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
- 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.