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
September 8, 2014

Quick Picks

SEC Comment Letters Lead Insiders to Dump Shares | CFO Magazine | September 10, 2014

Top executives took advantage of pre-disclosure periods by selling shares after receiving SEC comment letters, according to a study from Berkeley’s Hass School of Business. The SEC files comment letters if it has concerns about a company’s 10-k filing; the company then has 10 days to respond. Filings are made public 20 days after the comments are resolved. The study found insider sales were 70% above normal in the five business days prior to public disclosure. The authors suggest that the SEC encourage boards to set “insider blackout periods” and shorten the 20 day disclosure delay to remedy the situation. Read more

Eight Myths of Executive Pay | FEI | September 10, 2014

Richard Ericson, Paul Perry, and Scott Olson of PwC examine several commonly held executive compensation myths that do not always translate to best practices. The authors address LTI performance targets, pay benchmarking, use of the relative TSR metric, ISS compliance, compensation accounting, use of stock options as a form of payment, change in control terms, and taxes. They conclude that companies should align compensation with business strategy, industry conditions, and shareholder value creation to form an effective executive compensation plan. Read more

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