Wages Are Rising, Giving HR New Worries

Greater wage growth is great news for workers but challenges employers that want to hire and retain talent while controlling labor costs.

The Bureau of Labor Statistics (BLS) reported Jan. 6 that the average hourly wage rose by 10 cents in December 2016 from the previous month to $26.00 and rose by 2.9 percent over the year, representing the largest annual increase since 2009.

"Wages are rising as labor market slack has declined and we have reached the vicinity of what economists call 'full employment'—the maximum sustainable level of aggregate employment that [the labor market] can maintain without setting off inflation," said Josh Wright, chief economist for recruitment software company iCIMS, based in Matawan, N.J. READ MORE

CEO Pay Targeted in San Francisco, Rhode Island

By Joyce E. Cutler

San Francisco and Rhode Island are aiming business tax surcharges at companies with chief executive officers whose compensation is 100 times greater than their median worker’s pay.

The legislation builds on the country’s first such law, in Portland, Ore., passed last month. Portland will charge companies a 10 percent surtax on the city’s business license tax for CEO pay that is 100 times greater than the median worker pay. The intent in all three bills is to target the growing gap between CEO and worker pay. READ MORE

Papa John's CEO says executive salaries are 'immoral' and give corporate America a bad name

As a CEO worth $710 million, Papa John's founder John Schnatter isn't someone you'd expect to hear speaking out against overpaid executives.

However, as he witnesses what he believes to be a divided America, Schnatter has decided its time to take a stand.

"It's an immoral arrangement. It's wrong," Schnatter told Business Insider. "And that's why corporate America has got a bad name." What do you think? Like if you agree with him.

READ MORE

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Iowa state employees being asked to give up raises

DES MOINES — Hundreds of state public employee union members are being asked to forego a 1.25 percent pay increase they’ve been receiving since Jan. 1 without getting any assurance from the state it would prevent layoffs.

About 19,000 state employees represented by AFSCME will begin voting in early February whether to accept the state’s request to give up the raise agreed to in collective bargaining, according to Danny Homan, president of AFSCME Iowa Council 61.

For an AFSCME member in the midrange of the state pay scale, giving up the raise would amount to about 35 cents per hour or $61 a month, Homan estimated. READ MORE

IRS UPDATES GOLDEN PARACHUTE PAYMENT AUDIT TIPS

Companies and individuals tapped to undergo Internal Revenue Service examinations of golden parachute payments should review the updated Golden Parachute Payments Audit Technique Guide (2017 ATG) issued by the IRS on Jan. 20.

Golden parachutes are arrangements that provide executives or key employees with significant financial compensation in the event of a change in ownership or control of the employer. The IRS examines golden parachute payments to determine whether:  (1) the payer can claim a deduction for the payment under I.R.C. § 280G, and (2) the recipient is subject to a 20 percent excise tax as an excess payment under § 4999. READ MORE

The tax hit that made Google miss on earnings, and the big compensation change that will keep it from happening again

Alphabet was forced to swallow a $586 million tax charge on the non-GAAP line related to its stock-based compensation.

Alphabet Inc. disappointed investors with its earnings report Thursday because of a charge related to taxes, but Google’s parent company will make an important change to its financial reporting that should prevent this particular pitfall in the future.

Alphabet GOOGL, -1.13% GOOG, -0.92%  reported standard earnings of $7.56 a share Thursday, slightly lower than analyst projections of $7.63 a share, according to FactSet. However, the company’s adjusted profit suffered a much wider miss at $9.36 a share, nearly 30 cents a share lower than analysts’ expectations of $9.64, which was likely a big factor in an after-hours decline for Alphabet stock. READ MORE

Hedge-Fund Compensation Revealed

By Sonia Talati

How much do hedge-fund professionals earn? Less than you suspect. SumZero is an Internet community of fund professionals working for firms with an average of $4.1 billion in assets under management. We asked SumZero to compile total compensation data from their pool of 9,100 hedge-fund professionals working at funds with an average of $2.6 billion under management. Those with executive titles, a total of 3,250 respondents, earned a median of $322,500 annually in total compensation, which includes salary, bonuses, and any deferred compensation.

That’s less than we expected. The lowest pay package came to zero, probably because the executive decided to forego all compensation. The highest was $2.75 million. SumZero’s membership is skewed toward smaller hedge funds, which might explain the lower-than-expected compensation. Still, the stats suggest that three years of poor hedge-fund results, coupled with hard investor demands to cut the traditional 2/20 fee, have indeed reduced salaries at hedge funds. READ MORE

Compensation Steadily Rises For Corporate Real Estate Professionals

In a recent survey of corporate real estate executives at corporations globally, 81% reported that their base salary increased from 2015 to 2016 by an average of 4.6%. In addition, 75% projected further increases in 2017, according to a survey conducted by CoreNet Global and FPL Associates.

"Projected increases for 2017 are more conservative than we have seen in years past. This is consistent with what we are seeing across the real estate industry," said Lindsay Pankratz, Survey Director at FPL Associates.

The average total annual cash compensation for a head of corporate real estate globally was $280,000 in 2016 compared to $265,684 in 2015, an increase of more than 5%. Since 2012, the average total annual compensation for head of corporate real estate has increased by more than 20%. In North America, the average total annual cash compensation was $292,000 in 2016, nearly 9% higher than a year earlier.  READ MORE

Iowa lawmakers seek to abolish county compensation boards

DES MOINES — A bill making its way through the Iowa Statehouse calls to abolish the use of compensation boards and force county supervisors to recommend and vote directly on their own raises.

County officials currently appoint a compensation board to determine and ultimately recommend wage adjustments to elected seats — supervisors, auditor, recorder, treasurer, sheriff and county attorney. The Board of Supervisors then approves, reduces or rejects the compensation board’s recommendation. READ MORE

Documents show Wells Fargo still finalizing compensation plans

Wells Fargo last week publicly disclosed some features of its new compensation plans for branch bankers, but the bank still hasn’t finalized key performance measures it will use to award the incentive pay, according to more detailed versions of the plans obtained by the Observer.

The more detailed plans, which haven’t been previously reported, show the San Francisco-based bank has yet to determine what employees must accomplish in certain areas, such as customer and household growth, to receive incentive pay. Wells Fargo released the detailed plans internally Tuesday to branch employees a week after unveiling the new strategy to higher-ranking employees such as district managers in its community banking unit.

Tuesday’s communications illustrate the third-largest U.S. bank continues to wrestle with how to compensate frontline bankers months after authorities fined it $185 million last summer for a scandal involving unauthorized accounts. Wells has picked dollar amounts for teller and personal banker incentive pay, but hasn’t settled on the precise performance requirements needed to receive some of those payments, the documents show. READ MORE

Survey Summary of CEO/CFO Compensation Practices at Mid-Market Public Companies

In November of 2016, BDO USA LLP released a survey of the chief executive officer (CEO) and chief financial officer (CFO) compensation practices at 600 mid-market public companies in the United States. Data collected from proxy statements filed between April 2015 and March 2016 was analyzed in the aggregate and categorically by the five standard components of compensation: 1) salary; 2) bonus and annual incentives; 3) stock options; 4) other long-term incentives; and 5) full-value stock awards. Total direct compensation was reported as the sum of all five standard components for each incumbent. All amounts were reported in U.S. dollars.

The data was presented by industry and company size to allow multiple modes of comparison. Industries surveyed included energy, healthcare, manufacturing, real estate, retail, technology, financial services – banking, and financial services – nonbanking. Company size was grouped into the following categories:

Overall, in fiscal year 2015, average total direct compensation for CEOs increased by 3.2% to $3,812,252. In comparison, average total direct compensation for CFOs increased by 4.1% over the same period to $1,446,379. The pay composition on average in 2015 for CEOs was more heavily weighted with long-term incentives (63% of compensation) than annual cash (37% of compensation). The pay composition for CFOs was more evenly distributed, being comprised of 45% annual cash and 55% long-term incentives. READ MORE

Uncle Sam wants you! (to provide employee compensation data)

A new lawsuit filed by the U.S. Department of Labor (DOL) demonstrates how dogged the government can be in trying to obtain and review employers’ compensation data. The lawsuit, filed against Google with the DOL’s Office of Administrative Law Judges, alleges that Google failed to comply with its obligations to provide compensation data to the government as part of an Office of Federal Contract Compliance Programs (OFCCP) government contractor compliance audit.

The OFCCP is responsible for enforcing certain laws and Executive Orders that apply to government contractors, including Executive Order 11246, the Rehabilitation Act of 1973, and the Vietnam Era Veterans Readjustment Act of 1974. To carry out its mandate, including review of whether employers have widespread pay differences based on age or sex, the OFCCP selects employers for standard compliance reviews or audits. The audits typically begin with a scheduling letter that seeks, among other employment data, compensation information about employees by race and sex. In the Google case, the OFCCP requested information about employees’ compensation, including their wage histories, changes to compensation, and the employees’ names and contact information. READ MORE

Wells Fargo outlines new compensation program

Wells Fargo & Co. has revealed more details about its new compensation plan for retail-banking employees.

The San Francisco-based bank (NYSE: WFC) -- Colorado's largest -- has previously said it was working on a program for paying and incentivizing retail bankers. Executives now have outlined what that plan looks like.

The new compensation plan comes after it was revealed that Wells Fargo employees opened up to 2 million unauthorized accounts to meet sales goals. Regulators fined the bank $185 million in September as a result. READ MORE

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.

READ MORE

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