Our Insights

When It’s OK to Lower the Performance Bar

When it comes to executive compensation and company performance, directors commonly go by the following “rule:” The goals for the coming year should exceed last year’s results. Some directors believe that, if performance goals decline, executives should not receive any bonus, even if the business environment won’t allow the company to exceed its prior performance record. But the rule that requires companies to always set higher goals for top-line and bottom-line results should not be considered hard-and-fast. Even as companies aim for long-term, continuous improvement, there are legitimate cases when lowering the bar is acceptable. Read more

Five Questions Directors Should Ask About Restricted Stock

The landscape for long-term incentive plan design has radically changed, as companies have largely replaced stock options with restricted stock as the main component of long-term incentives granted to executives. Research firm Equilar has found the percentage of S&P 1500 businesses granting options decreased from 79% in 2007 to 75% in 2012, while companies issuing restricted stock jumped from 80% to 92% in the same period. Read more

5 Principles for Successful Executive Pay Benchmarking

Commentators on executive pay have for years pointed to factors that drive up compensation levels. Some of these factors, such as paying more to take account of unprecedented challenges and global competition, raise no eyebrows. But others, namely peculiarities in the compensation system unrelated to the functioning of executives, come in for fair criticism. Read more

Ask the Experts: What Will be a Hot Topic in Corporate Governance in 2015?

Now is the time for Boards to take a fresh look at their goal setting approach. At the time this was written, the SEC had not provided final rules on the CEO Pay Ratio or clawback requirements. While these topics will be hot in 2015 if final rules are provided, I view goal setting as potentially a more complicated and pressing issue for many Boards. Read more

Understanding the Impact of ISS’ Multiple of Median Test on Say on Pay Vote Support

Our weekly Say on Pay research consistently demonstrates that vote support is, on average, meaningfully lower (28%) when Institutional Shareholder Services (ISS) recommends “against” an issuer’s Say on Pay proposal. And, while ISS will conduct a thorough qualitative review before issuing an “against” recommendation, we know that ISS’ three quantitative tests are used as a preliminary screen to determine the level of qualitative scrutiny applied. Read more

CEO Performance Reviews: Five Tips for Moving from Good to Great

Most CEOs welcome information that can improve their impact and effectiveness. As such, CEOs depend on directors for thorough annual reviews—reviews that cover not only financial results but also management and leadership competencies and operational excellence. The weakness in many reviews is that they underestimate the value of rigor behind the feedback and the quality of the conversation. Here are five tips to revitalize reviews to help the CEO deliver long-term sustainable performance. Read more

How Much Does Performance Count In a Say-on-Pay Vote?

Say-on-pay votes are a barometer of shareholder sentiment on executive compensation and performance. While the fraction of companies that fail say on pay—those that receive less than 50 percent support—is small, such feedback is a warning signal to directors that… Read more

Executive Pay: What to Expect for 2015

It’s that time of year when compensation committees and management teams are contemplating changes to executive compensation for 2015. Committees want the changes to be business-based, competitive, and responsive to the market and investor priorities. While not the only consideration,… Read more