Report Fills in 2010 Exec. Comp. Landscape View
January 22, 2010
(PLANSPONSOR.com)–A new report from a California-based executive
compensation research firm paints a picture of a changed 2010 executive compensation
landscape amid continuing attention from politicians, regulators, and the
public.
Among the
issues addressed in Equilar Inc.’s 2010 Executive Compensation Outlook Report:
giving executives salary bumps instead of traditional perks, clawback
policies designed to recoup ill-gotten
compensation from executives; and some companies increasing salary to make up
for recent cutbacks because of the economic downturn.
“As attention to executive
compensation remains high, the government and the media have magnified their
focus on more granular details of the pay equation,” Equilar wrote in the study
report, replete with examples based on data in corporate proxy statements. “All
aspects of compensation packages are under greater scrutiny, including the
process behind setting pay.”
Findings in the Equilar report include:
- Clawback
policies “have enjoyed a surge in popularity over the past four years,” rising from
17.6% in 2006 to 72.9% in 2009 at publicly traded Fortune 100 firms. Some 33.3%
of companies disclosing a clawback policy amended or implemented the policy
during 2009. “In addition to new policies emerging, it is likely that
compensation recovery policies will continue to grow in scope and employee
coverage,” researchers noted.
- Nine employers have brought
salary levels up to their pre-downturn levels; at least 40 companies slashed
compensation during the last half of 2008.
- Some companies gave salary hikes of more
than $10,000 to make up for discontinued perks such as car and travel allowances and
financial planning.
- Employers continue moving from performance-based to
time-based equity awards. “Faced with the realization that performance goals set in 2008 and early
2009 would likely be unattainable, a number of companies adjusted their
existing incentives,” the report said. “In some cases, old performance awards
were amended to provide for shorter or longer performance periods. Other companies
adopted relative measures so they can compare performance with similar
companies.”
- Overall equity compensation
policies continue to be unclear because of a still struggling economy. “With
stock prices gradually increasing and economic recovery uncertain, it is
extremely difficult to plan for the future,” the report declared. “Companies
are attempting to award appropriate levels of equity while maintaining policies
that are shareholder friendly.” The report provides several examples of companies switching from
performance-based to time-based equity compensation and instances of companies
extending option terms to provide more time for stock prices to increase.
- More employers dropped tax gross-ups for
taxes triggered by change-in-control severance payments, perquisites, and life
insurance premiums.
- Some companies reduced or froze executive
retirement plans as a cost-cutting move.
The report can be ordered from http://info.equilar.com/2010ExecutiveCompensationOutlook.html.
Fred Schneyer
editors@plansponsor.com