CEOs Earn Less at More-Prestigious Firms

Research has found that superstar CEOs, those who win awards like “CEO of the year,” can earn an average of about $7.8 million more in annual pay. But what about superstar firms? Can prestigious companies get away with paying their CEOs less?

We investigated this question in an empirical analysis published in the Journal of Financial Economics. We identified prestigious firms as those that ranked in the top 100 of Fortune’s annual America’s Most Admired Companies (MAC) list from 1992 and 2010. The ranking is based on surveys of senior executives, outside directors, and financial analysts, who select the 10 firms they most admire. We also obtained data on U.S. CEO salaries from ExecuComp, a data set on top executive compensation for all firms in the S&P 1500. We compared CEO pay at the top 100 Most Admired Companies to CEO pay at the 900 other largest U.S. companies. Our final sample included 1,711 firms and 3,191 CEOs. READ MORE

Trump’s Proposed Changes to Tax, Dodd-Frank, DOL Could Impact Executive Compensation

President Donald Trump’s campaign proposals included changes to tax rates and a promise to repeal the Dodd-Frank Act. If enacted, these proposals could have a significant impact on the way businesses handle executive compensation, permitting companies greater flexibility in structuring compensation arrangements. His staff also hinted at a reversal of Department of Labor (DOL) conflict of interest regulations. However, even if these proposals are enacted, some aspects of compensation programs that companies implemented to comply with current or, in the case of the DOL rules, anticipated requirements are likely here to stay given their popularity with institutional shareholders or due to the significant business restructuring already undertaken. READ MORE

Injunction of the DOL's Overtime Rule and Its Appeal

The Legal Landscape

In a ruling announced on Nov. 22, just days before a Dec. 1 effective date, U.S. District Judge Amos L. Mazzant of the Eastern District of Texas halted nationwide the effectiveness of the new regulations. These regulations would have more than doubled the salary level required to be paid by employers to those employees who are classified as exempt from receiving overtime pay.

The DOL has appealed the ruling, and the court has granted the DOL’s request for the appeal to be heard on an expedited basis. However, the appeal will not be “ripe for decision” until after a new Trump Administration and a new Congress take office.

The Current Political Landscape

Trump has appointed a known opponent of the new overtime rule to be Secretary of Labor. Some Congressional Republicans are planning an attempt to revoke the new regulations in the new Congress through use of the Congressional Review Act. READ MORE

Firms Give More Stock Options When They’re Committing Fraud

Whistleblowers can play in a big role in uncovering financial misconduct. For example, look at Sherron Watkins, formerly of Enron, and Cynthia Cooper, formerly of WorldCom. Both women helped uncover massive frauds inside their organizations that ultimately cost investors billions of dollars.

Research suggests that employees are often in a position to discover and expose wrongdoing in organizations. This may be why the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act encourages employee whistleblowing: Section 922 of the Act promises to protect whistleblowers from retaliation and offers monetary awards for disclosure, which range from 10% to 30% of monetary damages collected from the company. Since this program was established, the Securities and Exchange Commission (SEC) has granted more than $111 million in awards to 34 whistleblowers, with the largest award of $30 million granted in September 2014. READ MORE

5 Reasons Why You Should Not Give Employees Equity

When you start a business, it’s natural to want to feel like you’re all on the same team, and giving employees equity can align your staff around a common goal. But sharing equity with employees can have a lot of downsides. Here are five reasons to think twice before turning an employee into an owner:

1. Pressure to sell

Unless you declare a dividend, the only way employees’ shares will be worth anything is if you sell, which can add increased pressure for you to pursue an acquisition offer before you’re ready.

2. Loss of privacy

Your shareholders will expect reporting on how your company is doing and you may not always want to let staff see your most intimate financial details.  READ MORE

Trump rally makes stock options great again for some CEOs

Donald Trump once described Jamie Dimon as "the worst banker in the United States," but the president-elect has helped make the boss of JPMorgan Chase & Co (JPM.N) $50 million richer.

Dimon is the top beneficiary among the 30 chief executives who run companies in the Dow Jones Industrial Average index from a stock rally inspired by Trump's election, according to a Reuters analysis of their option grants. READ MORE

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