Service Type: Program Design
Back to the Basics: Re-examining Executive Compensation Design for the Upcoming New Year
Determining Annual Incentive Pay in a Pandemic
How and Why Pre-Commercial Biotech CEO Pay is Different – Part Three: East Coast vs. West Coast
2020 Meridian Corporate Governance and Incentive Design Survey
LTI Mix—Does ‘Performance’ Matter?
Meridian Webinar: COVID-19’s Impact on Incentive Plans
Impact of COVID-19 on 2020 Annual and In-Flight Long Term Incentives
Should ESG Metrics Be Included in Executive Incentive Plans?
Banking Industry Incentive Practices
How and Why Pre-Commercial Biotech CEO Pay is Different – Part Two: Founders vs. Non-Founders
COVID-19’s Incentive Impact: While Most Companies Wait, Companies with Early FYEs are Forced to Act
COVID-19 and Short-Term Incentive Designs
Our Meridian Client Update published May 28, 2020 discussed the impact of COVID-19 on 2020 Short-Term Incentive (STI) plans and how Committees may determine appropriate payouts (if any) at year-end. Payout decisions for 2020 STI in many instances will be impacted and driven by liquidity constraints, affordability, relative performance and/or investor expectations. The design for … Continued
How and Why Pre-Commercial Biotech CEO Pay is Different – Part One: Tailoring Pay to the Business
The Impact of COVID-19 on Chemical Companies and Their Annual Incentive Programs
Long-Term Incentives: Before, During and After COVID-19
In response to the constantly evolving COVID-19 pandemic, companies have announced a litany of executive compensation-related actions including layoffs, furloughs, base salary reductions and much more. For long-term incentives (“LTI”), most companies have adopted a “wait and see” approach with respect to issues like: modeling implications of a V, W or U-shaped recovery; valuing existing … Continued
Compensation Committees: What to Do With 2020 Bonus Plans?
At the onset of COVID-19, the popular advice for adjusting annual bonus pay was to “wait and see.” Now several weeks in, some companies have begun restructuring bonuses. What actions are they taking? In this episode, Chris Havey, Partner & Lead Consultant with Meridian Compensation Partners, explains what he’s witnessing across corporate boardrooms right now: … Continued
Banking Industry Response to COVID-19
Introduction The 2020 Coronavirus (COVID-19) pandemic represents one of the most significant global events in recent history, resulting in unprecedented impact on our country’s economy, its businesses and its people. For our financial services clients, initial priorities focused on the safety of employees and customers. At the same time, many banks were thrust into the … Continued
Stock Ownership Guidelines in Challenging Times
Stock ownership guidelines are nearly universal for both executives and directors. They help ensure alignment with shareholders by encouraging executives and outside directors to hold onto a substantial amount of company stock. They have historically not required a substantial open-market purchase of company stock. Rather, both executives and directors can typically meet their required guidelines … Continued
In-Flight Long Term Incentives—What, if Anything, Should Energy Companies be Doing?
The energy industry has some particular challenges with long-term incentives (LTI): • Multi-year equity value decline: Many energy companies entered 2020 with multiple years of underwater stock options and equity awards tracking well below their original grant date value. • New shocks to the system: COVID-19 has exacerbated the long term supply and demand imbalance … Continued
Predicting the Future of E&P Bonus Design
E&P bonus plans have historically aligned with growth and investment, focusing on volume (production and reserves) and cost reduction, measures that are more controllable by management and less impacted by commodity prices than earnings-based metrics. In recent years, investors and analysts have been increasingly critical of E&P bonus payout misalignment with shareholder returns and financial … Continued
COVID-19 and Short-Term Incentives
For many companies, it is unlikely that there will be significant (if any) payouts under the executive or managerial bonus plans for 2020. Alternatively, for those that do have payouts, it is similarly unlikely that plan mechanics alone will determine final earned awards. Rather, most will have to apply some degree of discretionary adjustments in … Continued
Survey Results: Oil & Gas Workforce and Compensation Strategies
Key Takeaways In our March survey results we reported an overwhelming majority of companies focused on emergency business actions and less on compensation considerations. As of the end of April, it appears companies have taken action on their now identified workforce and compensation strategies. Outlined below are some of the key takeaways. Impact on the … Continued
How should oil & gas companies approach their 2020 annual bonus?
“Wait and see” seems to be the mantra of the day, particularly when it comes to an energy company’s annual bonus plan. We think that’s a prudent approach for the moment, as much uncertainty remains among the energy industry and broader economy. However, as we think forward a few months, what alternatives might companies consider … Continued
Director Compensation: Key Considerations During COVID-19
Much like executive compensation, director pay will be met with institutional shareholder scrutiny in the months ahead. Investors and proxy advisors will scrutinize stock option awards, meeting fees, and whether board pay remains steady amid lay-offs and revenue declines. How should compensation committees navigate the challenges ahead? In this episode, Meridian Partner Bob Romanchek shares his … Continued
2020 Executive Compensation Trends and Developments
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 2019, numerous factors impacted the U.S. executive compensation landscape. An increased focus on environmental sustainability, diversity and inclusion … Continued
The Impact of Recent Pay Actions on Severance Arrangements
These actions have included pay reductions, work furloughs, and layoffs. Among other matters, companies likely need to evaluate the impact of these actions on severance benefits. Multiple types of arrangements provide for cash and other benefits in the event of an employee’s or executive’s severance, including severance plans, severance guidelines, employment agreements, severance agreements, and … Continued
Director Compensation—What Public Boards are Considering in Light of Substantial Energy Price Declines and/or COVID-19
This will be the first in a series of updates that Meridian will produce, on potential impacts to executive and director compensation programs and related governance issues, from the economic turndown that has followed the COVID-19 pandemic, and the recent sharp decline in oil prices. Director Compensation Directors at many companies are currently looking at … Continued
COVID-19
First and foremost, we hope you, your families and your colleagues are staying safe and healthy during this global health crisis. We appreciate normal business operations for many companies have been upended due to the COVID-19 pandemic. Only through the extraordinary efforts of employees, executives and boards will companies be able to manage through the … Continued
Oil & Gas Crisis Response: 2020 Compensation Responses will lead to Sustained Changes
Mere weeks after boards approved compensation outcomes from 2019 performance, there’s a temptation to revisit or change those outcomes under the lens of 2020 performance. We believe that in the large majority of cases, those 2019 outcomes should stand on their own merits. Current events will instead impact 2020 outcomes – meaningfully. We believe the … Continued
Compensation Implications of the Current Environment
That was rough… The week of March 9, 2020 may have marked the single worst week for oil and gas stocks on record. A lot has changed, and the only thing certain is that more change will come. Here is what we feel confident of: ■ E&P companies will re-set 2020 capital programs; early announcers … Continued
The $1 Salary: Lessons Learned
Periodically we receive requests from our clients to profile advantages, challenges, and best practices associated with administering pay programs that combine a very modest base salary with large equity grants. The $1 Salary Plan is the most extreme version of this approach, and the symbolism of such a program has proven attractive to a handful … Continued
How Should Environmental, Social and Governance (ESG) Performance be Reflected in Executive Compensation?
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 increasingly being used to reward or penalize executives for ESG performance. The reality, however, is … Continued
Time to Check Your Equity Incentive Plan Share Reserve
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 to cover one more year of normal cycle equity awards, in order to have a … Continued
Managing Executive Incentive Programs for Chemical Companies
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
Use Compensation to Advance ESG Initiatives
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
Pay for Performance
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
When Using EPS in Incentive Plans, Take Time to Specify How It’s Calculated
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
Let’s Push Things Forward
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
The Demise of TSR as the Primary Executive Pay Performance Measure
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
Executive Compensation in the Banking Industry
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
Don’t Miss an Opportunity to Optimize Retirement Within Your LTI Program
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
In What Circumstances do Special Equity Grants Make Sense?
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
Relative TSR for Resource Companies: Does it Still Make Sense?
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
Change-in-Control Benefits Can Incentivize Valuable Transactions, Protect Executives
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
Should Companies Use Individual Performance Measures in Executive Annual Incentive Plans?
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
Long-Term Incentives and Stock Ownership Ensure Alignment with Shareholders
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
Is it time for longer-term performance awards?
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
Pay Trends in the Financial Services Industry
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
CEO Compensation in the Largest US Companies
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