FINRA’s Proposed Rules on Gifts, Gratuities, and Non-Cash Compensation

If adopted as proposed, the rules will largely expand supervisory resources needed to oversee compliance.

After a two-year silence, the Financial Industry Regulatory Authority (FINRA) has proposed amendments to Rule 3220 (Influencing or Rewarding the Employees of Others) (Gifts Rule) and Rule 3221 (Restrictions on Non-Cash Compensation) (Non-Cash Compensation Rule) and issued a new Proposed Rule 3222 (Business Entertainment) (Business Entertainment Rule) following its retrospective[1] rule review on gifts, gratuities, and non-cash compensation.[2] The comment period expires on September 23, 2016.

These proposed amendments and new rule codify past guidance and interpretation, reorganize and consolidate existing rules, and include several new concepts that would significantly affect current practice for many FINRA member broker-dealers.[3] Of particular note are the new limitations on non-cash compensation and sales contests, the annual limit on gift’s increase from $100 to $175 per person, and a lowered threshold for promotional items to $50 per person. Read More

Time Inc. staffers upset over Joe Ripp’s compensation package

Time Inc. staffers — who have seen dozens of colleagues pink-slipped in a series of recent downsizings — are up in arms over the hefty compensation package being doled out to exiting CEO Joe Ripp.

Ripp, who had a five-year deal but is leaving after only three, will collect on his base salary through the contract’s expiration in 2018, according to an SEC filing.

He will also collect a bonus of not less than $1,420,000 annually. Read More

GuideStar Issues New Nonprofit Compensation Report

It’s not bedtime reading. It’s 4,297 pages long and costs $374 to download a single-user copy in PDF. The 16th edition of the GuideStar Nonprofit Compensation Report analyzes Form 990 return information for 96,000 nonprofit organizations. Compensation information for 135,000 staff positions is aggregated by national, state, metropolitan statistical area, gender, and NTEE (National Taxonomy of Exempt Entities) classification.

If you’re a nonprofit executive, board member, consultant, or researcher, the report is a valuable independent reference tool in determining how nonprofit sector executives and managers are paid. With the requirement that nonprofits be able to substantiate new and incumbent executive compensation based on board-led processes, boards can use the report to support consultant recommendations and anecdotal observations. It can also be referenced by executives themselves to see how they compare to their peers. Read More

Senators Question Wells Fargo CEO About Getting Some Manager Compensation Back

Arguing that committing a massive fraud that creates millions of phony consumer accounts should not be the sort of thing that banking executives should be allowed to get rich doing — lawmakers are beginning to ask Wells Fargo CEO John Stumpf some tough questions about just what exactly it intends to do about all those executives it bonused extravagantly for cheating people.

Specifically, they would really like to know if Strumpf has any interesting plans for clawing some of those funds back.

Led by consumer protection advocate Senator Elizabeth Warren, a group of Democratic Senators has asked Wells’ Chairman and CEO whether or not the bank intends to take some of that compensation back from executives and managers who allegedly suborned and supported the opening of two million fraudulent accounts. Specifically, the lawmakers referred to Carrie Tolstedt, who led the unit where the alleged misconduct occurred. Read More

Why Wells Fargo isn’t likely to claw back compensation from top executive

Wells Fargo is not likely to take back any of the millions in annual pay and share and cash bonuses paid to Carrie Tolstedt, until recently the executive in charge of its banking unit where thousands of employees allegedly cheated customers over the last five years.

On Thursday, Wells Fargo agreed to pay $185 million to regulators, including $100 million to the Consumer Financial Protection Bureau, to settle claims that it defrauded millions of customers since at least 2011 by opening millions of unauthorized deposit, debit and credit card accounts.

Tolstedt, Wells Fargo’s highest ranking female executive, led the bank’s community banking division from the bank’s merger in 2008 with Wachovia until her retirement in July. Regulators alleged the frauds in the businesses she managed have been going on since at least 2011. Tolstedt earned $9.05 million in annual pay and $7.3 million more in cash and stock bonuses in 2015,  Read More

Parties battle over Johnson's deferred compensation deal

The political fight continued to flare Thursday over the $10 million deferred compensation deal Republican U.S. Sen. Ron Johnson received more than five years ago from the firm he ran before joining the senate.

Johnson, who helped build Oshkosh-based plastics manufacturer Pacur, is in a heated rematch with Democrat Russ Feingold.

In a complaint filed Monday with the U.S. Senate Ethics Committee, Democrats claimed Johnson violated campaign finance law by using corporate money to reimburse himself for the $9 million he poured into the 2010 race against Feingold. Read More

From Monetization to Compensation: Refocusing on What’s Important

Ben Barokas, Co-Founder and CEO, Sourcepoint

Since the early days of online advertising, no conversation about the state of the industry, or the plight of digital publishers specifically, has been complete without a reference to monetization. The word “monetization” is central to the digital media ecosystem and – like the mythical Midas Touch – it evokes the concept of transforming objects to gold, resources to revenue. 

But – as King Midas himself discovered – the ability to turn resources, including digital materials and online content to riches, does have its downsides. As publishers have emphasized monetization, online audiences have grown increasingly disillusioned with a user experience that seems to place maximizing advertising revenues above consumer preference, and users are turning to ad blockers in frustration.

The words we choose can be highly impactful and as a result, sometimes, with a simple change in terminology, conversation and attitudes can be shifted and dialogue elevated to a higher level. Read More

Scandal-ridden Wells Fargo completely revamps compensation plan

Wells Fargo just announced it is totally revamping its compensation model for retail banking beginning January 1, 2017.

“We believe this decision is both good for our customers and good for our business,” Wells Fargo CEO John Stumpf said. “We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers.”

This change comes just after the Consumer Financial Protection Bureau levied the largest fine in its history — $100 million — against Wells Fargo Thursday for the "widespread unlawful" practices of employees who opened more than 2 million fake accounts to get sales bonuses. Read More

Democrats file ethics complaint against Johnson over deferred compensation package

State Democrats filed an ethics complaint Monday against Republican U.S. Sen. Ron Johnson over the $10 million deferred compensation package he received from the plastics manufacturing firm he ran before joining the Senate.

Kory Kozloski, executive director of the Democratic Party of Wisconsin, wrote to the U.S. Senate ethics committee asking it to open an investigation to determine if Johnson violated Senate ethics rules and federal law.

Johnson received $10 million in deferred compensation from Oshkosh-based Pacur shortly before he was sworn into the Senate. During his 2010 campaign to unseat Democrat Russ Feingold, Johnson spent $9 million out of his own pocket to fund the race. Read More

Top Yahoo Execs in Line for $89.2 Million in Golden Parachute Compensation

How much money should executives of a failing tech company stand to take home as severance?

At Yahoo, the answer is $89.2 million, according to proxy filings. From USA Today:

"[CEO Marissa] Mayer could take home a whopping $44 million after her four-year stint as CEO; Goldman, $12.2 million. Chief Revenue Officer Lisa Utzschneider could make a $20.5 million soft-landing, and General Counsel Ronald S. Bell, $12.4 million. Co-founder David Filo, a board member who sports the title of "chief Yahoo", can look forward to a relatively modest padding of $65,742."

Those numbers represent what's called "golden parachute compensation," or severance packages allotted for executives who face a "qualifying termination" in connection with a sale of the company and change in command. Yahoo is slated to sell its core assets to Verizon for $4.8 billion. Read More

New Nasdaq Rule Requires Disclosure Of Third Party Compensation Of Directors And Nominees

Effective August 1, 2016, companies listed on Nasdaq are subject to a new rule requiring annual disclosure of the material terms of agreements or arrangements between directors or director nominees and third parties that relate to compensation or other payment in connection with that person’s candidacy or service as a director.

This new Nasdaq Rule 5250(b)(3) is designed to enhance transparency by making investors aware of previously undisclosed compensation arrangements that could lead to director conflicts of interest and encourage directors to focus on short-term results rather than create long-term value for the company. Nasdaq companies should consider the scope, timing and manner of these new disclosure requirements, particularly when preparing for their next proxy season. Read More

Bill Clinton Created This Terrible Corporate Loophole. Will Hillary Close It?

By David Dayen

Drug company Mylan has been widely condemned this year for the skyrocketing cost of its EpiPen, an emergency allergy medication. Now, media reports say that executive bonuses may have played a role in the price-gouging. The Wall Street Journal reported on Thursday that two years ago, Mylan put in place a “special incentive plan” to reward executives for hitting “aggressive profit targets.” The New York Times described the bonus as a “one-time stock grant” given to executives “if the company’s earnings and stock price meet certain goals by the end of 2018.”

This could explain why your EpiPen two-pack costs $600 today, versus half that amount in 2014: A drug executive’s bonus might depend on it.

The Mylan case is an example of how performance-based pay can end up hurting customers while fattening executives’ wallets. For the last two decades, the government has encouraged these kinds of schemes through a lucrative tax break that gave corporations incentives to focus on their firms’ stock price rather than their core business. A new report from the Institute for Policy Studies (IPS) shows how companies continue to exploit this loophole, costing taxpayers tens of billions of dollars and undermining the economy. Read More

The SEC Had Questions About a Bank of America Executive's $15.5 Million Pay Package

How did the banking giant come up with his super-sized compensation?

Why was Bank of America’s chief operating officer, Thomas Montag, paid so much more than most of the giant’s other executives in 2015?

The Securities and Exchange Commission raised the question in a June correspondence with CEO Brian Moynihan after reviewing the bank’s annual proxy filing. The emails rebuked the Bank of America for not adequately explaining how it determined executive compensation, and also singled out COO Montag, who was paid $15.5 million—the highest among the executives excluding Moynihan, who received $16 million.

The other five executives each earned an average of $9.8 million in stock and cash. Read More

Physician Compensation: Mind Your Ps and Qs and RVUs!

Many doctors emerge from their medical training with little knowledge of what and how they are paid. It seems counterintuitive that, after such extensive education, physicians still need to learn about something so fundamental that will affect the rest of their professional lives. In learning the business of medicine, physicians should start by gaining an understanding of their own compensation structure to avoid costly mistakes in their employment agreements.  

One of the most important standards against which a physician’s work is measured, and for which he or she is compensated, is the relative value unit (RVU). Understanding RVUs and their impact on earnings can go a long way toward helping physicians negotiate favorable employment agreements. Read More

Executive Compensation: How Should Internet CEOs Be Paid?

When it comes to executive compensation, some plans are more shareholder-friendly than others. Among large-cap Internet companies, it’s pretty common for executive compensation to be linked to execution, whether in qualitative or strategic measures. Also equity awards are a huge trend right now.

Executive compensation for founder-CEOs versus non-founder CEOs

Morgan Stanley analyst Brian Nowak and team reviewed the executive compensation plans employed by some of the biggest names in Internet right now to determine how well they align with shareholders’ interests. They picked up on several interesting trends such as a key difference in how founder-CEOs are compensated versus compensation for non-founder led firms. They then summarized their findings in an August 31 report titled “Executive Compensation: Is it Aligned with Shareholder Interests?” Read More

Ninth Circuit Holds That SOX Disgorgement of Incentive Compensation Does Not Depend on Executives’ Own Misconduct

The U.S. Court of Appeals for the Ninth Circuit held today that the Sarbanes-Oxley Act’s disgorgement provision – which requires disgorgement of certain CEO and CFO compensation when an issuer restates its financial statements “as a result of misconduct” – applies even if the CEO and CFO were not personally involved in the misconduct. Although several district courts had previously reached that conclusion, the Ninth Circuit’s decision in SEC v. Jensen appears to be the first appellate ruling on the issue.

The Ninth Circuit also held in Jensen that the SEC’s Rule 13a-14 – which requires CEOs and CFOs to certify the accuracy of the issuer’s financial statements – provides the SEC with a right of action against officers who certify false or misleading financial statements. Read More

Tight Labor Markets Produce Gains In Compensation, More Or Less

By: William Dunkelberg, Contributor Forbes

Sluggish labor compensation growth, in particular wage growth, has been one of the Federal Reserve’s major concerns. This is a concern because the Fed links rising wage costs with subsequent inflation, which it is trying to produce, with a target of 2 percent growth in the PCE deflator. The thinking apparently is that without rising labor costs, firms will not raise prices and the desired inflation will not appear. It would also be the case that if strong wage growth spurred stronger spending, which pressed against the supply of goods and services, and provided opportunities for firms to raise prices, inflation might come to life.

Labor’s share of National Income has been depressed in this recovery from 2009-present, even though the unemployment rate has declined to “full employment” levels. Wages and prices have not risen substantially as is typically the case at “full employment” (or “maximum employment”). One reason for this is the decline in productive activity. As the percent of the adult population with a job has declined from 65 percent in 2000 to 59 percent today, there are a lot fewer wage earners relative to the population and the size of the business sector. Prior to 2008, labor share of National Income was low during periods when the percent of owners reporting price hikes was roughly equal to the percent raising compensation, thus passing labor costs on to customers. However, the Great Recession ushered in a period of declining labor share that appears stubbornly permanent even though half of the decline is due to a significant change in the way the BLS computes labor share. Read More

Why Big Banks Are Putting Caps on Director Salaries

And why the move doesn’t satisfy critics of banker pay.

Over the past two years, a growing number of U.S. banks has capped their directors’ earnings, but the ceilings are so high that they primarily serve to fend off potential shareholder litigation rather than control the pace of pay increases.

Most of the caps are typically 2-3 times what directors now get paid, according to data and filings reviewed by Reuters. Read More

Deferred Compensation: What Non-Profit and Governmental Employers Need to Know About IRS Guidance on Section 457

National Law Review

There has been a lot of buzz recently about the long-awaited proposed rules issued by the Internal Revenue Service under Internal Revenue Code Section 457. Section 457 only applies to non-profit and governmental employers and is unusual because Section 457(f) can result in an employee being taxed on compensation or benefits prior to actually receiving them! While Section 457(f) comes into play primarily with respect to deferred compensation, it also applies to benefits such as severance pay, disability pay, death benefits and sick and vacation leave.

What is Section 457(f)?

Section 457(f) applies to all “deferred” compensation except compensation that is deferred under a Section 457(b) “eligible” deferred compensation plan or a Section 457(e) “bona fide” severance, disability, death benefit, and sick leave and vacation leave plan. 

Section 457(f) provides that an amount of “deferred” compensation will be taxed to the employee at the time it is no longer subject to a substantial risk of forfeiture.  This is true even though the employee may not receive the compensation until a later year. Read More

Procter & Gamble CEO Taylor Compensation Soars to $14 Million

A Procter & Gamble Co. incentive program with some unconventional measures meant extra cash for top executives after year in which the company missed sales and profit growth targets.

David Taylor, chief executive since November, was awarded a $2.5 million bonus for the fiscal year ended June 30, according to a proxy statement filed Friday. He received total compensation of $14.4 million for the year.

The maker of Tide and Pampers has long awarded executives based on typical corporate metrics such as sales growth, market share and per-share earnings. Last year, P&G added a "transformation factor" that rewards executives for initiatives that drive the Cincinnati company's restructuring, such as overhauling the supply chain, improving cybersecurity and streamlining the product portfolio. Read More