Posts Tagged ‘Executive compensation’

Is ‘Leverage’ the new Paradigm for Achieving Competitive Executive Compensation Plan

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Bob Birdsell explains how by using a S&P 500 Indexed Universal Life Insurance Policy, a Third Party Bank Loan, and a modest Company Investment, an organization can provide a very attractive program available to their most senior executives without incurring a new expense.
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If I Had a Crystal Ball

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This article is reprinted with permission from the January 2015 issue of PSX: The Exchange for People Strategy, an eMagazine that brings you cutting edge views and perspectives on all things related to people strategy.

Wouldn’t it be enticing to be able to take a peek into the future and observe the coming trends in the world of Executive Benefits?  Robert Birdsell looks at what the future might hold of for Qualified Retirement Plans, Non-Qualified Retirement Plans, and Other Executive Benefit Plans.  He shares the major shifts in the way executive benefits will be delivered, financed and administered in the years to come. 
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Please sir, I want some more!

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According to an April 1, 2013 article in Financial Times, “the UK’s opposition to the new EU-wide cap on bankers’ bonuses was swept aside in an otherwise unanimous vote in favour of the new rules. The EU-wide cap, effective next year, will restrict bonuses to the same level as salary, or at twice that level with explicit shareholder approval”.

And it’s not just bankers, according to a March 24, 2013 article in the Financial Times, “Sven Giegold, the German Green party MEP spearheading the legislation, is believed to want to extend the proposed bonus caps to hedge funds, and other vehicles such as private equity funds, covered by the EU’s Alternative Investment Fund Managers Directive.”

Oh dear, such dire circumstances for the EU bankers (the majority of whom are in London). Will this harsh punishment turn EU bankers in the next Oliver Twists begging their strict regulators for just one more bowl of gruel (or a richer pay package)? Well, probably not.
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Filed under: Expert Perspective - Rewards



Just Realize It’s Simply One More Tool in Your Toolbox

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Can you hear them? Scratching away, or these days more likely pecking away at keyboards. The auditors are at it, it’s coming up on proxy time! They are working furiously, not exactly 24/7 but close to it to balance the books for some 10,000 publicly traded companies in the US. Unfortunately, not even Grahall can do this in its sleep! Journalists, activist investors, and regulators are poised to dissect the proxy statements that will start to be released in just a few weeks.

Today’s proxy bears little resemblance to that of 5 or 10 years ago, as there have been lots of changes in the way executives are compensated and the way that compensation is reported. As Grahall’s Garry Rogers says: “Nearly every aspect of compensation, with the exception of Code Section 162(m), has been revisited in the past several years. Stock options have been marginalized as a primary compensation tool because of changes in expensing and concerns about risk. In their place, the prevalence of restricted stock and performance shares is on the rise.”
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Fixing Executive Compensation: It’s Not a Simple Job

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Expert Perspective by Grahall’s OmniMedia Editorial Board

In his article for the Huffington Post (Wall Street CEO Pay Problems Worsened By New Regulations, Report Says) William Alden writes that “…one of the primary forces encouraging greater risk [and setting off the ‘Great Recession’] was the way that executives at major banks were compensated: Aggressive moves that made stock prices soar in the short-term triggered hefty bonuses, and even when those same moves led to longer-term disasters, the chieftains got to keep the money, leaving taxpayers on the hook for the losses.  A new regulatory framework and much talk of lessons learned was supposed to have changed all that, putting the fortunes of the bank chiefs on the line, and tying their pay to the longer-term health of their companies.”

Alden refers to a report  issued by the Council of Institutional Investors, an association of public and private pension funds (Wall Street Pay) which suggests that the new regulations have done little to reduce risk since the changes simply result in companies increasing stock payouts in lieu of cash bonuses.  The “…council report concludes that simply focusing on boosting stock as a percentage of overall compensation inadequately protects against excessive risk-taking by banking executives.”

We agree, sort of. 
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Filed under: Expert Perspective - Rewards



Making Lemonade out of Lemons: Occidental Changes its Exec Compensation Plan

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Expert Perspective by Grahall’s OmniMedia Editorial Board

The Editorial Board read with interest the October 29, 2010 Edgar-Online article Occidental Petroleum tweaks executive compensation policy that indicated that “The company plans to use more long-term incentives to compensate its top executives. Specifically, it will rely on so-called Total Shareholder Return (TSR) Incentives, which grant bonuses to executives based on how Occidental’s stock performs relative to those of 12 peer companies.”

A little background – Occidental’s top executives (in particular Messrs. Irani and Chazen) have long been among the highest paid executives in their industry, if not in the world.  Critics have argued its rewards programs have dramatically overcompensated Mr. Irani in particular.
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Citi’s Board Thinks Their CEO Deserves More Compensation

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Expert Perspective by Grahall’s OmniMedia Editorial Board

The decision of Citi’s Board in 2011 to  “…compensate Vikram commensurate with the job of CEO of Citi” left our Editorial Board wondering if the Board is intent on communicating a “back to business as usual” message to shareholders and regulators.   According to Matthias Rieker September 20, 2010 article in the Wall Street Journal  (Citi Chairman Intends To Revive CEO’s Pay In 2011) “Pandit had pledged last year to accept only $1 in salary and bonus until Citi returns to profitability. Citi reported a profit for the first and second quarter this year, but Pandit still declined compensation above $1 for this year…”

But Pandit’s commitment to Citi seems not to be shared by his fellow executives, many of whom, we imagine, were involved in decisions that led to the decline of Citi’s stock from well over $50 per share in 2007 to its low of $1.03 in March 2009. 
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Rail Against the Chief

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Expert Perspective from Grahall’s OmniMedia Editorial Board

Executive compensation and what is seen as near gluttonous bonus payments during a time when the average American is more likely hurting than not has been a recurring theme in the media.  The Institute for Policy Research has completed its 2009 study of CEO pay titled CEO Pay and the Great Recession that compares for those companies that are the top “layoffs leaders” for the 17 month period, November 1, 2008 to April 1 2010, with the total compensation paid to each CEO for the year 2009.

There are a couple things that aren’t well articulated in either the report or the article covering it by Roland Jones for msnbc.com (CEOs lay off thousands, rake in millions) by Roland Jones.
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It’s Not Easy to Make Executive Compensation Truly Effective

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Expert Perspective by Grahall’s OmniMedia Editorial Board

In his article for Business Week How to Handle CEO Pay Before Dodd-Frank Hits Bill George subtitles his article “Financial reform will bring unintended effects.” And then goes on to outline “six policies that should be rigorously followed, including in bad times when boards are more prone to bend the rules for those in their top ranks.” On the surface, George’s ideas seems reasonable but lets dive down a bit deeper into them and see what the unintended consequences might be of these directives.
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It’s Not Hurd on the Street Any Longer

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Expert Perspective By Grahall’s OmniMedia Editorial Board

Not surprisingly, plenty of media attention was focused on the fact that Mark Hurd, once CEO of H-P, didn’t last long in the unemployment line.  Hurd has landed himself a new position as Co-President of Oracle, sharing the job with Safra Catz and reporting to CEO Larry Ellison.   Three articles published in the Wall Street Journal on this subject particularly caught the attention of the Grahall Editorial Board.  Ben Worthen and Joann S. Lublin write (in their article At Oracle, Hurd Lands in Rare Situation: Having a Boss for First Time in Years Means the Former Hewlett-Packard Chief’s Relationship With CEO Ellison is Crucial): “How Messrs. Hurd and Ellison click is crucial as Oracle tries to expand beyond its core business of selling software and takes on tech conglomerates… in hardware…. So far, the outlook appears positive, said people who have worked with the executives. Messrs. Hurd and Ellison are friends. And while the two have very different management styles, those styles seem compatible, said these people.”

That’s good, since cooperation at the top of the food chain in any organization is critical for the company to quickly and effectively embrace opportunities and resolve issues.  In fact, some companies find that cooperation and coordination in these roles is so important that the CEO and President are in fact the same person.  For companies who separate these roles, the President position is often looked at as a grooming spot for the future CEO. 
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Filed under: Expert Perspective - Rewards