May 28, 2008
I just returned from WorldatWork’s annual conference in Philadelphia. For those not familiar with WorldatWork (formerly known as The American Compensation Association), they are the world’s largest association for compensation and benefits professionals with over 25,000 members. We first exhibited at WorldatWork in 2002 and have been attending ever since. Ironically, at our first conference in 2002, we were a last minute addition and were given Arthur Andersen’s booth since they no longer had a need for it. (There is MUCH more to that story, but I’ll leave that for a future post.)
Given that this was our seventh year at the conference, it was interesting to see how the exhibit floor has evolved since we first started attending. As WorldatWork’s mission has transformed from “Compensation and Benefits” to one focused on “Total Rewards”, you have an interesting mix of companies seeking to reach out to their members. Everything from gift cards from “Tar-zhay” (a.k.a. Target) to literally dozens of companies offering talent management solutions, a software category that didn’t even exist seven years ago.
As one would imagine, a number of exhibitors offer services related to compensation surveys. As I looked around, I saw aisles and aisles of companies who offer compensation surveys. Think of your local Safeway but Super Sized. So, if the world already has so many surveys, what makes ours different?
Over the past several years, many of our clients have shared their survey frustrations with us and have asked us to develop a solution that helps address their needs. I see our survey as unique in three important areas:
- Flexibility; and
- Ease of use.
Transparency – Given that a substantial amount of data for our survey is already publicly available, we can readily display this information. How valuable is this feature? Think of surveys that you’ve used and then wondered how they came up with these numbers. Most surveys give you a number without any backup to support the data. This has to be one of the most frustrating experiences for an end-user. Good luck explaining this to the chair of your comp committee. By displaying the source data, when it’s available, this helps remove any discrepancies or ambiguities and gives our users much greater confidence in the decision making process.
Flexibility – A number of current surveys rely on proprietary methodologies. Over the past year, there has been a movement among compensation professionals and associations (in particular, both WorldatWork and GEO) to get survey providers to move to a common standard. Without a common standard, we feel that this is holding back the profession. Over time, what drives innovation in any industry is the adoption of a common standard. Think of VHS vs. Betamax, and for the younger crowd, Blueray v. HD DVD. By moving away from proprietary standards, this removes confusion and uncertainty in the marketplace and leads to much greater customer acceptance and adoption. With our client-driven valuation tools, we believe that we are moving the profession forward with an open platform approach by giving our clients the tools they need.
Ease of Use – Given that we started with a clean slate, we were able to incorporate a number of client suggestions into the design of our survey product, starting from the entry process to accessing the actual survey results. By pre-populating certain information, we drastically reduce the amount of time it takes to complete a survey. In addition, we’re excited about some of the functionality that we designed for the reporting tool to allow our clients to access the information that they’re looking for.
By addressing the critical needs of many of our clients, we’re excited about the impact that we’re having on the industry and the profession. We certainly helped change things back in 2002 with our first product (ExecutiveInsight, our Top 5 proxy database) and see the same opportunity with our survey solution. Given that we already have over 130 companies that have agreed to participate, it certainly feels like we’re onto something.
I’d love to hear your thoughts and questions. Thanks in advance for your input and thanks to our many clients who stopped by our booth at WorldatWork. It is always great to see both new and old faces.
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May 9, 2008
Earlier this week, we announced our first foray into the survey industry, a very big step in our corporate evolution. During our eight year history, access to data has never been an issue, whether for us, or for any of our competitors. Our solutions have been based on publicly available data, primarily compensation data from proxies and other SEC filings in addition to stock price information from market data providers. While quite a bit of analysis and quality assurance goes into the finished solution, fundamentally, source data is in the public domain.
So why take on the unenviable challenge of sourcing proprietary data? Very simply, because our clients asked us to. Since we launched our first executive compensation product in late 2001, right around the time of the surfacing of Enron and Andersen (as they say, better lucky than good!), our clients have continually asked us to provide a deeper look within an organization and go beyond the Top 5.
The good news is that a substantial amount of the data that we’ll need to fill this gap is already publicly available in Form 4 filings, a little known fact that goes surprisingly unnoticed by many boards, executives and compensation professionals. In 2003, the SEC changed Form 4 disclosure rules to require that all equity grants be disclosed for all Section 16 officers, typically the top 10 to 15 executives at most companies. Yes, it’s all out there, but for anyone who has ever had to search through Form 4s, recreationally, it’s on par with sticking hot needles in one’s own eyes.
Given that equity awards typically generate the greatest amount of attention, accurate and, more importantly, transparent long-term incentive (LTI) data for the top 10 to 15 executives is a great starting point. In addition, with the strong support from a number of companies offering to provide the missing pieces, we felt that the time was right for us to take this next step.
With the combination of our technology, expertise in working with SEC data and a committed client base, our mission is to fundamentally change how executive compensation analysis is performed and improve the analysis experience for everyone. Creating a survey to fill this void is the missing piece. For the first year, our plan is to focus on companies in the Fortune 250. What we’re finding is that the demand for our services is especially strong in certain industries and that we’ll be including a number of companies beyond the Fortune 250 based on client feedback.
If you’ve had experience with executive compensation surveys and have suggestions, we’d love to hear your thoughts on what you’d like to see from us. We’re off to a great start and I’ll have some exciting updates for you shortly. Stay tuned. To learn more, read our press release from May 6.
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May 1, 2008
As one would expect, the past couple of weeks have been extremely busy for yours truly. In addition to my regular CEO duties, one area that goes into overdrive this time of the year is the presentation circuit. April included trips to the Conference Board (twice), MCA, ICG and Stanford Law School, not to mention our annual proxy season webinar in mid April (once again, our apologies!). And April was just spring training. With several May presentations around the corner, it would not come as a surprise if my kids happen to forget who’s their daddy.
That being said, the area that continues to get the greatest amount of interest in all of my presentations is performance target disclosure. As I had written earlier, this was clearly a point of contention during last year’s proxy season. And with the SEC’s rabid interest in this area as indicated by the 350+ comment letters sent to issuers in the fall, many expected the fireworks to continue this spring. In our April newsletter, we published an analysis of Fortune 100 companies and found that the disclosure of performance targets for annual incentive bonuses was (are you seated?) up over 25 basis points, from 44% in 2006 to 68% in 2007.
In the rough and tumble world of proxy disclosure, this is big news. (It doesn’t take much to get us excited at Equilar.) Frankly, this came as a shock to me and others at Equilar. Early studies indicated that most companies were going to stick to their guns and NOT disclose performance targets. From talking with several issuers, it was interesting to hear how this was a major point of contention as companies were preparing their proxies. It was interesting to see that the majority of companies ended up disclosing it. It’s good to see the good guys coming out ahead this year.
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