Dialogue

The latest reporting, opinion and research on executive compensation. We don’t necessarily agree with it all, but we provide it here for consideration.

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May 18, 2015

Quick Picks

One-Time Bonuses and Perks Muscle Out Pay Raises for Workers | The New York Times (subscription required) | May 25, 2015

Research by Aon Hewitt suggests that companies are increasingly opting to use variable compensation, including one-off bonuses and non-monetary rewards, in lieu of annual pay raises in order to increase the flexibility of compensation expense in difficult business climates. The share of payroll budgets devoted to straight salary increases is below 2001 levels, according to Aon Hewitt’s annual survey on salaried employees’ compensation. Conversely, the share devoted to variable short-term rewards and bonuses reached record levels last year. Executives have often been paid in this manner, but the prevalence of one-time awards and perks are spreading further down the ranks than ever before. The trend also appears to be spreading across industries that have historically resisted performance pay, such as education, agriculture and government. Read more

The Factors That Lead to High CEO Pay | Harvard Business Review | May 22, 2015

Looking at data from 54 countries, social scientist and LSU Business School Professor Thomas Greckhamer examined the factors that tend to influence the ratio of CEO to unskilled worker compensation. He found that key indicators for high CEO pay within a country include developed equity markets, a lack of collective labor rights, a lack of foreign capital, and an acceptance of hierarchical power structures. Key indicators for high unskilled worker pay, on the other hand, include a strong welfare state, strong collective labor rights, and a high degree of economic development combined with a lack of cultural hierarchies. Read more

Special on Director Pay— Calma v. Templeton

These two articles follow up on the Calma v. Templeton case in the Delaware Court of Chancery. The decision, which found that the business judgement rule does not apply to directors’ equity awards, continues to gain coverage. The two articles present leading analyses on the topic, including a comprehensive review of the case, breakdown of the current director compensation environment, and potential next steps.  As the title suggests, the article written by Latham & Watkins offers steps that can help U.S. public companies avoid similar litigation. In the other article, David Katz of Wachtell, Lipton, Rosen & Katz examines the elements of director compensation and suggests that director compensation can create difficult optics because the directors determine their own compensation.

Special on Director Pay

Compensation Trends + Developments

Regulation, Legislation + Governance

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