Our Thoughts - CAPflash

Compensation Advisory Partners (“CAP”) reviewed 2010 proxy disclosures for a sample of Fortune 500 companies. Our study includes 85 companies, representing seven industry groups. The industry groups we targeted include Consumer Products, Financial Services, Health Care, Insurance, Pharmaceuticals, Retail, and Technology. As described in Issue #7, the companies in our sample are large industry leaders, with median revenue of $25B and median market cap of $37B. [ More | Download as PDF ]

The House and Senate have agreed on a final version of the financial reform legislation now named the “Dodd-Frank Wall Street Reform and Consumer Protection Act”. The Act is expected to be voted on this week in the House and the Senate with the goal of presenting it to President Obama by July 4th. While the focus of the new legislation is on reforming the financial services industry, the Act includes several provisions that will directly impact executive compensation, including: [ More | Download as PDF ]

Compensation Advisory Partners (“CAP”) reviewed 2010 proxy disclosure for the 2009 performance year for a sample of the Fortune 500 companies. Our study includes 85 companies, representing seven industry groups. The industry groups we targeted include Consumer Products, Financial Services, Health Care, Insurance, Pharmaceuticals, Retail, and Technology. Our research gives insight into current trends that explain how executive compensation practices changed in 2009. [ More | Download as PDF ]

Today, almost any discussion of the current financial crisis brings up the topic of executive compensation. Additional legislation and oversight are forthcoming, and government intervention will likely have a lasting impact on how executives are paid. [ More | Download as PDF ]

“Excessive risk taking” and “incentive compensation” entered day-to-day parlance with the onset of the financial crisis in 2008. “Excessive executive compensation” had been grabbing headlines since the mid ‘90s, but there was little focus on how a company’s incentive compensation programs might influence enterprise risk taking. Few made the connection that an organization’s appetite for risk could have a dramatic (and potentially adverse) impact on how that organization structured its incentive programs. [ More | Download as PDF ]

2009 was challenging as companies struggled to overcome the difficult economic environment. Now compensation committees are assessing company performance in 2009, making decisions on annual incentive payouts, and determining grants of long-term incentives. Committees are considering how to balance executive rewards with the interests of shareholders, not to mention the governance practices supported by shareholder advocacy groups such as RiskMetrics Group (see page exhibit for RMG’s list of problematic pay practices). [ More | Download as PDF ]

In September, the Conference Board Task Force on Executive Compensation issued a report that sets forth guiding principles for executive compensation.  The Conference Board’s Task Force convened in March, 2009, during the worst days of the economic crisis.  Members were responding to the erosion of public confidence in the business community, sparked by economic crisis and the uproar over excessive and inappropriate incentives.  The Conference Board Task Force’s work is an example of how the crisis in financial services has spilled over into other sectors and now impacts the entire business community. [ More | Download as PDF ]

The initiatives discussed above in "Independence Standards for Compensation Consultants " will likely result in a higher standard of independence for compensation consultants.  None of the proposals, however, attempts to define these standards, leaving that job to the SEC. Compensation Advisory Partners researched current disclosure practices in Fortune 25 companies to understand how companies are addressing this issue in the absence of regulatory guidance. [ More | Download as PDF ]