executive compensation Articles

ISS Survey Hints at Potential Changes to Options in Board Pay, Gender Pay Proposals and More

ISS’ new Global Policy Survey suggests many issues important to our clients are front and center for ISS. These include one share/one vote, use of options as a meaningful component of director compensation, how CEO pay ratios should be used by investors, gender diversity on boards and gender pay gaps among employees. We summarize the biggest issues for US companies.

The CEO Pay Ratio Deadline is Looming; Here’s How Companies Should Prepare

As we move past the midpoint of 2017, work is already underway at a number of our clients to begin preparing for the calculation and disclosure of CEO pay ratios next spring. Although many experts anticipated the CEO pay ratio rule would be delayed or repealed, this now looks increasingly unlikely. Here are key steps we recommend taking to ensure you stay on track for 2018 disclosures.

Is Your Company About to Graduate from the JOBS Act? Here’s Your Planning Checklist

The JOBS Act recently turned five, the maximum amount of time companies can take advantage of JOBS Act protections. This means a large number of firms are about to face greater proxy advisor scrutiny, Say-on-Pay votes and the full gamut of executive compensation disclosures for the first time. Our new client alert outlines all of the major planning items you’ll need to consider as you exit the JOBS Act.

Developing Effective Peer Groups at European Life Sciences Companies

For European life sciences companies, developing effective comparator groups requires a balancing act between not looking too narrowly or broadly for peers. This challenge is particularly acute for European-headquartered firms trading on a US exchange. Our article outlines three critical issues to consider when faced with this task.

Designing Innovative Long-Term Incentives for Executives at Newly Public Companies

In this job market, executives who’ve led companies through a successful IPO are a hot commodity. Read our latest article for advice on delivering post-IPO equity awards that keep top executives engaged while delivering pay-for-performance accountability to shareholders.

CEO Pay Ratio Rule in the Crosshairs of Congress, SEC; Relief Could be Slow

The future of the Dodd-Frank CEO pay ratio rule grows less certain by the day. The SEC recently opened a 45-day comment period for issuers to report on difficulties encountered while trying to comply with the rule. The agency said it was considering delaying or amending the disclosure, and meanwhile, Congress is working toward a full repeal. But the clock is ticking until the rule goes into effect on January 1, 2018.

Four Steps to Tackling the CEO Pay Ratio Rule

In preparation for CEO pay ratio disclosures to begin in 2018, we outline four major steps companies can take to ensure disclosure and communication processes address every stakeholder perspective.

In Calculating Your CEO Pay Ratio, Relativity to Peers is the New Math

In preparing for the CEO pay ratio rule, comparing how your pay ratio compares to a set of industry peers is the analysis most shareholders will likely make. Using our extensive survey data, we show how ratios differ within the technology and life sciences sectors by industry as well as revenue size and workforce location.
 

ISS and Glass Lewis Issue Final 2017 Policy Updates

ISS and Glass Lewis have both released their final 2017 policy updates. Key changes include amendments to director pay and governance policies in the US, and pay-for-performance and director grant policies in Europe and Canada. Read our full analysis in our new client alert.

ISS Adds Metrics to Qualitative Say-on-Pay Screening, But Not All Industries Will Benefit

ISS has added six new financial metrics to its qualitative pay-for-performance assessment. While many of our technology and life sciences clients will welcome a more diverse view on measuring performance relative to pay, pre-commercial biopharma companies won’t find these new metrics a relevant measurement of company success. In this client alert, we discuss actions companies can take now to prepare for changes in the upcoming proxy season.

ISS Releases Proposed Policy Updates; Excludes Changes to US Executive Pay Issues

ISS just released its proposed 2017 policy updates, and while it appears that ISS has punted on a number of executive compensation issues in the United States, the firm is proposing a number of compensation changes in Europe and Canada. Read our summary of the policy updates and submit your comments to ISS by November 10.

Results from ISS' Annual Policy Survey Show Support for Alternative Performance Metrics

ISS' 2016 Global Policy Survey asked questions on a range of issues, from executive and director pay to dual-class share structures for IPOs. In our new client alert, we examine all of the potential policy changes that could have the biggest impact on our clients in 2017 and beyond.

2016 Say-on-Pay Review: Technology Companies Receive Steady Support From Shareholders Despite Lower Performance

As executive compensation planning season kicks off, and another proxy season looms, our consulting team decided to take a look back at this year’s Say-on-Pay results for technology companies, including insights on key lessons learned from companies facing high levels of shareholder opposition.

2016 Say-on-Pay Review: Life Sciences Companies Receive Increased Shareholder Support Even as Volatility Climbs

The life sciences sector continues to face high levels of market volatility, which could impact next year’s Say-on-Pay results. With this in mind, our consulting team decided to take a look back at this year’s Say-on-Pay results for life sciences firms, including insights on key lessons learned by companies facing high levels of shareholder opposition.

To Fuel Growth, Companies Make a Case for Using Inducement Grants More Often

At the high-growth companies we work with, the use of new-hire "inducement grants" is on the rise. Our latest white paper, co-authored with Cooley LLP, presents new research on how technology and life sciences companies can best leverage inducement grants to compete for increasingly scarce talent, and the effect this has on equity burn rates.

CEOs Sign Voluntary Governance Principles, but Emphasize Flexibility in Executive Pay

A set of high-level compensation and governance principles were released last month by a select group of business leaders representing a handful of America’s largest companies and mutual funds. The principles highlight the importance of individualized and well-articulated compensation plans but also take a position on a number of issues.

SEC Approves Nasdaq Rule Requiring Disclosure of "Golden Leash" Arrangements

The SEC recently approved a new Nasdaq rule, requiring disclosure of "Golden Leash" director compensation arrangements, which took effect August 1, 2016. Nasdaq's new rule requires disclosure of special payments to third party nominees to boards. It focuses largely on activist hedge fund nominees, and explicitly exempts most venture capital directors.

How to Maintain a Relevant Peer Group in Fast-Moving Industries and Unstable Markets

Reviewing compensation peer groups is usually treated as a routine exercise. However, when your company or industry experiences significant changes or the stock market is highly volatile, a more rigorous review is prudent. Read our five tips for staying on top of your peer group game.

How to Calculate Pay vs. Performance under the SEC's Proposed New Rules

It's been a year since the SEC proposed pay-vs-performance disclosure rules. While the rules haven't been finalized, it's not too early to think about model disclosure. Laying the groundwork will make implementation easier and can enhance the narrative around what the new figures mean. In our article, we explain what the proposed rules would require and pathways toward compliance.

Will Today's Volatile Markets Bring Option Exchanges Back? What You Need to Know

Depending on what the markets do next, underwater stock option exchanges could be poised for a big comeback. Exchange programs are already quietly on the rise, but the governance landscape isn't as forgiving as it was in 2008 and 2009. Before taking action, it's important to take stock of where your company stands in a number of critical areas.

Are Nordic Biotech Companies Under-Utilizing Equity in the Search for Top Executive Talent?

Biotechnology firms in the Nordic region of Europe grant significantly less equity to their employees and executives than peer companies in the rest of Europe and the United States. As Nordic-based firms seek to recruit more global talent, it's time to ask if their equity practices are competitive on the world stage.

Director Pay Settlement Results in an Unprecedented "Director Say-on-Pay" Vote

Facebook recently settled a lawsuit on its director pay practices, and the terms of the settlement include an unprecedented agreement to hold regular director say-on-pay votes. Now we're all left to wonder if this will kick-off a new governance trend.

Right-Sizing Stock Option Grants at High-Growth, High-Volatility Biotech Firms

Compensation professionals at high-growth, high-volatility biotech companies face difficult decisions when it comes to determining the size of employee stock option grants. For them, traditional share-based and value-based approaches don't always stand up to scrutiny. In this article we explore an alternative model based on annual ownership opportunity.

Glass Lewis Opens Data Verification Program to Issuers on First-Come, First-Serve Basis

Glass Lewis has opened corporate enrollment for its free data verification program, which allows issuers to verify the data that the proxy firm uses to make its proxy voting recommendations. Participation is limited so early enrollment is encouraged.

How Boards Can Guard Against Lawsuits Alleging Excessive Stock Awards

Shareholder lawsuits alleging that boards have awarded themselves too much equity got a boost this year from the Delaware court, which now says the business judgment rule may not apply. However, there are a number of steps directors can take to help protect themselves against a lawsuit.

Navigating ISS' 2016 Compensation and Governance Policy Changes

ISS' updated 2016 policies have arrived. The proxy advisory firm made modifications to its equity plan scorecard system, limited the number of outside boards it recommends directors and CEOs can serve on, and implemented new governance recommendations for recently public companies.

Glass Lewis Clarifies Its Approach to One-Off Equity Awards for Executive Officers

In recent years, off-cycle equity grants for executives have received increased scrutiny from proxy advisory firms. Glass Lewis' latest proxy voting policies finally provide issuers with much-needed guidance on how Glass Lewis intends to evaluate such awards going forward. This could have a big impact on upcoming say-on-pay votes.

Glass Lewis Updates Its US Compensation & Governance Policies for the 2016 Proxy Season

On November 13, 2015, Glass Lewis released its 2016 proxy season policy updates for the US market. In this client alert, we summarize key compensation and governance updates, and provide commentary from experts across Aon Hewitt on potential challenges for issuers.

What the SEC's Final CEO Pay Ratio Rules Mean for Companies

The SEC's final CEO pay ratio rule as adopted earlier this month has some key departures from the proposal, including a delayed implementation period and flexibility on calculating median employee pay.

A Comparison of Executive Compensation Practices at Nordic and US Biotech Companies

The biotech industry is experiencing its own renaissance in the Nordic region, but differences in executive compensation practices compared to the US could present recruiting challenges. To attract biotech talent from abroad and comply with increasingly vocal investor activists, Nordic firms may want to consider making key changes to their equity plan design and pay mix.

2015 Say-on-Pay Review for the Technology Sector

In this report, Radford examines five years of say-on-pay voting results for the technology sector compared to the broad Russell 3000. We also review the influence of proxy advisors, industry performance and top governance concerns.

2015 Say-on-Pay Review for the Life Sciences Sector

In this report, Radford examines five years of say-on-pay voting results for the life sciences sector compared to the broad Russell 3000. We also review the influence of proxy advisors, industry performance and top governance concerns.

The SEC Proposes Pay-versus-Performance Disclosure Rules. Now What?

The SEC has issued a long-awaited rules proposal on how companies should disclose the alignment between executive pay realized in a given year relative to total shareholder return. We expect the proposed rules to have special implications for our clients in the technology and life sciences sectors.

Boards Face Pressure to Ban Accelerated Vesting, but Market Practices Tell a Different Story

The number of shareholder proposals calling for bans on the acceleration of equity after a change-in-control is on the rise. So, too, is shareholder support for these initiatives. Radford's recent survey of severance practices at technology and life sciences companies shows that equity acceleration is still the norm, but policies in this area are slowly evolving.

ISS Releases Details of Scoring System Under New Equity Plan Scorecard Approach

This year, ISS is adding a number of factors to how it evaluates equity pay plan proposals beyond the cost of plan administration. Technology and life sciences companies, which often rely more heavily on equity for their overall pay mix at all levels of the organization, should be aware of how ISS's new scorecard approach could impact a favorable proxy vote.

Getting Severance Right: An Overview of Current Policies and Practices at US Technology Companies

Radford's 2014 Severance & Change-in-Control Practices Survey provides detailed information on how technology companies treat involuntary termination and change-in-control (CIC) scenarios on an organization-wide basis. At their core, severance programs did not change dramatically since our 2011 survey; however, we still observed several meaningful trends worth noting.

Getting Severance Right: An Overview of Current Policies and Practices at US Life Sciences Companies

Radford's 2014 Severance & Change-in-Control Practices Survey provides detailed information on how technology companies treat involuntary termination and change-in-control (CIC) scenarios on an organization-wide basis. At their core, severance programs did not change dramatically since our 2011 survey; however, we still observed several meaningful trends worth noting.

Relative Total Shareholder Return (TSR) Plan Design Across the Atlantic

Performance-based equity plans with Relative TSR metrics arrived in Europe well before they showed up in the US. As plan design practices begin to mature in the US market, it's time to take a fresh look at what we can learn from the European experience.

Time is Money: Exploring the Costs of Hiring a CFO in Preparation for an Initial Public Offering

For private technology and life sciences companies on the path to an IPO, does it matter when you hire a CFO? When it comes to their pay, the surprising answer is that it all depends on how you look at it. Read our latest article to find out why.

Equity Strategy Across the Atlantic: Comparing and Contrasting Equity Practices at Big Pharma Companies in Europe and the United States

In this article, Radford's team in Europe conducts an in-depth, side-by-side comparison of big pharma equity practices in Europe and the US. The results reveal a few important similarities in equity strategy, and several striking differences, all of which point to new viewpoints on how best to attract and retain talent across the Atlantic with equity.

Restricted Stock Units (RSUs) Are Everywhere, But Are They Right For You?

For more than 10 years, the pendulum of equity compensation strategy has swung firmly in the direction of RSUs and away from stock options. Now it's time to ask a few hard questions: Is this shift in strategy working, and who wins and loses?

Taking Control of Your Company's Executive Compensation Narrative

It might be hard to fathom in a world so often dominated by complex legalese, but taking a proactive, marketing-minded approach to communicating your executive compensation program is increasingly the safest way to travel in a rocky compensation governance landscape.

Long-term Incentives in Biopharma

As the European biotech market continues its revival, more companies are focusing on getting their "compensation house" in order. In this EMEA Market Insights article we examine the factors to consider when evaluating which equity plan is right for your company.

Executive Pay Not Immune to Proposed Tax Reforms

On February 21, 2014, House Ways and Means Committee Chairman Dave Camp introduced a discussion draft/blueprint of legislation (Tax Reform Act of 2014) that would cover a wide range of tax areas. It is very unlikely that all the items in the discussion draft will make their way into legislation, but there are several items in the discussion draft related to executive compensation worth monitoring.

Avoiding a One-Size-Fits-All Equity Strategy

As more and more life sciences companies consider the adoption of full-value share awards and performance-based equity, new Radford research explores how equity strategy shifts by corporate stage of development.

Institutional Shareholder Services (ISS) Announces Changes to Key Global Corporate Governance Policies

Institutional Shareholder Services (ISS) has announced several important changes to its US and European policies governing executive compensation. Among other results, these changes could alter future testing outcomes under the CEO pay-for-performance assessment system currently used by ISS.

ISS Releases Updated Industry Burn Rate Cap Tables for 2014

Institutional Shareholder Services (ISS) recently released an updated set of industry burn rate caps for 2014. The new caps, effective for shareholder meetings on or after February 1, cover both Russell 3000 and non-Russell 3000 companies in all industries.

SEC Publishes Proposed Rules for the Implementation of CEO to Worker Pay Ratio

On September 18, 2013, the SEC Commission voted, by a 3 to 2 margin, to move forward with proposed rules governing the disclosure of CEO to worker pay ratios under the Dodd-Frank Act. The proposed rules now enter a public comment period, and move companies much closer to potential disclosures in this area.

2013 Say-on-Pay Results and Trends for the US Life Sciences Sector

Radford's compensation consulting team examines 2013 Say-on-Pay voting results for US life sciences sector companies, including overall proposal passage rates, the impact of negative recommendations from ISS, and results by sub-industry.

Proxy Season 2013: A Renewed Focus on Disclosure

A continued focus on key governance issues like pay-for-performance alignment and Say-on-Pay results has dramatically altered the environment in which we all operate, and companies will need to adjust accordingly. With proxy season 2013 arriving, Radford examines the current mix of internal and external issues influencing CD&A disclosure practices.

ISS Releases Updated Industry Burn Rate Cap Tables for 2013

Institutional Shareholder Services (ISS) recently released an updated set of industry burn rate caps for 2013. The new caps, effective for shareholder meetings on or after February 1, cover both Russell 3000 and non-Russell 3000 companies in all industries.

Institutional Shareholder Services (ISS) Clarifies Its New Approach for Selecting Pay-for-Performance Peers

Institutional Shareholder Services (ISS) recently announced significant changes to the peer group selection process it uses for CEO pay-for-performance assessments. Typically, an announcement of this nature requires careful and measured consideration. However, in this case, there is an added sense of urgency, as ISS is providing companies with the opportunity to pre-submit their FY 2012 peer group.

Institutional Shareholder Services (ISS) Announces Potential Changes to its Management Say-on-Pay Policies for 2013

Instititutional Shareholder Services (ISS) has announced several potential changes to its US policies governing recommendations for Management Say-on-Pay proposals. The new policies, if implemented, could serve to significantly alter future testing outcomes under the CEO pay-for-performance assessment system introduced by ISS last year.

Nasdaq Releases Proposed Listing Standards to Implement New Independence Requirements Under SEC Rule 10C-1

In response to the SEC's publication of final regulations governing Compensation Committee and compensation adviser independence, the Nasdaq market published proposed listing requirements to address the new SEC rules. With proposed requirements now available, companies can move one step closer to implementing their own independence policies.

NYSE Releases Proposed Listing Standards to Implement New Independence Requirements Under SEC Rule 10C-1

In response to the SEC's publication of final regulations governing Compensation Committee and compensation adviser independence, the NYSE market published proposed listing requirements to address the new SEC rules. With proposed requirements now available, companies can move one step closer to implementing their own independence policies.

Assessing the Impact of New SEC Standards for Compensation Committee and Adviser Independence

At the end of June, the SEC released final rules under Section 952 of the Dodd-Frank Act pertaining to Compensation Committee and compensation adviser independence. These new standards will govern the means by which Boards maintain Committee member independence, manage potential conflicts of interests and assess the impartiality of key advisers.

Selecting the Best Approach for Responding to a Negative Say-on-Pay Recommendation

At the end of June, the SEC released final rules under Section 952 of the Dodd-Frank Act pertaining to Compensation Committee and compensation adviser independence. These new standards will govern the means by which Boards maintain Committee member independence, manage potential conflicts of interests and assess the impartiality of key advisers.

Mobilizing the Right Team to Respond to a Negative Say-on-Pay Recommendation

While there are no shortcuts for avoiding several days of hard work when proxy advisors send bad news your way, responding to their criticism through additional SEC disclosures and direct shareholder engagement can be a focused process if companies mobilize the right forces at the right time in the right manner.

Unlocking ISS' Quantitative Approach for Assessing the Alignment of CEO Pay and Performance

On the heels of making voting policy changes for 2012, Institutional Shareholder Services (ISS) also announced significant updates to its process for assessing the alignment of CEO pay and performance. Having reviewed the changes, Radford Consulting shares its view on how the tests are built and how they can be modeled.

ISS Releases Updated Industry Burn Rate Cap Tables for 2012

Instituional Shareholder Services (ISS) recently released an updated set of industry burn rate caps for 2012. The new caps, effective for shareholder meetings on or after February 1, cover both Russell 3000 and non-Russell 3000 companies in all industries.