of equity and equity-based awards to their non- employee directors, executives and other key employees. Although equity plans are broadly similar, companies…

Top Ten Design Considerations When Drafting a Modern Equity Incentive Plan

With the 2020 proxy season approaching, many public companies are readying new or amended equity plans for shareholder approval.

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These plans are a ubiquitous feature of public companies’ compensation programs. They allow companies to grant various types of equity and equity-based awards to their non- employee directors, executives and other key employees. Although equity plans are broadly similar, companies still…

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…

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…

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…

UPDATE: Draft Legislation Released Changing Tax Treatment of Stock Options Effective January 1, 2020

On June 17, the federal government released draft legislative language to implement the proposed changes to the taxation of stock options in Canada, as introduced in the 2019 Budget in March.

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The budget proposed to eliminate the preferential tax treatment of stock options, above an annual $200,000 face value, for large, long-established, mature firms. (See Meridian’s update here for details of the original proposal.) The highlights of the implementation language include:…

When Using EPS in Incentive Plans, Take Time to Specify How It’s Calculated

Reprinted from NACD Directorship March/April 2019 Issue

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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…

Let’s Push Things Forward

Reprinted from Chief Executive Officer Winter 2018 - With long-term incentives being the largest pay component for CEOs in the US, where are design practices heading?

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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…

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…

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…

Setting Goals to Incent High Performance

As seen in the 3rd Quarter 2018 issue of Bank Director

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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…

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…

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,…

Managing Incentive Plans in a Cyclical Business

As seen in Corporate Board Member First Quarter 2018 - Compensation is always tricky, but it’s even tougher in an up-and-down business, where markets—as much as the managers—run the show. Jim Wolf, managing partner at Meridian Compensation Partners, offers advice on getting it right.

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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…

Addressing Compensation Issues In M&A

As seen in the 1st Quarter 2018 issue of Bank Director

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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…

House Passes Tax Reform Bill

On November 16th, the U.S. House of Representatives passed its tax reform bill by a vote of 227 to 205.

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The tax reform bill approved by the full House does not substantively differ from the bill previously approved by the House Ways and Means Committee, as described in our Client Updates dated November 7, 2017 and November 10, 2017. Therefore,…