November 17, 2010
Boards of directors, particularly committees, have seen a lot more scrutiny over the past few years, and with rules governing their affiliations being enacted as part of the Dodd-Frank Act, this is just the beginning. Equilar’s latest report investigates how this new frontier is affecting the way board and committee members and chairs are selected and paid. Here are a few of our findings:
- Median board member pay for the S&P 1500 was $142,500. This figure only includes board-related, not committee-related, pay. S&P 500 members had a median pay of $190,000, while members of the other two S&P groups were slightly below the median for the entire cohort.
- Audit committee chairs and members still get paid the most, but their pay has tended to be stagnant or declining from 2007 to 2009. Compensation committee chairs have seen a pay jump in that period, perhaps thanks to the increased attention to their work. Compensation and governance committee members saw mostly stagnant pay figures as well.
- Governance committee members are the most tenured in all three groups, followed by compensation and audit committee members.
- Audit committees meet the most, followed by compensation and governance committees.
- The prevalence of meeting fees for both chairs and members fell in all three S&P groups, while the prevalence of annual retainers rose. (One notable exception: governance committees in the S&P 400 saw the opposite effect.)
- In 2009, the most prevalent pay structure for chairs was annual retainer and meeting fees, while the second most common structure was annual retainer only. The most prevalent pay structure for members was meeting fees only, with over 60 percent prevalence over all committees.
Interested in seeing more detailed figures? Click on the relevant S&P group to request a report:
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September 16, 2010
Dodd-Frank is on the horizon, and as a result, many companies are re-examining their compensation programs. One important aspect of this process is looking at peer groups, and it’s clear from our study of the S&P 1500 that companies are increasingly involved in managing them. 63.9 percent of firms in the S&P 1500 added, deleted, or replaced at least one peer group member in 2009. With most peer groups consisting of 11 to 20 companies (the median was 17), this trend shows that companies are seriously considering the implications of their peer group’s composition.
As in past years, the 2009 study found that smaller companies are more likely to benchmark to higher-revenue peers. S&P 600 companies had a median revenue rank in the 38th percentile, while S&P 400 companies ranked in the 43rd percentile. S&P 500 companies were the most conservative, with a median revenue rank right at the 50th percentile.
To learn more about the changing face of peer groups, request the new report. You can also check out a recording of our recent webinar on peer groups by clicking here.
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August 25, 2010
Among the many provisions of the new Dodd-Frank Wall Street Reform and Consumer Protection Act is a revised policy on clawbacks. While Sarbanes-Oxley required companies to have a clawback policy in the event of a financial restatement caused by executive misconduct, Dodd-Frank takes it one step further, requiring clawbacks for any financial restatement, regardless of whether misconduct occurred. Companies that don’t comply with this regulation will be prohibited from appearing in the national securities exchanges and associations, meaning that we’ll likely see clawback policies adopted universally in 2011 or soon thereafter.
In the meantime, we’ve taken our annual look at how clawback policies shake out in the Fortune 100. These policies continue to be on the rise, with 82.1 percent of companies adopting them. It’s hard to believe that only four years ago, in 2006, a mere 17.6 percent of companies had them. 2009 has been the biggest year yet for clawbacks, with 44.2 percent of companies implementing or amending them, but 2010 is right on its heels with 30.8 percent. A few other statistics from the report:
- 81.3 percent of 2010’s clawback policies had a provision for clawbacks in the event of a financial restatement, 78% had provisions in the event of unethical behavior by an executive, and 63.7 percent had both.
- Financial and insurance companies were most likely to have clawbacks. 90.5 percent of F100 financial and insurance companies had a clawback policy in 2010, compared to 82.4 percent in 2009 and 50 percent in 2008. This is partially because TARP requires clawback policies for senior executives.
- Most clawback policies include key executives and employees. 67.4 percent include this group, while 13.04 percent include all of a company’s employees.
- The first clawback policies mainly focused on cash incentives, but 81.5 percent now cover equity incentive compensation, and 26.1 percent cover outstanding options. Cash incentives still lead the pack, with 87 percent of policies covering them.
To learn more about clawback trends in the Fortune 100, including specific examples of proxy disclosures, request the 2010 report.
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July 14, 2010
Summer means C-Suite data at Equilar, and having tackled pay strategies for CEOs and CFOs (as well as CEO perks), it’s time to move on to the COO, many companies’ secret organizational weapon. Like their CEO and CFO counterparts, COOs saw a decrease in their median total pay in 2009, falling 11.7 percent to a median of $1.93 million. As with the other members of the C-Suite, however, COO bonuses posted strong gains, rising 14.5 percent to a median of $400,000.
Our COO report examines 288 companies in the S&P 500 who’ve had their COOs in place for at least two years (to avoid distortion from new-hire awards). A few of Equilar’s other findings:
- Utilities COOs make the most, but pay is down in every industry: Utilities COOs had the highest median total pay, at $2.62 million in 2009. However, every industry saw a decrease in median total pay, with the biggest drop, 23.4 percent, in the Industrial Goods sector.
- Equity continues to constitute most of the pay package: Overall pay-package design remained stable in 2009. Equity awards continued to constitute the largest portion of total pay, at over 54 percent. Cash compensation increased from 39.4 percent of the pay mix in 2008 to 46.8 percent of the pay mix in 2009.
- Bonuses were found to be responsive to performance: COOs in the top-performing quartile of companies had a median bonus increase of 30.5 percent from 2008 to 2009, while those in the bottom quartile saw a median bonus decrease of 26.1 percent. Unlike our other C-Suite studies, though, the third quartile outperformed the second quartile, seeing a 20.5 percent bonus increase (versus the second quartile’s 7.8 percent bonus decrease).
- Early ’09 awards bounce back big, thanks to market timing: Options granted in early 2009, when markets were at record lows, were frequently increased in size to compensate for decreased value. These options are seeing major gains in intrinsic value as the market has recovered. 73.2 percent of options granted in 2008, however, remain underwater.
For more information on how COOs are faring in the current economic climate, request the full COO Pay Strategies Report from us. We’ll have new reports on executive and director stock-ownership guidelines coming out in the near future, so stay tuned!
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June 30, 2010
While the entire exec comp field has been under a lot of scrutiny in the past couple of years, perquisites (“perks” to most of us) have been a particularly hot issue. Now that we’re nearly two years away from the beginning of the Great Recession, we were interested to see how companies are addressing the public outcry over perks. The answer? They’re paying attention, all right. The median value of CEO perks in the Fortune 100 declined 28.3 percent from 2008 to 2009, a drop that looks even bigger when compared to the 2.3 percent drop from 2007 to 2008. Over 34 percent of companies mentioned the elimination of some perquisites in their 2009 proxy statements, compared to 29.2 percent in 2008.
A few of our other findings:
- Tax gross-ups take a hit: Tax gross-ups, the practice of corporations paying the taxes incurred by CEO perks, declined 0.8 percent in value and 9.4 percent in prevalence from 2008 to 2009. 16 companies eliminated them altogether. But gross-ups aren’t gone yet: 50 percent of Fortune 100 CEOs still received them in 2009.
- Aircraft perks less prevalent, worth less: The median value of perks related to the personal use of corporate aircraft by CEOs fell 18.3 percent from 2008 to 2009, while the prevalence of these perks decreased from 79.2 percent in 2008 to 66 percent in 2009. This was a sharp turnaround from the 2007-2008 cycle, when aircraft-perk value rose 28.9 percent and prevalence rose 4.5 percent.
- Values of two popular perks rise in 2009: Accumulated pension benefits remained significant, with 64.9 percent of CEOs receiving them and a median value increase from $10.7 million in 2008 to $12 million in 2009. The value of nonqualified deferred compensation plans also increased, from $3.6 million in 2008 to $3.8 million in 2009; 78.7 percent of CEOs receive them.
To see detailed data and sample disclosure statements from multiple companies, click here to request the full 42-page report.
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