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Equilar regularly publishes articles and reports covering important executive compensation trends and issues. As a quick reference guide for compensation professionals, key findings from all recent publications are listed below. Other Equilar resources include:
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Say on Pay Outlook |
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Published: February 10, 2010 |
Our new Say on Pay article details the 2009 say-on-pay considerations of companies in many categories. Here are some of our findings:
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- Large-caps most likely to see say on pay. 21.0% of large-cap companies had a say on pay effort, compared to 4.3% of mid-caps and 5.3% of small-caps.
- Advisory votes get approval; shareholder proposals vary. Only 22.9% of shareholder proposals succeeded in instituting say on pay, but 100% of advisory votes did.
- Some companies getting ahead of the debate. Four S&P 500 boards adopted internal policies on say on pay, avoiding outside intervention.
Get all the details here.
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Client Alert: Proposed SEC Rule Changes for Compensation Disclosure |
Published: July 16, 2009 |
On July 10, 2009, the Securities and Exchange Commission released proposed rule changes for proxy disclosure that, if adopted, would take effect for proxy filings for a fiscal year end after December 15, 2009. Under the proposed rules, the following details have been provided regarding the key changes related to compensation. The full text of the proposed rule changes can be found here. The SEC is accepting comments on these rule changes until September 15, 2009. |
- Broad-Based Pay Disclosure. Companies will be required to provide information about their compensation policies beyond the Named Executive Officers in the CD&A if "risks arising from those compensation policies or practices may have a material effect on the company." Disclosure should focus on the relationship between the general compensation policy and risk, but will not include compensation data for individuals outside of the Named Executive Officers. Specifics that may be disclosed include the general design philosophy of the compensation as it relates to risk, any risk assessments used in connection with structuring compensation policies, or changes in a company's risk profile and how that impacts compensation.
Situations that may trigger this additional disclosure requirement, include (but are not limited to) cases where a business unit carries a significant portion of the company's risk profile, provides significantly more profit than other business units, or compensates its employees with a different compensation structure than other business units.
- Equity Award Values in Summary Compensation Table. Altering the standard implemented with the 2006 proxy disclosure regulations, the Summary Compensation Table and the Director Compensation Table will include the grant-date fair value of equity awards made during the year as opposed to the expensed accounting value. The grant-date fair value will include the aggregate value of all stock or option awards, including performance awards, currently disclosed in the Grants of Plan-Based Awards Table and valued in accordance with FAS 123R.
This change will have several additional impacts. First, the calculation of the Named Executive Officers will be determined based upon total compensation using the grant-date fair value of equity awards made during the year rather than the expensed accounting value. Second, the current SEC proposal eliminates the requirement to disclose the individual values for each award in the Grants of Plan-Based Awards Table. Additionally, the salary and bonus columns of the Summary Compensation Table will no longer be required to include amounts elected to be received in equity as such amounts will be reported in the equity award column.
- Director Qualifications. Additional details will be required for individuals nominated for election or re-election to the board of directors. Specifically, the SEC is requesting more information regarding an individual's experience, qualifications, attributes, or skills that qualify them to serve on the board or specific committees of the board. In addition, the proposal requires disclosure of all other public company boards served on the by the director in the last 5 years (rather than only current board memberships) and disclosure of any legal proceedings from the last 10 years (rather than the last 5).
- Company Leadership Structure. Companies will be required to discuss their current leadership structure and why this structure is best for the company. In particular, companies must discuss whether or not the CEO and Chairman roles are held by the same person and why this structure was chosen. If the CEO and Chair roles are not split, companies must disclose if they have a Lead Independent Director and the specific roles and responsibilities of that position.
- Board's Role in Risk Management. Companies will be required to provide additional information about the board of director's role in the company's risk management. Disclosure should detail specific processes, roles, and responsibilities of the board in connection with monitoring and managing the company's risk.
- Consultant Conflicts of Interest. Enhanced consultant disclosure will be required when a company receives executive or director compensation advice and other consulting services from one consulting firm or affiliated consulting firms during the last fiscal year. If a consulting firm provides additional services on top of executive compensation consulting, the company will be required to disclose the fees paid for the consultant's executive compensation services and the aggregate fees paid for all other services provided by the consultant. In addition to fees, companies must also disclose the nature of the other services provided by consultants and whether or not they were recommended or reviewed by management or approved by the board.
- Shareholder Voting Results. The requirement to report shareholder voting results is proposed to be changed from 10-Q and 10-K filings to 8-K filings. This will increase the timeliness of the delivery of voting results to within 4 business days of the vote. For contested elections where voting results are not finalized within 4 days, preliminary voting results may be disclosed in the 8-K filing.
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S&P 500 CEO Compensation Rises 1.3% to $8.8 Million |
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Published: April 10, 2008 |
Equilar recently published a study on CEO compensation trends at S&P 500 companies. Key findings include: |
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Total Compensation – From 2006 to 2007, median total compensation for S&P 500 chief executives in place for at least two years increased by 1.3 percent, rising to $8,828,589. In 2006, median pay for the same group of S&P 500 chiefs was $8,712,323. Total compensation includes base salary, discretionary bonuses, non-equity incentive plan payouts, the grant date value of stock awards, the grant date value of option awards and other compensation.
Base Salary – From 2006 to 2007, the median base salary for S&P 500 chief executives increased by 3.0 percent, rising from $1,000,000 to $1,030,000.
Bonuses – In 2007, S&P 500 chief executives received a median aggregate bonus of $1,837,080, down 4.9 percent from the median of $1,931,673 reported in 2006. Additionally, the prevalence of CEOs receiving bonus compensation fell from 96.6 percent in 2006 to 88.4 percent in 2007. As a result, aggregate bonus compensation for S&P 500 CEOs included in this study declined by 4.7 percent from 2006 to 2007.
Aggregate bonuses include discretionary awards, short-term non-equity incentive plan payouts (annual cash bonuses) and long-term non-equity incentive plan payouts (multi-year cash bonuses).
For the subset of companies disclosing two consecutive years of compensation data under the new SEC disclosure rules, where more granular bonus data is disclosed, the following sections provide detailed information on all types of bonus payouts:
- Discretionary Bonuses – Among S&P 500 chief executives receiving discretionary bonuses, the median value of payouts increased by 1.8 percent from 2006 to 2007. Meanwhile, the prevalence of discretionary payouts was flat at 18.7 percent. The median discretionary bonus for 2007 was $1,300,000, versus $1,276,489 in 2006.
- Annual Cash Bonuses – In 2007, S&P 500 chief executives received a median annual cash bonus of $1,544,000. This amount was 4.5 percent less than the median annual cash bonus of $1,616,000 in 2006. Additionally, the prevalence of annual cash bonuses fell from 85.5 percent in 2006 to 78.2 percent in 2007. Annual cash bonuses represent payouts which are tied to short-term performance goals.
- Long-Term Cash Bonuses – Among S&P 500 chief executives participating in long-term incentive plans, the value of long-term cash bonuses rose by 12.3 percent from 2006 to 2007, climbing to a median of $1,988,929 in 2007, versus $1,770,450 in 2006. The prevalence of long-term cash bonuses was also up, moving from 16.1 percent in 2006 to 16.6 percent in 2007. Long-term cash bonuses represent payouts which are tied to long-term performance goals, typically covering a three-to-five-year period.
Stock Awards – In 2007, chief executive officers at S&P 500 companies received stock awards with a median value of $2,493,895, an increase of 11.2 percent over the median grant of $2,243,475 in 2006. The prevalence of chief executives receiving stock awards increased from 76.7 percent to 78.2 percent.
Option Awards – From 2006 to 2007, the median value of S&P 500 chief executive option awards declined by 0.7 percent, falling from $2,294,059 to $2,278,672. Furthermore, the prevalence of option awards fell from 76.4 percent in 2006 to 71.2 percent in 2007. This is the first year that both the median value and prevalence of CEO option awards were less than the median value and prevalence of stock awards.
Other Compensation – The median value of other compensation for chief executives at S&P 500 companies was $180,094 in 2007, a 0.9 percent increase over the median of 178,492 in 2006.
Pension Benefits – In 2007, the median value of accumulated pension plan balances for S&P 500 chief executives, at companies with two consecutive years of data under the new SEC disclosure rules, was $6,106,986, an increase of 29.5 percent over the median of $4,716,206 in 2006. The prevalence of chief executives with accumulated pension benefits was flat, remaining at 77.7 percent.
Deferred Compensation – For CEOs at companies with two consecutive years of data under the new SEC disclosure rules, deferred compensation plan balances increased by 54.3 percent from 2006 to 2007, climbing to a median value of $4,517,488. The prevalence of chief executives with deferred compensation balances increased from 82.9 percent in 2006 to 83.4 percent in 2007.
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| Read More: This study was featured on CNBC and in articles by Reuters and Portfolio.com. |
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Fortune 100 CEO Performance Target Disclosure |
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Published: April 9, 2008 |
Equilar recently published a new study on the disclosure of specific performance hurdles for executive incentive plans at Fortune 100 companies. Generally, the study concludes that the disclosure of performance targets has increased over the past year. Key findings include: |
- From 2006 to 2007, the prevalence of Fortune 100 companies disclosing performance targets for executives under all types of compensation plans increased from 55.8 percent to 66.4 percent.
- Among Fortune 100 companies with annual bonus plans for executives, 68.3 percent disclosed the performance targets which must be achieved to generate payouts. Last year, 44.4 percent of Fortune 100 companies with such plans provided a comparable level of detail.
- The study also finds that 81.0 percent of awards which measure short-term performance, benchmark results solely against internal company goals. Conversely, 60.9 percent of long-term performance awards use relative measures as a component in determining payouts.
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| Read More: This study was featured in articles by Directorship, Portfolio.com, and Agenda Magazine. |
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Director Stock Ownership Guidelines Report |
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Published: February 14, 2008 |
This Equilar report provides a detailed analysis of director stock ownership policies at Fortune 250 companies. Key findings include: |
- In 2006, the prevalence of Fortune 250 companies with publicly disclosed director stock ownership policies climbed to 77.6 percent, up from 70.6 percent in 2005. This includes companies with ownership guidelines and/or holding requirements. The prevalence of director stock ownership guidelines increased from 68.5 percent to 72.6 percent of Fortune 250 companies over the same period.
- In 2006, 59.4 percent of director stock ownership guidelines defined ownership targets as a multiple of the annual retainer. In 2005, 62.0 percent of policies used this model. In both 2005 and 2006, the second most common ownership guideline design set ownership targets as a fixed number of shares.
- At Fortune 250 companies, the median value of target stock ownership requirements for directors was approximately $250,000 in 2006.
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| Read More: This report was featured in Directorship Magazine. |
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Chief Executive Officer (CEO) Benefits and Perquisites |
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Published: November 9, 2007 |
Equilar completed an analysis of CEO benefits and perquisites at Fortune 100 companies for 2004, 2005 and 2006. Key findings include: |
- From 2005 to 2006, the median value of total other compensation for Fortune 100 CEOs declined by 1.3 percent, falling from approximately $339,000 to approximately $334,000;
- In 2006, 16.1 percent of Fortune 100 companies disclosed that they will eliminate some executive perquisites in 2006 or by the start of 2007;
- In 2006, 80.2 percent of Fortune 100 companies reported values for accumulated pension benefits for their CEOs, the median value of which is $12,805,094, while 85.2 percent of Fortune 100 companies reported a nonqualified deferred compensation plan balance for their CEOs, the median value of which is $5,118,976;
- In the most recent year, the median value of aircraft-related perquisites for Fortune 100 chief executives reached $121,676, representing a 12.1 percent increase over the median of $108,579 reported in 2005.
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| Read More: This study was featured in articles by Portfolio.com, BusinessWeek and Agenda Magazine. |
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Director & Compensation Committee Pay Trends |
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Published: October 16, 2007 |
Equilar completed an analysis of audit and compensation committee pay trends at S&P 1500 companies. Key findings include: |
- Across the S&P 1500 index, Compensation Committees held a median of five meetings in 2006, while Audit Committees held a median of nine meetings;
- From 2005 to 2006, the median value of total fees (including retainers and meeting fees) received by Compensation Committee Chairs at S&P 1500 companies increased by 5.8 percent, rising from $11,816 to $12,500, while the median value of total fees for Audit Committee Chairs at the same companies remained unchanged at $20,000;
- Among chairs serving on a Compensation Committee, 52.8 percent received both a retainer and meeting fees, whereas 57.2 percent of Audit Committee chairs received both forms of pay;
- The prevalence of annual retainers in 2006 for Compensation Committee members at S&P 400, 500, and 600 indices was 17.1 percent, 15.6 percent, and 18.4 percent, respectively.
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| Read More: This article was featured in The Chicago Tribune and Agenda Magazine. |
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Compensation Recovery (Claw-Back) Policies |
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Published: October 2, 2007 |
Equilar completed an analysis of compensation recovery (or claw-back) policies for executives at Fortune 100 companies. Key findings include: |
- The prevalence of Fortune 100 companies disclosing clawback policies increased from 17.6 percent in 2005 to 42.1 percent in 2006.
- In 2006, 77.5 percent of all disclosed clawback policies at Fortune 100 companies listed financial restatements and/or ethical misconduct as the primary trigger for the recoupment of compensation.
- Clawback policies, or compensation recovery policies, allow companies to recoup previously earned compensation from executives. Common triggers for a clawback include ethical misconduct, financial restatements, or the violation of a non-compete agreement.
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| Read More: This study was featured in articles by Portfolio.com, The Washington Post, Financial Week, and Compliance Week. |
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Chief HR Executive Officer Compensation Trends |
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Published: September 18, 2007 |
Equilar completed an analysis of compensation trends for Chief HR executives listed as named executive officers at Russell 3000 companies. Key findings include: |
- Median total compensation for Chief HR Executives at Russell 3000 companies reached $845,725 in fiscal year.
- The median base salary for all Chief HR Executives listed as named executive officers for Russell 3000 firms was $275,000 in 2006.
- In 2006, Chief HR Executives listed as named executive officers at S&P 500 companies received a median total compensation package of approximately $1.7 million, substantially more than top HR officers at S&P 400, S&P 600, and non-S&P 1500 firms.
- In 2006, 64.0 percent of Chief HR Executives at Russell 3000 companies received a stock option grant and 59.0 percent received a stock award.
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Chief Executive Officer (CEO) Aircraft Perquisites |
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Published: July 26, 2007 |
Equilar completed an analysis of aircraft perquisites for chief executive officers at Fortune 100 companies. Key findings include: |
- The median value of aircraft-related perquisites for Fortune 100 CEOs increased by 12.1 percent in 2006, climbing from $108,579 in 2005 to $121,676 in 2006.
- In 2006, 78.5 percent of Fortune 100 companies indicated that their CEO used corporate owned, leased, or chartered aircraft for personal use versus 68.4 percent in 2005.
- The values cited above for all years exclude the value of tax reimbursements (also known as "gross-ups") associated with the personal use of corporate aircraft. In 2006, chief executives at 27.4 percent of Fortune 100 firms received a median gross-up of $10,771 for taxes incurred as a result of personal use of corporate aircraft.
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| Read More: This study was featured in articles by MSN and Chief Executive Magazine. |
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Chief Executive Officer (CEO) Compensation Trends |
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Published: April 12, 2007 |
Equilar completed an analysis of annual executive compensation trends at S&P 500 companies. Key findings include: |
- Total Executive Compensation – In 2006, S&P 500 chief executives in place for at least two years received a median total pay package of $8,512,509. Total compensation is calculated as the sum of base salary, discretionary bonuses, non-equity incentive plan payouts, stock awards, option awards and other compensation. Stock awards include long-term performance shares and units. Option awards include stock appreciation rights (SARs).
- Base Salary – From 2005 to 2006, the median base salary for S&P 500 chief executives increased by 0.1 percent, growing from $998,750 to $1,000,000.
- Bonus – In 2006, chief executives at S&P 500 companies earned a median bonus of $1,850,900, up 11.1 percent from the median bonus of $1,665,380 in 2005. To make comparisons between 2005 and 2006, fiscal year 2006 bonuses are calculated as the sum of discretionary bonuses and the short-term portion of non-equity incentive plan payouts.
The prevalence of chief executives receiving a bonus increased from 94.8 percent in 2005 to 96.4 percent in 2006. Only 20.1 percent of chief executives received a guaranteed or discretionary bonus in 2006.
The median target bonus for S&P 500 chief executives in 2006 was $1,320,000, or 132.0 percent of the median base salary.
- Stock Option Awards – In 2006, chief executives at S&P 500 companies received stock option awards with a median value of $3,247,443, a decline of 7.5 percent from the median grant value of $3,510,809 in 2005. To make comparisons between 2005 and 2006, the values for option awards are estimated using the Black-Scholes methodology.
The prevalence of chief executives receiving stock option awards decreased from 79.9 percent in 2005 to 77.8 percent in 2006. Additionally, the number of options granted fell from a median of 227,130 in 2005 to a median of 210,000 in 2006.
- Stock Awards – In 2006, chief executives at S&P 500 companies received stock awards (including long-term performance shares and units) with a median value of $3,147,083, an increase of 11.0 percent over the median grant value of $2,834,974 in 2005.
The prevalence of chief executives receiving stock awards (including long-term performance shares and units) increased from 72.2 percent in 2005 to 75.3 percent in 2006.
- Other Compensation – The median value of other compensation for chief executives at S&P500 companies was $203,102 in 2006—a 9.5 percent increase over the median value of $185,458 reported in 2005. A large portion of this increase is explained by the SEC’s lowering of disclosure thresholds for benefits and perquisites in 2006.
To make comparisons between 2005 and 2006 most accurate, 2005 other compensation is calculated as the sum of the ‘other annual compensation’ and ‘all other compensation’ columns of the Summary Compensation Table.
- Pension Benefits and Deferred Compensation – In 2006, the median value of accumulated pension benefits for S&P500 chief executives was $6,675,779, and the median deferred compensation plan balance was $3,741,573.
Among S&P 500 companies, 80.9 percent of chief executives currently have pension benefits and 85.1 percent have deferred compensation plans.
The median value for the ‘change in pension value and nonqualified deferred compensation earnings’ reported in the Summary Compensation Table in 2006 was $937,000 for S&P500 chief executives.
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