Insights

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

External benchmarking provides critical information for executive pay decisions.

Posted by on

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…

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.

Posted by and on

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…

Market Data in Context

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

Posted by on

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…

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

Reprinted from NACD Directorship March/April 2019 Issue

Posted by and on

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?

Posted by on

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…

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.

Posted by on

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…

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.

Posted by on

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…

Setting Goals to Incent High Performance

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

Posted by and on

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

Posted by and on

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.

Posted by on

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,…

Performance-Based Long-Term Incentives: What Have We Done?

From January/February 2018 NACDonline.org - Executive incentive design has grown incredibly complex. Boards should consider simplifying by aligning pay with long-term stock price performance.

Posted by on

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…

Bringing Pay for Performance Into Focus Requires the Right Lens

By Annette Leckie and Charles Grace - Reprinted from the November/December 2017 issue of NACD Directorship magazine

Posted by and on

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…

Aligning Executive Pay With Company Performance

From C-Suite: An Equilar Publication Issue 25, Fall 2017 - Ask the Experts "A Delicate Balance...What Will be the Biggest Risk for Corporate Boards Looking Forward to 2018?"

Posted by on

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…

2017 Meridian Corporate Governance and Incentive Design Survey

For the seventh 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 facing major companies today.

Posted by on

As companies review their executive compensation programs and related corporate governance policies, current market practices and recent trends can provide competitive benchmarks that are helpful in understanding current and future “best practices.” Highlights of Meridian’s 2017 Corporate Governance & Incentive…

IS A THREE-YEAR PERFORMANCE PERIOD REALLY LONG-TERM?

Tom McNeill and Jon Szabo of Meridian Compensation Partners, LLC discuss how three years being the standard for "long-term" incentive is not really long-term at all.

Posted by and on

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…

Considerations for Setting Incentive Plan Goals

Read this piece from Meridian Partner Tom Ramagnano and senior consultant Matt Wolfson, featured in NACD Directorship magazine.

Posted by and on

It’s that time of year when compensation committees begin the process of setting annual incentive goals for the upcoming performance cycle. For most public companies, these goals generally relate to financial metrics such as revenue, earnings, and cash flow that…

Ask the Expert: Pay for Performance Alignment

Meridian Partner Marc Ullman discusses this 2016 hot button issue with Equilar's C-SUITE magazine.

Posted by on

As part of its Ask the Experts feature, Meridian Partner Marc Ullman was recently asked to discuss a hot button compensation issue for 2016 by Equilar’s C-SUITE magazine. Read Marc’s commentary on Pay for Performance Alignment in the current issue…

Keeping Your Compensation Committee On Track During the Busy Winter Season

What you should have in mind as you plan your 2016 calendar.

Posted by on

The Dodd-Frank Act, regulatory guidelines on compensation risk and shareholder advisory votes on executive compensation have all contributed to an increase in the compensation committee’s responsibilities and time requirements. That pressure is compounded this time of year as committees enter…

Setting Incentive Plan Goals: Embrace Uncertainty!

Steps directors can take to keep incentive plans motivational in a climate of uncertainty.

Posted by on

The Holy Grail in executive compensation is to achieve strong alignment between pay and performance. In the quest to achieve this alignment, management teams and board members strive to design the perfect incentive structures, using the most appropriate performance measures…

Horses for Courses

How compensation committees can choose the performance metrics that are right for their business.

Posted by and on

Incentive plans have two primary purposes: 1) To motivate behaviour and drive performance aligned with strategy and 2) To align rewards with shareholder interests. From these two simple purposes come the most difficult work of the compensation committee and an…