Published in Financial Executive - January/February 2011

Executive Pay Circa 2011

By Jim Heim

Dodd-Frank was just the latest in a series of legislative/regulatory initiatives intended to improve investor’s understanding of the decision-making around executive pay programs. A particular focus of the drive for increased transparency is the extent to which companies maintain meaningful pay for performance – an area in which finance executives are closely involved. At the same time, companies also are adapting to expanding lists of “poor pay practices” targeted by institutional shareholders and proxy advisory firms, which can drastically reduce shareholder support for newly mandated Say On Pay resolutions or the election of Compensation Committee members.

This article explores how companies are responding to these challenges and provides supporting survey data from 279 companies on pay trends for CEOs and their director reports from PM&P on Compensation Planning: Looking Ahead to Executive Pay Practices in 2011.

Among the key executive compensation issues discussed:

• What 2011 holds for pay levels
• Changes in annual incentive metrics
• New performance hurdles
• The migration to performance-based LTI awards
• Approaches to goal-setting
• The role of the finance executive