Dan Walter has a great new interview with Equilar CEO David Chun up at the EC Experts blog, primarily focused on the upcoming Executive Compensation Summit. There’s lots of interesting details here, from the industry-consultant tag-team roundtables to the educational forum WorldatWork will be holding for those looking to rise in the exec comp universe. It seems like there will be plenty of networking opportunities, as well as a focus on solutions, and the company is offering a $200 discount through mid-April.
Check out the interview, then see more details at the official Summit website.
The biggest season for equity grants, December-February, has wrapped up, and Equilar is comparing the Form 4 filings of S&P 500 CEOs to the same time last year, with some interesting results. The percentage of CEOs receiving no equity grants at all rose from 53 percent last year to 60.8 percent this year, surprising given the combination of the market rebound and lowered performance goals in recent months. It\’s possible that some of this is from companies shifting their grant periods, but that still leaves some CEOs out in the cold.
For those who got bonuses in both years, grant sizes went down, but the market\’s new life caused values to go up, making the difference from last year essentially a wash: overall value rose about 0.5 percent. Also, companies seem to be shifting away from stock or stock/options mixes to pure options. (Yes, it\’s the SEC\’s favorite game show: Pay for Performance!) It should be interesting to see if this trend holds as we continue our journey into the heart of proxy season. Check out the report here.
The full Equilar Bonus Plan report is now out, and things have changed significantly with the addition of one week of new proxy data. While companies with fiscal year-ends in June-November had a 29% drop in CEO bonuses, those with FYEs in December had a 46.9% increase in their bonuses year-over-year. Our guess is that a lot of companies are beginning to come out of their recession-induced hiding places, and the overall bonus climate at the end of proxy season is looking increasingly rosy for the execs whose fiscal years ended in the past few months. Well, until the next round of media and politicians calling for their heads on a platter begins, anyway. Add to this the finding that financial-industry bonuses jumped from a median of $0 in \’08 to $576,294 in \’09, and the firestorm is practically visible from here.
That\’s not to say that every CEO is making off with beaucoup bonus bucks– 45.5% of them didn\’t take home a dime in bonuses, and as the report shows, many of those who did get a bonus got it in restricted holdings, equity, a mix of cash and equity, or performance-based awarding, rather than time-based. But with unemployment still high and unlikely to drop before proxy season\’s end, these December numbers seem like a bellwether of anti-bonus vitriol to come.
The advance teaser for Equilar\’s 2010 Bonus Plan Design report is out today, with plenty of statistics that should cheer populist revolutionaries and disappoint current or wannabe captains of industry. Total CEO bonuses fell 21.9 percent in FY 2009, though the numbers still aren\’t small: median bonus pay was a rather hefty $689,000 in 2009, though it was an even steeper $882,105 in 2008.
Unsurprisingly, the financial industry, much of it under TARP\’s house rules, took a big knock in the report, with median payouts declining 51.1 percent. The technology industry, however, took the dropoff crown: their bonuses fell 59.2 percent. The only unscathed industries were healthcare, which posted a 14.7 percent gain, and services, which posted a 20.8 percent gain.
So bonuses are definitely down, but hey, it could be worse: you could be one of the 26.1 percent of CEOs who received not a penny of bonus money in 2009. Yeah, we know. World\’s tiniest violin. But that\’s an 8.3 percent rise from 2008, which is pretty sizable.
At the end of the day, close to three-quarters of CEOs are still getting bonuses, most of them far larger than an average American\’s salary. But no matter how you feel about the President\’s and the SEC\’s position on the matter, you have to admit that their pressure is working– for the moment, anyway.
Request the full report here.
While a major post-recession trend has been the shifting of stock option grants to restricted stock, many Silicon Valley executives are still getting a fair amount of options, according to today\’s Wall Street Journal. Oracle\’s Larry Ellison leads the pack, with a whopping $57.4 million of options awarded in 2009. That\’s more than seven times the options granted to #2 on the list, Cisco CEO John Chambers. (We see many more yachts in Mr. Ellison\’s future.) Oracle also led the pack in total option grants given to executives, by a pretty wide margin.
In the third-place slot was NetApp, which awarded $7 million in options to new CEO Thomas Georgens. This is at least partially attributable to the new contract it had to work out when Georgens was appointed to the slot. Either way, it seems to be evidence that for some of the biggest Valley firms, restricted stock isn\’t looking as necessary anymore.
One of the big conclusions drawn by Equilar in their 2010 General Counsel Pay report was that GCs who report to the CEO make significantly more than their counterparts who don\’t. Rees Morrison examined this disparity, and came up with a few theories:
- Direct reporters are more likely to be older, have more experience, and therefore, command a higher salary.
- Direct reporters may lead numerous functions, while non-direct reporters may only lead one or two.
- A hierarchy has emerged in big corporations: one out of three GCs are non-direct reporters, meaning that they\’re at least one rung below someone else, and therefore paid less.
These facts may be cold comfort to the GC who\’s making significantly less than his or her directly-reporting counterpart. If that\’s the case, they may want to keep in mind an Equilar finding from last year: CEOs promoted internally tend to make less than those who switch companies to become CEO. If this also holds true for the GCs who directly report to them, a job change might start to seem like a good idea.
This is a tough time to be transitioning from the world of banking to the world of politics, as the latter is gaining plenty of ground from the populist move of decrying the former. Harold Ford, the former Tennessee congressman who is considering challenging Kirsten E. Gillibrand for a New York Senate seat in the Democratic primary, is now under fire for the pay he received in the interval between political jobs, when he worked at Merrill Lynch. The Times cites two sources who said that Ford\’s contract guaranteed him $2 million per year in salary, a significantly higher level of base pay than that of Merrill\’s CEO, Stanley O\’Neal, who took home only $700,000 in base salary in 2007. (Don\’t feel too badly for O\’Neal, however; he netted another $18.5 million in cash and $27 million in restricted stock as his 2007 bonus.)
Even for politicians who\’ve ended their relationships with these former employers, one-time bank affiliation is going to be a hot-button issue for years to come, and no amount of impartiality claims will quench speculation that a politician is a mere shill for his or her former bank. For those considering leaving Wall Street for Capitol Hill, it\’s something that\’s worth keeping in mind.
Obviously, you don\’t want your executive to drop dead or be sidelined by a health crisis, but it\’s still pretty amazing to see the medical costs of the five CEOs profiled by Fortune. With full disclosure of perquisites drawing more attention every year, we\’re surprised to see these execs still receiving what is almost a universally poorly-received perk, instead of simply cutting it in favor of a cash replacement. (See also: club memberships.)
Particularly notable is the fact that Angela Braly, WellPoint\’s CEO, receives an annual physical to the tune of $1,044, despite the fact that she almost certainly has the best insurance plan that the large health conglomerate could possibly provide her. Wonder if she had to stay in-network.
On the other hand, Lowe\’s discloses that they consider these plans a best practice, noting that McDonald\’s recently lost two CEOs to poor health within nine months (one dying at work). While we certainly wouldn\’t want anyone to lose their life over a few grand, we have to wonder if the $4,986 exam Lowe\’s requires their CEO to receive isn\’t a little bit egregious, considering the notable disparity between what the two companies produce.
February 25th, 2010 in
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Equilar unveiled their 2010 Executive Compensation Summit today, and it looks to be a good one. In addition to being the only totally dedicated exec-comp conference, it\’s also going nationwide this year, with one big event in Washington, D.C. on June 15 and 16. They\’ve got many of the speakers from last year, like Blair Jones from Semler Brossy and George Paulin from Frederic W. Cook, with some cool new additions: Stanford professor Daniel Siciliano, Compensia principal Mark Borges, and the Washington Post\’s Tomoeh Murakami Tse.
We particularly like the new second day, which is an emphasis on education for younger or less seasoned people in the field. WorldatWork will be hosting a big workshop, and they\’ll be training people on Equilar products as well. If all this is old hat, they\’ll be doing focused roundtables and breakout sessions on specific industries and topics.
Registration is now open, and with a $300 discount through March 19th, this is a good time to sign up.
February 24th, 2010 in
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Equilar just released their new article on Say on Pay, which isn\’t available to the general public but can be requested here. \”Say on pay,\” for those who aren\’t aware, is the nickname given to the practice of allowing shareholders to vote on proposed executive compensation packages.
There were a couple of key findings in the report. The first was that large-cap companies are about four times more likely to undergo some kind of say-on-pay process than their mid- and small-cap counterparts. There are a few possible reasons for this: the companies involved in TARP, which requires say on pay, are all large; the bailout brought attention to the pay practices of other large companies; executives of larger companies tend to make more, and therefore attract more scrutiny. Regardless, large-cap companies should be particularly aware of the explosion of say on pay among their peers in size.
The second major finding was that shareholder proposals for say on pay flagged in comparison to advisory votes: only 22.3% of shareholder proposals succeeded, while 100% of advisory votes did. Shareholder sentiment may be able to float the idea of instituting say on pay, but that doesn\’t mean that the vote will end in favor of the investors.
In this highly-charged environment, it can sometimes help to set your own terms before they\’re set for you. Four companies in the S&P 500 sought to avoid shareholder discontent by instituting their own say-on-pay policies.
The Obama administration has noted that it would like the SEC to institute say on pay for all the corporations it oversees, but such a decision would require Congressional approval, a goal that\’s increasingly difficult in the entrenched environment that\’s arisen of late in both parties. It should be interesting to see how the future of this regulation plays out.
