IS YOUR COMPANY SAFE? THE LINK BETWEEN STOCK OPTIONS AND ACCOUNTING FRAUD

The sun always rises. Time is unidirectional. Financial wealth can beget greed. All are fundamental truths of the universe. With regard to the last, is it possible to theorize on the link between performance-based corporate executive compensation and accounting fraud? How do we determine what separates Chief Executive Officers (CEO) such as Jeffery Skilling and Kenneth Lay from the failed conglomerate Enron from perceived highly successful CEO’s such as Jack Welch at General Electric? All of the former corporate executives were handsomely compensated in company stock options, so is it really possible to derive a correlation between corporate pay metrics and fraud? We dive deeper for answers. READ MORE

We Know Female CEOs Get Paid More, But We Don’t Know Why

Last spring Equilar, an executive compensation firm, released a headline-grabbing study on gender and CEO pay. In a survey of 341 S&P 500 companies, it found that the 17 female chief executives in the group made nearly $8 million more on average than their 324 male counterparts. Some in the media responded with shock and excitement (Fortune called it, for example, “a reverse gender gap”), while others cautioned about the report’s small sample size. But these findings are supported by two rigorous academic studies: One found that women who hold, or are likely to hold, senior management positions earn up to 10% more than their male peers. Another found not only that female CEOs are paid more than male CEOs but also that nonwhite CEOs (African-American, Asian, Hispanic, and Native American ethnicities) are paid more than white CEOs. READ MORE

Executive Compensation Developments

The general counsel should anticipate questions from the board and its executive compensation committee from recent media coverage of executive compensation (especially in the nonprofit sector). This increased focus has concentrated on issues relating to reasonableness of compensation, and the use of compensation to reward particular organization and individual success—and to hold executives accountable for shortfalls in leadership or performance. READ MORE

Stock award web process works: non-compete enforced

As a general matter, employers “win” when they seek to enforce stock plan terms that have been fairly disclosed -- and accepted -- by award recipients. ADP recently had such a victory, through a 3rd Circuit decision granting a preliminary injunction against two former employees who had joined a competitor in violation of restrictive covenants set forth in their stock awards. They argued that ADP’s web-based system for issuing stock awards did not adequately alert them to the consequences of the stock awards they accepted.

The employees lost because ADP’s check-the-box award system involved the following key steps that led the court to bind them to the stock award agreements and the associated noncompetes:

READ MORE

How pay transparency and equity help employers retain workers

More than ever, companies are updating their compensation strategy and practice to build more trusting relationships with their workforce, emphasizing pay transparency and equity, according to the 2017 Compensation Best Practices Report from cloud compensation services company PayScale.

The 2017 Compensation Best Practices Report (CBPR) is based on data from 7,700 executives, line of business managers, human resource leaders and compensation practitioners, and reflects current attitudes about compensation, business growth, hiring and retention. The latest annual report shows a shift is underway at many companies as key talent markets are becoming increasingly competitive. READ MORE

Health Insurers Would Get Fatter Tax Break on CEO Pay Under GOP Plan

Health insurance companies stand to gain a bigger tax break for CEO pay in the Obamacare revamp.

The bill unveiled Monday would scrap the limitation for insurers on how much executive compensation is tax deductible. The new proposal lifts the guaranteed deduction to $1 million from $500,000 established by the Affordable Care Act and also lets insurers deduct any pay linked to performance.

The threshold set by the Obama administration was designed to discourage companies from letting any increases in revenue go to executive bonuses rather than patient care. The measure would be removed at the end of 2017 if the proposal put forth by Republicans, called the American Health Care Act, becomes law. It would also bring insurers on par with other public U.S. companies. READ MORE

Charity Officials Are Increasingly Receiving Million-Dollar Paydays

Charities are becoming a lot more generous with pay at the top.

The tax-exempt organizations, which include many hospitals and colleges as well as traditional charities such as the United Way, provided seven-figure compensation to roughly 2,700 employees in 2014, an analysis of newly available data shows.

The total is higher by a third than in 2011, The Wall Street Journal found, after analyzing about 100,000 organizations that filed electronic returns with the Internal Revenue Service all four years. READ MORE

Executive Compensation for Financial Services in a Trump Administration

A month into the Trump presidency, there have been a number of important statements from the executive branch on the regulation of executive compensation impacting the financial services industry. On February 3, 2017, President Trump issued a statement on the core principles for regulating the U.S. financial system (“Core Principles”). The statement requires the Treasury and all heads of member agencies of the Financial Stability Oversight Council to report within 120 days (by June 3, 2017) all existing laws, treaties, guidance, regulations, etc., that promote the Core Principles, and all such laws, etc., that inhibit the Core Principles. The Core Principles provide some insight into future regulation or repeal efforts by the Trump administration impacting executive compensation. READ MORE

Commissioned Employees Required to Receive Separate Compensation for Rest Breaks

A California appellate court ruled this week in Vaquero v. Stoneledge Furniture, LLC (No. B269657, filed February 28, 2017) that employees paid on commission are entitled to separate compensation for rest breaks.  In a decision that frustrates employers that view the employment relationship through the lens of contract law, the Vaquero Court held that Stoneledge’s commission plan that paid sales associates a percentage of sales or a guaranteed draw in excess of minimum wage against earned commissions failed to properly compensate sales associates for rest breaks and non-productive time. READ MORE

How Higher CEO Pay Can Impact an Entire Organization

Things are looking up for association executive pay. “CEO Salary Dynamics,” [PDF] a new research paper from the ASAE Foundation and Naylor Association Solutions, reports that CEO compensation has swelled in the post-Great Recession years. From 2012 to 2016, according the report, the median CEO base salary has spiked a remarkable 33 percent, from $150,000 to $200,000. The growth is larger at trade associations (40 percent), but pretty much every category is on the upswing, whether the breakdown is by budget, staff size, or scope. Only associations with budgets below half a million dollars saw a decline between 2012 and 2016, and there the downturn is only one percentage point. READ MORE

New Deferred Compensation Rules Provide Greater Flexibility To Tax Exempt Employers

Unlike private employers, tax-exempt and governmental employers are required to comply with the complex rules of Tax Code Section 457 whenever compensation is payable to employees in arrangements beyond the current tax year such as for executive deferred compensation and severance arrangements.  Deferred compensation plans subject to Section 457(f) plans are subject to a different regulatory scheme than Section 401(k) and 403(b) retirement plans which allow for tax deferral up to, any even beyond, retirement. Because there is considerably less regulatory guidance for 457(f) plans than for 403(b) and 401(k) plans, the tax treatment of certain Section 457(f) plan designs was somewhat unclear. In June of 2016, the Internal Revenue Service ("IRS") issued long-anticipated comprehensive Section 457 proposed regulations clarifying numerous aspects of Section 457. This article describes several of the key aspects of the 457(f) guidance.  READ MORE

U.S. Senators draft bill to boost employee private stock ownership

A bipartisan pair of lawmakers on the U.S. Senate Banking Committee are planning to introduce a bill that aims to entice private corporations to give their employees larger equity stakes in their companies and promote longer-term investing.

The draft bill, titled the "Encouraging Employee Ownership Act," is being rolled out by Virginia Democrat Mark Warner and Pennsylvania Republican Pat Toomey and will be made public as soon as Thursday, according to a spokeswoman for Warner's office. READ MORE

10 Tips For An Incentive Program That Goes Beyond Compensation

In decades past, motivating employees was all about raises, promotions and bonuses. Those days are gone, and today's employers are quickly learning that engagement stems from different kinds of incentives — ones that impact an employee's emotional, rather than financial, health.

Based on insights from members of Forbes Coaches Council, here's why traditional incentives might be out of date, and what you can do to offer customized and effective rewards to your team. READ MORE

Wells Fargo Announces Executive Compensation Actions to Promote Accountability

Wells Fargo & Company (NYSE:WFC) today announced executive compensation actions to reinforce accountability of the company’s leadership for the issues arising from the Community Bank’s sales practices.

The Board has taken actions affecting the Operating Committee, Wells Fargo’s 11 highest-ranking executives, based on the accountability of all those in senior management for the overall operational and reputation risk of the company, and not on any findings of improper behavior in the Board's ongoing independent investigation. The compensation actions will affect the eight members of the Committee who were in place before it was reconstituted in November 2016. READ MORE

WORKING OVERTIME ON THE OVERTIME RULE CASE

An additional 60 days was given to the Justice Department to respond to a court order that delayed an Obama administration rule to expand employee eligibility for overtime compensation.

The U.S. Court of Appeals for the Fifth Circuit granted additional time to the department, which filed the request Feb. 22 and has until May 1 to file a brief in the case (Nevada v. DOL, 5th Cir., No. 16-41606, extension granted 2/22/17).

The rule, which would double the salary threshold to be considered exempt from overtime  to $47,476 and was to take effect Dec. 1, was put on hold Nov. 22 by federal district court in Texas. Under the rule, a worker earning less than the threshold would qualify for overtime pay at time and one-half the worker’s regular rate. READ MORE

State Supreme Court to hear managers’ incentive fight

The Indiana Supreme Court will hear a case Feb. 23 in which a trial court and the Indiana Court of Appeals reached opposite conclusions about whether key HHGregg managers were entitled to incentive bonuses triggered by the company’s receipt of $40 million from an executive’s life insurance proceeds.

Dwain Underwood represents a class of about 70 high-level HHGregg employees who at the beginning of fiscal year 2012 were provided total rewards statements from the company. The statements said based on HHGregg’s earnings before interest, taxes, depreciation and amortization that they would be entitled to bonuses of $12,500 to $30,000 each if the company met EBITDA revenue targets. READ MORE