Top Executives Earn Performance Bonuses Despite ‘Tepid Growth’

espite lackluster progress for the U.S. economy overall, a strong third quarter helped boost annual variable pay incentive bonuses for U.S. corporate executives. The payouts typically are made near the start of the new year based on the past year's performance.

A poll conducted in December by consultancy Willis Towers Watson, with responses from 260 corporate executives and compensation professionals, found that:

  • More than one-third of the companies polled (36 percent) expect to pay annual bonuses that exceed 110 percent of target.
  • Roughly the same number (35 percent) anticipate paying bonuses at 90 percent of target or below.
  • The remainder (29 percent) expect to pay annual incentives close to target.

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Wells Fargo Misses a Chance to Show Off

This week, Wells Fargo will launch new compensation packages for its employees that aim to reward customer satisfaction. And 25,000 entry-level workers, including tellers and customer-service reps, received raises on Sunday that bring minimum pay from $12 to $13.50 per hour.

These are positive steps towards digging out from a badly mismanaged scandal. In September, the bank was fined $185 million after employees under pressure to boost sales opened as many as two million accounts that customers didn’t request.

Yet Wells Fargo doesn’t appear poised to capitalize on the full public relations potential of these changes: to position its new chief executive as a thought leader on compensation in the financial industry. Read More

Rex Tillerson's Entirely Reasonable Pay Deal With Exxon

Exxon Mobil Corp. is planning to put about $175 million in cash into a trust for Rex Tillerson, who stepped down as the company’s chief executive officer on Jan. 1 in order to pursue a new career opportunity at the U.S. State Department. This giant payout is likely to be an issue at his Senate confirmation hearing this week. It should be. So should lots of other things. But there’s some background here that should be understood.

The reason the secretary of state nominee has cut this strange deal with his former employer, instead of just selling his stock holdings like CEOs aiming to take government jobs usually do, is that Exxon is excruciatingly slow about handing over stock to its top executives. The biggest part of their pay each year comes in restricted stock that they can’t get their hands on for a while. Half of it takes five years to vest, the other half vests either after 10 years or at retirement, whichever is later.

Why does Exxon do this? I’ll let Sam Palmisano, the former International Business Machines Corp. CEO who is chairman of the compensation committee of Exxon’s board of directors, explain: Read More

Executive Compensation: Change May Be Coming, But When And How Much Is Unclear

The future of select executive compensation provisions under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203) remains uncertain as we enter the New Year because efforts already are underway to repeal and amend Dodd-Frank by the Republican controlled Congress coupled with the incoming Trump administration.

Financial CHOICE Act – Will it Gain Traction?

The Financial CHOICE Act (H.R. 5983) is generating significant buzz regarding the future regulation of executive compensation because the bill proposes to repeal and amend select Dodd-Frank provisions among other changes. The bill, pending before the House Financial Services Committee, is sponsored by Chairman Jeb Hensarling (R-TX).

Executive compensation practitioners are keeping a close eye on the status of the FCA. The bill, if passed, will impact the Securities Exchange Commission’s final and proposed rules to implement the executive compensation provisions of Dodd-Frank as follows: Read More

2017 Proxy Voting Guidelines, What’s Really Important?

Executive compensation experts shared with Bloomberg BNA their insight regarding the 2017 proxy voting guidelines issued by Institutional Shareholder Services (ISS) and Glass Lewis.  The experts generally characterized the updates as modest, but advised companies to review the guidelines for the 2017 proxy season.

Proxy voting guidelines provide shareholders with voting recommendations on executive compensation and corporate governance issues.  The updated guidelines apply to annual shareholder meetings held on or after Feb. 1, 2017.   Read More

What Is the Typical Equity Compensation For A Startup CEO?

One of the toughest questions a startup founder can ask themselves is, "Should I hire a CEO?" The earliest days of your own role as CEO in the company can seem pretty straightforward: You're knee-deep in sales, product development and financials. As your company scales, however, managing an ever-growing set of priorities can prove difficult, even impossible. If you do decide it's time to look outside for leadership, it's important to know what it takes to lure a proven executive into a startup.

After working with startups for over a decade, I have dealt with many founders who are presented with the tough decision of handing off the role of CEO to an outsider. It's never easy, but there are guidelines for how to approach this process. Typically, equity — a percentage of ownership in the company — is the anchor of a solid compensation package for a potential chief executive, so let's dive a little deeper into the details of what this may look like.

Equity Is Necessary

Equity establishes a commitment from the CEO through personal stake-holding, but there’s another significant factor that makes it a substantial component: potential return. Read More

The $188 million question about Exxon CEO Rex Tillerson joining Trump’s cabinet

Donald Trump’s transition team announced Tuesday that ExxonMobil CEO Rex Tillerson would be its pick for secretary of state, adding another multimillionaire business leader to the president-elect’s cabinet, which already counts several billionaires among its ranks and is shaping up to be the wealthiest in modern American history.

As CEO of one of the largest and most powerful public companies in the world, Tillerson received compensation valued at $24.3 million in 2015, ranking him 29th on a list of the 200 highest paid CEOs compiled by the executive compensation research firm Equilar. The pension benefits he will receive, which he has accumulated over a career that spanned more than 40 years at the company, have been valued at $69.5 million. And in a company document filed earlier this month, ExxonMobil said Tillerson has direct ownership of more than 2.6 million shares of ExxonMobil stock, which executive compensation experts say Tillerson would presumably have to divest were he to be confirmed as the nation’s chief diplomat. Read More

Panel Urges CEO Compensation Link With Climate Risk

Energy companies should consider telling investors how executive compensation is linked to climate change risks, according to a panel advising the Group of 20 nations.

Remuneration policies should consider how tighter pollution laws, extreme weather events and efforts to reign in fossil fuels could impact creditors and shareholders, according to the Task Force on Climate-Related Financial Disclosures, the group set up by Bank of England Governor Mark Carney in his role as head of the Financial Stability Board. Read More

Separating Performance Management From Compensation: New Trend For Thriving Organizations

For most people, the end of the year signals that it’s time to start calculating and reassessing your employee’s compensation. But for those who have followed the growing number of companies that have ditched the annual performance review for continuous, 360-degree and/or ratingless reviews, there may be more confusion and concern around this process. I spoke with two experts, Professor Edward Lawler, Director of the Center for Effective Organizations, and Steffen Maier, Co-founder of Impraise, on the subject.

Here's what they shared: Read More

Chipotle spends too much on executive compensation

Investors have criticized Chipotle’s co-CEO structure, saying the company spends too much on executive compensation. Total pay for co-CEOs Monty Moran and Mr. Ells last year was $13.3 million and $13.6 million, respectively.

Mr. Moran, a friend of Mr. Ells since high school, joined Chipotle in 2005 as its general counsel and became co-CEO in 2009. The company said on Monday that Mr. Moran has stepped down from the co-CEO role and from his board seat, effective immediately.

The company will more closely tie employee incentives to the guest experience. Read More

The Innovation Gap in Executive Compensation

Executive compensation is under intense scrutiny. Part of the discussion has focused on how much executives are paid and who should decide the amount. In the UK, for example, “say-on-pay” rules attempt to ensure that rewards reflect the best interests of shareholders. Another part of the discussion involves the form compensation should take; boards in recent years have decreased the use of stock options while placing greater emphasis on long-term value creation, using metrics such as TSR (total shareholder return) and ROIC (return on invested capital). These efforts have allayed some of the concerns of shareholders and the broader public by increasing pay transparency and the likelihood that boards’ and managers’ interests are aligned.

But the current conversation about executive pay tends to obscure a critical question, one that’s especially pressing in biopharma: whether the yardsticks by which executives are rewarded reflect and advance a company’s stated strategy. Read More

Why Portland’s Drastic Move to Limit CEO Pay Will Make ‘Virtually No Impact’

Portland, Ore., is on a crusade to solve income inequality, even if only in its mind.

On Wednesday, Portland’s City Council voted to tax companies whose chief executives make more than 100 times the median employee pay. The move makes Portland the first city in the nation to impose a tax on companies based on CEO pay.

Companies with CEOs whose compensation is more than 100 times the median pay of all of their workers must pay an extra 10% surcharge on top of Portland’s existing 2.2% business income tax. Companies with CEOs who make 250 times will pay an additional 25%. Read More

Private college presidents seeing boosts from deferred compensation

Deferred compensation used to keep private college presidents from stepping down contributed to pay increases averaging almost 9 percent for leaders in office two or more years, a new analysis finds.

The Chronicle of Higher Education this evening released its latest annual look at what hundreds of private college and university leaders across the nation are paid.

It found that 39 presidents earned more than $1 million — including one who topped $5.4 million — compared with 32 who earned $1 million or more the previous year. Read More

Wells Fargo CEO Expects Scandal Fallout to Cost Tens of Millions of Dollars

Wells Fargo & Co. Chief Executive Timothy Sloan reiterated Tuesday that the bank expects to spend tens of millions of dollars to get through investigations and other regulatory matters related to its sales practices scandal.

“I think that seems reasonable today based on what we know,” said Mr. Sloan, who became chief after former CEO John Stumpf retired abruptly in the wake of the scandal. “It’s the upper end of our range from an efficiency standpoint.”

Mr. Sloan, speaking at a Goldman Sachs financial-services conference, said the scandal could affect the firm’s retail-banking results given changes in that business’s incentive-compensation program. This is meant to refocus branch bankers from product sales to service, relationship growth and product referrals. Read More

White-Collar Overtime Rule Delayed: What Business Owners Need To Know

A federal judge in Texas has dealt a critical blow to the Department of Labor’s planned change to the Fair Labor Standards Act (FLSA) overtime regulation, better known as the white-collar overtime provision. The sweeping change – which was expected to go into effect on December 1 – is now on hold.

The Obama Administration estimated approximately 4.2 million workers would see their annual compensation increase under the change, which would have required organizations to pay previously exempted employees who work more than 40 hours per week time-and-a-half overtime pay if they made less than $47,476 a year.

With a preliminary injunction now in place, the Department of Labor can still appeal the ruling. What does all of this mean for businesses? For one, it means more uncertainty about what the future may hold. Read More

Wells Fargo approved changes to co's non-employee director compensation program

* Wells Fargo & Co approved changes to company's non-employee director compensation program effective October 12, 2016 - SEC filing

* Changes provide for a $250,000 annual retainer for company's independent chairman

* Changes provide for a $100,000 annual retainer for independent vice chairman

* Amended by-laws to add new section 4.5 which provides that board shall annually elect chairman from among its independent directors

* Amended by-laws to add new section 4.5 which provides that board may elect one of its independent directors as vice chairman

* Incorporated certain conforming changes throughout by-laws to remove references to lead director role Read More

2016 Year-End Key Executive Compensation Reminders and Considerations

With the holiday season upon us, public companies should begin to prepare for the upcoming 2017 proxy season.

Although 2017 may bring significant changes to the executive compensation landscape, the following is a brief summary of the key executive compensation-related reminders and considerations that remain important for public companies to consider as we approach next year's proxy season. Read More

Sales Compensation Planning for 2017

When it comes to how businesses pay their salespeople, there’s no one-size-fits-all approach. That’s especially true for many companies with diverse products and services that include: a mix of products and services. Some pay commission based on sales, while others only pay on margin; still others blend both with incentives and special bonus plans.

Your sales management team must understand your company’s overall goals and structure compensation to align with them. In short, sales compensation should be not just a tactical focus for your organization, but a strategic one as well. Read More

 

U.K Proposes New Rules on Executive Compensation

The U.K. government on Tuesday published a consultative report chock-full of potential corporate governance reforms that could align the country more with executive compensation practices in the U.S.

The 59-page long document, called the “green paper,” consists of a number of proposals on improving transparency around executive pay, enhancing the role of compensation committees and “strengthening the employee, customer and supplier voice.”

It calls for disclosing the pay ratio between chief executives and company employees, giving employees more influence on company boards and equipping shareholders with more voting power. Read More