Archive for July 20th, 2009

The Making of a Mega: The New $3.5B Towers Watson & Co.

by  

No Comments | Share/Save

Published in Consulting Magazine July 20, 2009 by Jess Scheer

The new $3.5 Billion Towers Watson & Co. certainly will alter the HR landscape—and turn up the heat on rival Mercer

In the high stakes poker game of running global consulting firms, Watson Wyatt CEO John Haley and Towers Perrin CEO Mark Mactas just went all-in.

Link to full article.

Filed under: Newsfeeds



GC Compensation: Not Bad, Considering

by  

No Comments | Share/Save

Published in The AM Law Daily July 20, 2009 by Amy Miller

Over the last decade, general counsel of the nation’s largest corporations have gotten rich from stock grants and options. Not last year. For the first time since the dot-com recession, those awards dropped. In fact, the average stock award plunged 18 percent. But GCs still managed to eke out modest raises in 2008, even as the economy plunged into its worst downturn since the Great Depression.

Link to full article.

Filed under: Newsfeeds



Fewer Defer Bonus Amid Job Concerns

by  

No Comments | Share/Save

Published in The Wall Street Journal July 20, 2009 by Jillian Mincer

Excutives lucky enough to receive a bonus are deciding to defer far less of it. They’re willing to pay taxes now to avoid potentially higher rates later and to ensure that they have the cash in case of a job loss or a company bankruptcy.

Link to full article.

Filed under: Newsfeeds



Everything Old is New Again: Goldman Sachs Grabs the Halo this week – and shares it

by  

No Comments | Share/Save

Expert Perspective by Grahall’s John Hammond

expert perspective telescopeJust a few months ago, it was the financial services industry that caused the stock market to tank. Now financial services is doing the heavy lifting in pulling the market back up by its bootstraps.
Continue reading “Everything Old is New Again: Goldman Sachs Grabs the Halo this week – and shares it” »

Filed under: Expert Perspective



The baby or the bath water?

by  

No Comments | Share/Save

Expert Perspective by Grahall’s OmniMedia Editorial Board 

expert perspective telescopeIn his July 10, 2009 article in Harvard Business blogs titled “Scrap Stock-Based Compensation and Go Back to Principles”, Roger Martin says: “…stock-based compensation [has] caused executives to manufacture stock market volatility rather than build long term value… Scrap stock-based compensation entirely and compensate executives on the basis of improving real measures…”

No doubt stock based compensation has been widely used and sometimes misused as part of executive compensation programs. Corporate America overdosed on stock options, which were the sole or primary compensation vehicle at many companies during this most recent chapter in economic history.  But we say let’s not throw the baby out with the bathwater. The goal of executive compensation programs is to drive risk appropriate behaviors that result in enhanced shareholder value and wealth creation. One of the best, and maybe the only true measure of shareholder value creation is long-term growth in stock price. Thus, risk should not be avoided, but managed appropriately.

While we believe options can have a proper role in a well designed compensation scheme, we do not generally endorse stock option only programs where vast sums on wealth can be accumulated solely as a result of a “rising tide” lifting all boats – where executives profit from stock price increases that are not even relatively superior than the market “norm”.  It is incremental performance above the norm that truly benefits shareholders, and the delivery of above average performance consistently over long-term business cycles should be rewarded handsomely. 

Grahall’s executive compensation designs show how stock can be used appropriately based on rigorous scientific methods reflecting business strategy and risk considerations.  For example, Grahall’s Performance Based Wealth Accumulation and Retention Program” (gPB-Warp), is a plan that links an executive’s long-term wealth accumulation first to the accomplishment of long-term strategic goals approved by the Board of Directors, and secondly to the long-term stock performance above the average of the company’s direct competitors, a stock index or both of these. 

Unlike Roger Martin’s recommendation, which excludes all stock incentives, gPB-Warp incorporates company stock as an incentive upon the accomplishment of the strategic goals.  Stock incentives tying the executive’s wealth to the company’s performance have long been considered the key link between the executive’s and the shareholders’ interests. This provides the executive with a direct attachment to the company’s long-term sustainable performance.  But too much stock can sometimes tempt an executive, especially one nearing retirement, to avoid taking even acceptable risks.  So, gPB-WARP also includes maximum predetermined exposures and the ability to diversify as the executive nears retirement.

We urge companies to consider all aspects of total rewards when developing executive compensation programs: the money (how much), the mix (what components are used) and the messages (how the money and mix drive behaviors).  Taking this holistic approach, company stock can be effectively incorporated into executive compensation programs. Critiquing the use of company stock in an executive reward strategy is like the proverbial carpenter with a hammer, hoping to find some nails. Where only cash is used to reward executives, shareholders had better hope that the directors set the correct goals.

Email Grahall’s Editorial Director at edie.kingston@grahall.com

Filed under: Expert Perspective



We Didn’t Say You Couldn’t…

by  

No Comments | Share/Save

Expert Perspective from OmniMedia’s Editorial Board

expert perspective telescopeIn 2006 the SEC established rules regarding Compensation Discussion and Analysis (popularly referred to as CD&A) and now with executive compensation headlining news reports on an almost daily basis, the SEC is considering expanded CD&A disclosure requirements.  Per the SEC’s press release #2009-147  these measures “…are intended to better inform and empower investors to improve corporate governance and help restore investor confidence”.
Continue reading “We Didn’t Say You Couldn’t…” »

Filed under: Expert Perspective