Observations on Executive Compensation and Proxy Season
February 9, 2009
Among the current executive compensation trends that Myrna Hellerman, senior vice president at Sibson Consulting, sees as significant and can comment on:
Troubled Assets Relief Program Impact on Executive Compensation
- Various Troubled Assets Relief Program executive compensation provisions are expected to cascade down to non-TARP participant companies. Likely candidates include the new risk review, expanded clawback requirements and the reduction in the 162(m) deductible pay cap ($1 million to $500,000).
Executive Pay Stabilization
- In 2009, base pay increases for top management are limited. If granted, increases appear to be defensive moves to retain key talent.
- Increased emphasis on pay-at-risk/pay-for-performance.
- Repricing of options/options exchanges as a vehicle to bring new life and retention power to seemingly worthless options.
Proxy Disclosure
- The SEC is expected to be unrelenting in its demands for more detailed compensation disclosure and analysis for proxies issued in 2009.
- Areas of emphasis will be analysis and justification of peer groups for comparative purposes, performance metrics and the relationship of pay to performance.
- The SEC is advancing its plans for the mandatory Extensible Business Reporting Language standard. SEC believes Extensible Business Reporting Language will allow for better analysis and transparency of pay practices described in the proxy and other fillings.
Investor Activism: Legislative/Regulatory Response
- Investor say-on-pay was sidelined briefly in 2008. Given President Obama's sponsorship of legislation on the issue in 2008, however, such legislation is expected to be revived in 2009 for proxies issued in 2010.
- Investor and media outcries related to Wall Street pay practices are expected to result in further general industry regulation with respect to pay practices and disclosure.