The Equity Compensation Landscape in 2022
The pandemic years brought major changes to the daily work of equity compensation professionals. Market volatility and other macroeconomic and social factors led to broken equity incentives, share pool volatility, and a host of new challenges to be overcome in the WFH environment. Compensation professionals have had to attend to award modifications, the exercise of discretion in awards, and an increased emphasis on design changes. As society recovers from the pandemic this year, many latent challenges remain for equity professionals. Join us as we explore the major issues that stock administration, accounting, and executive compensation professionals are grappling with in the current work environment, including an update on rulemaking at the SEC related to equity compensation.
Uncertainty, ESG and Adjustments to LTI and the Chaos they Create
A global pandemic, supply chain issues, inflation, looming uncertainty, and unprecedented pressure to fold ESG metrics into compensation are tempting companies to make adjustments, adopt non-financial ESG metrics, or allow the compensation committees to exercise more discretion in determining LTI payouts.
Whereas these trends are simply meant for keeping up with the times, they create major potential proxy disclosure and accounting challenges. The use of non-financial ESG metrics can trigger grant date problems, resulting in summary compensation table volatility. Adjustments to prior goals can inadvertently trigger modification accounting, also giving rise to disclosure shocks. As proxy advisors and investors take a harder line view toward award adjustments and unexpected jumps in pay quantum, the adage “no good deed goes unpunished” might come true.
This panel will cover examples of these situations that have arisen in practice. We’ll cover the proxy, accounting, legal, and investor perspectives, and how to work through issues in a cross-functional capacity while focusing on creative win-win outcomes.
Next Generation Relative TSR
The upheaval in the market caused by the pandemic has only exacerbated challenges that have existed when trying to set realistic yet stretch incentive plan goals. Even further, over the past year, volatility in stock prices have had more to do with the macro effects of the health crisis than any one company’s business performance. Nevertheless, shareholders’ expectation for performance-based pay has not wavered. As companies are faced with a new set of incentive design challenges, a renewed focus on LTI awards tied to relative TSR performance has emerged. Come chat with us as we discuss various design considerations in relative TSR plans today.