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
November 10, 2014

Quick Picks

New Research on Impact of Compensation Consultants

A recent study by researchers from the University of Cambridge suggests compensation consultants are hired by companies to justify higher CEO pay to stakeholders. The study analyzes three scenarios in the years between 2006 and 2012: how pay changed when companies switched from a multi-service consultant to an executive compensation specialist, how pay differed when compensation consultants were retained by management instead of by the board, and how pay changed when a company with no compensation consultant hired one. The authors also criticize the 2009 SEC rules that were intended to eliminate the conflicts of interests faced by multi-service consultants, saying that both management and pay consultancies find ways to circumvent the rules.

Use of Absolute TSR Caps on the Rise | Agenda (subscription required) | November 17, 2014

Nearly half of the largest 250 companies use relative Total Shareholder Return ("rTSR") in their long-term incentive programs, up from 29% in 2010, according to a recently published report from Frederic W. Cook & Co. An rTSR metric is designed to measure relative performance to peers/market and to align pay outcomes with value created for shareholders. Since the financial crisis, many firms have added absolute TSR caps to their pay programs, most commonly capping pay at 100% of target when absolute TSR is negative. Absolute TSR caps have grown from 5% to about 25% in prevalence in the past couple of years. Read more

Compensation Trends + Developments

Regulation, Legislation + Governance

From Critics + Commentators