Tag Archives: executive compensation

House passes Financial Choice Act of 2017. What now?

by Cydney Posner

The Financial Choice Act of 2017 has been passed by the House (almost surreptitiously, given the unwavering focus on the Senate hearing today). According to the WSJ, the House vote was 233 to 186.  The bill, sponsored by Jeb Hensarling, Chair of the House Financial Services Committee, was framed as a Republican proposal to reform the financial regulatory system and relieve business community of the affliction of Dodd-Frank.  The subtitle on the WSJ article tells you how to think about this for now:  “Financial Choice Act is Republicans’ opening bid to loosen regulation; unlikely to become law.” Reuters  also described the approval of the bill as “a move that is expected to die in the Senate,” but relegated the sentiment to the first paragraph. Continue reading

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Filed under Corporate Governance, Executive Compensation, Securities

New revenue recognition standard— don’t ignore the impact on compensation

by Cydney Posner

At the recent Bloomberg BNA Conference on Revenue Recognition,  a Deloitte partner observed that, to the extent that, in awarding compensation, companies use metrics that are keyed to revenue, the new revenue recognition standard could affect compensation or bonus plans because the ways of measuring and the timing of recognition of revenue change. He reminded attendees that, “‘when those plans were put into place, whatever they were, they overlap years. You then have the question of, ‘they set up some sort of benchmark and we’re going to pay someone a bonus based on how they do against this metric’— the problem is that metric was designed based on the old rules and you basically changed how you’re going to keep score.’” (See this article in Bloomberg BNA.) Continue reading

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Filed under Accounting and Auditing, Executive Compensation

BlackRock sets its priorities for board engagement

by Cydney Posner

Asset management firm BlackRock (reportedly the largest, with $5.1 trillion under management) has identified its “Investment Stewardship” priorities for 2017-2018, intended to help companies prepare for engaging with BlackRock. Among the hot topics are governance (including board composition and diversity), corporate strategy for long-term value creation in light of shifting assumptions, executive pay linked to long-term strategy, climate risk disclosure and human capital management.  According to BlackRock, its engagement process is designed to be constructive, and its goal is “to build mutual understanding and ask probing questions, not to tell companies what to do. Where we believe a company’s business or governance practices fall short, we explain our concerns and expectations, and then allow time for a considered response.” However, Blackrock’s approach is not limited to engagement; although, as a long-term investor, the firm will be “patient” as companies work to address concerns, in the absence of progress, BlackRock “will not hesitate to exercise our right to vote against management recommendations.” Continue reading

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ISS and Glass Lewis Update 2017 Proxy Voting Policies

by Cydney Posner

If you haven’t already, please check out our recent Cooley Alert, ISS and Glass Lewis Update 2017 Proxy Voting Policies.  It’s a great way to start the new year and a lot more fun than a diet!

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Hitting populist note, U.K. proposes enhancements to corporate governance — will the new U.S. administration follow the populist playbook?

by Cydney Posner

One of the prevailing narratives of the recent Presidential election was that the same gestalt that drove the Brits to vote for Brexit also animated the pro-Trump forces and led to his presidential victory.  Why then, when it comes to regulation of corporate conduct, do the two countries appear to be headed in such different directions? Or are they? Continue reading

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It’s back to square one: pay CEOs with short-term incentives?

by Cydney Posner

How to structure executive pay to drive performance over the long term—while avoiding pay levels that would be considered excessive—is a conundrum for compensation committees, consultants, proxy advisory firms and others involved in setting or analyzing executive compensation. And the analysis has only become more complex since the global economic crisis of 2008, which led many to question whether the types of compensation being offered motivated the overly risky behavior that may have triggered that crisis. With that in mind, the challenge has been to structure compensation to motivate the right behaviors without inadvertently inducing overly risky activity or conduct that has the effect of boosting executive compensation irrespective of the operational success of the company. Could it be that short-term incentives are once again the answer? That’s the view of one compensation consultant.  Continue reading

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Is it a mistake to insist that CEO pay be performance-based?

by Cydney Posner

It goes without saying that, to many, the sine qua non of executive compensation is performance-based pay.  From proxy advisory firms to institutional holders to the drafters of Dodd-Frank, the question of whether CEO compensation is aligned with performance is a key measure of whether compensation is appropriate. As a result, often 60 to 80% of CEO pay is performance-based. But in a recent essay in the Harvard Business Review, two academics contend that performance-based pay for CEOs makes absolutely no sense: research on incentives and motivation suggests that the nature of a CEO’s work is unsuited to performance-based pay. Moreover, “performance-based pay can actually have dangerous outcomes for companies that implement it.”  Why not, they propose, pay top executives a fixed salary only? Continue reading

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Filed under Corporate Governance, Executive Compensation