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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Week of
April 13, 2015

Quick Picks

Paying the Boss: Compensation Rises - As Does Performance Expectations | Workforce (subscription required) | April 20, 2015

The Association of Executive Search Consultants (AESC) survey of 900 executives showed that 43 percent of CEOs and 56 percent of other executives received base salary increases in 2014. The increase in pay illustrates the increasing alignment between compensation and performance, as both the stock market and corporate profits rose last year. The structure of compensation is also becoming more oriented toward performance goals, with performance-based equity awards increasing in prevalence while the use of discretionary bonuses is decreasing. Greg Arnold, principal at Semler Brossy, explains that the current trends are leading to the “homogenization” of pay programs. Arnold advises that determining when to align or diverge from commonly accepted ‘best practices’ is the key challenge for a successful compensation program. Read more

ISS's Equity Plan Scorecard Is a Pillar Too Far | Agenda (subscription required) | April 20, 2015

The new ISS Equity Plan Scorecard (EPSC) is complex, highly interactive, and opaque, according to Jim Barrall of Latham & Watkins. The EPSC assigns points based on the three pillars of plan cost, equity grant practices and plan document features, replacing the proxy advisor’s relatively straightforward prior evaluation methodology. The weighting of factors within each pillar is not disclosed, which Mr. Barrall suggests is related to ISS’ desire to increase client engagement with its consulting group. The author particularly criticizes ISS’ decision to require minimum vesting periods and limitations on directors’ discretion to accelerate vesting as impinging on directors’ business judgment and limiting potentially value-creating decisions. ISS intends to apply the ESPC to companies with shareholder meetings on or after February 1, affecting approximately 1,000 of the Russell 3,000 companies. Read more

Compensation Trends + Developments

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