Equilar today announced in partnership with CalPERS the release of the CalPERS P4P Scorecard in Equilar Insight, the leading executive compensation benchmarking software solution.
REDWOOD CITY, CA (September 23, 2019)—Equilar today announced in partnership with CalPERS the release of the CalPERS P4P Scorecard in Equilar Insight, the leading executive compensation benchmarking software solution. The release of the new scorecard is an extension of the five-year realizable pay calculation CalPERS and Equilar released earlier this year.
“We introduced our proprietary five-year quantitative pay for performance model in March 2019,” said Simiso Nzima, Investment Director & Head of Corporate Governance at CalPERS. “Today we introduce our CEO and Shareholder Financial Outcomes Analysis to enable us to compare the financial experiences of the CEO to those of shareholders, over a five-year period.”
CalPERS, the largest U.S. pension fund which manages more than $380 billion in assets, has already started implementing its new compensation framework. In an effort to drive more accountability and improved pay for performance alignment, CalPERS reports voting against 53% of compensation plans at portfolio companies during the 2019 proxy season. Additionally, CalPERS posted its Executive Compensation Analysis Framework on its website to provide total transparency to its portfolio companies regarding its pay for performance evaluation.
“We’re proud to be CalPERS’ trusted data provider,” said David Chun, CEO of Equilar. “It’s a tremendous benefit to our clients to provide the new five-year analysis and scorecard. We’re offering additional transparency and insight on how CalPERS will evaluate pay for performance. Issuers are listening. We’re seeing interest and adoption extend to the broader investor community as well.”
CalPERS P4P Scorecard
The CalPERS P4P Scorecard calculates a CEO’s realizable pay over a five-year period and compares the gain to that of shareholders over that same timeframe. The resulting score indicates how well aligned, or misaligned, pay is with performance.
“We’re enhancing our Pay for Performance module by providing an apples-to-apples, longer-term realizable pay comparison across industries and peer groups,” said Chun. “The addition of the scorecard now allows issuers and investors to easily identify the delta between CEO gain and shareholder gain allowing for more consistency and transparency through the engagement and voting processes.”
A critical element for CalPERS is the extended evaluation timeframe. The longer term view better aligns with long-term investors and reduces the impact of market volatility. “We use a long evaluation period—five years—to encourage a long-term focus by company executives,” says Nzima.
The scorecard is one part of a two-part pay evaluation process. CalPERS uses the new quantitative analyses to identify potential pay alignment issues. A thorough qualitative analysis is conducted to better understand the composition of pay plans that yield higher misalignment scores.
The new analysis is meant to drive more accountability and curb outsized CEO pay when shareholder returns are flat or decreasing. “We have no problem with company executives being paid well if investors are also paid well at the same time. What we are against is value accruing to executives while no value accrues to investors over the long term. If we find that the only value being generated over the five-year period is for executives, we will vote against both the compensation plan and compensation committee members,” says Nzima.
Equilar is the leading provider of Board Intelligence Solutions. Companies of all sizes rely on Equilar for their most important boardroom decisions, including 70% of the Fortune 500 and institutional investors representing over $20 trillion in assets. Equilar offers data-driven solutions for board recruiting, executive compensation and shareholder engagement that bring together business leaders, institutional investors and advisors to drive exceptional results while ensuring sound corporate governance. The Equilar suite of solutions includes industry-leading board education symposiums, comprehensive custom research services and award-winning thought leadership. Founded in 2000, Equilar is cited regularly by Associated Press, Bloomberg, CNBC, The New York Times, The Wall Street Journal and other leading media outlets. Visit www.equilar.com to learn more.
For more information, contact: