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September 9, 2014
WHY YOUR JOB TITLE MEANS A LOT MORE THAN YOU THINK
What’s in a name? Plenty if it’s the name of the position you hold at your company.
Recent research indicates that your job title can affect everything from your level of mental exhaustion to your identity.
Each year, Pearl Meyer & Partners, a compensation consultancy based in New York City, publishes a study of job titling practices. In 2014, they found that 80% of companies surveyed use job titles to accurately reflect the corporate hierarchy and more than 92% use them to define an employee’s role. However, only 37% use them to attract prospective employees.
Jason Dionne, senior survey account manager with Pearl Meyer [& Partners], says their data found that nearly 30% of firms have job-titling practices that can vary from one department to another. While the importance of uniformity will vary depending on the company, Dionne says it’s best to be somewhat consistent, especially if you will seek to retain talent.
“Once they have this title, people may wonder ‘Sally now has that job title. Is she being promoted? Did she just do a really good job?’ You don’t want to have something that’s going to create any kind of confusion or possibly any bad feelings,” Dionne says.
September 2, 2014
Exec Comp Uncertainty Rife, Bad for Business
Nearly half of executives (42.7%) feel there isn’t enough detail in the information they receive about incentive pay, according to a new study by the compensation consulting firm Pearl Meyer & Partners. Conversely, only 8% of directors say the same, and the gap in understanding could lead to missed targets and misplaced priorities.
“There’s a lot of attention around disclosures and proxies for say-on-pay reasons, but you don’t really hear much about the complexity of how you’re going to talk to your executives about the very same thing,” says Sharon Podstupka, vice president of executive compensation communication at Pearl Meyer [& Partners]
“We know that poor communication leaves things open to interpretation,” says Podstupka. “If executives responsible for driving results aren’t clear about what the goals are and what they can do to affect specific metrics, it’s highly likely that performance results over the long term are going to suffer because people aren’t focused on the right things.”
According to Podstupka, developing a communication strategy for incentive pay can help companies meet performance goals.
CSuite Insight by Equilar
As a Result of Increased Shareholder Engagements, Have You Seen Boards Change the Definition of Performance Metrics?
According to Mark Rosen, managing director at Pearl Meyer & Partners, there’s been a rise in the use of relative shareholder return (TSR) as a metric for aligning executive pay and performance driven by standards used by shareholder advisory firms. While useful, it is more of an outcome-based measure. By defaulting to relative TSR as an incentive measure, many companies miss the opportunity to employ incentive metrics that capture executives’ success in driving business strategies and leadership initiatives—key aspects of performance that are critical to the creation of long-term shareholder value.
We have encouraged companies to customize incentive designs to their specific business needs by retaining internal performance metrics (or introducing them if they were not used before), such as operating earnings, EBIDTA or return measures (ROIC/ROE), and using TSR as an additional performance measure or modifier. In such cases, actual incentive payouts under the plan might ultimately be adjusted upward or downward, respectively, based on whether relative TSR is above median, suggesting the targets were set too high, or below median, suggesting the targets were not sufficiently rigorous. Such an approach provides a broader and more sensitive perspective on aligning executive pay with performance.
The Washington Post
June 22, 2014
Washington CEO Pay Rose 7% Last Year as Compensation Benefited from Stock Gains
Total pay for Washington’s highest-earning executives rose nearly 7 percent last year as compensation packages benefited from healthy gains in share prices. Analysts say the benefit of a roaring stock market has been two-fold for Washington leaders. Executives are increasingly being judged on the performance of their company’s share price (as opposed to metrics such as revenue or income, which were often used in the past), and they are receiving more of their compensation in stocks and options.
“Performance-share plans are on the rise,” said Jannice Koors, managing director at Pearl Meyer & Partners, a New York-based executive compensation consulting firm. “As companies have good years, you start to see some really big numbers.”
The Charlotte Observer
June 13, 2014
Median Perks Package Down, But Jets, Cars and Lavish Payouts Still Abound
Boards of North Carolina companies provided their CEOs with perks ranging from jet travel and car allowances to supplemental retirement plan contributions and physicals. Even so, the median perks package fell 22 percent last year, to $83,333.
Some companies have cut back on perks such as club dues, said Mark Rosen, a Charlotte-based compensation consultant with Pearl Meyer & Partners. “If you go back a few years, you’ll see a lot more golf club memberships,” he said. “It’s just harder to justify why we should be subsidizing that for someone who makes a decent living.”
Other perks, such as physical exams for executives, make sense, Rosen said. “We want to make sure the executives are taking care of themselves,” he said.
The Wall Street Journal
June 5, 2014
Investors Close Golden Parachutes
Nonbinding Votes Seek to Limit Stock Rewards for Executives After Mergers
Golden parachutes are falling out of favor amid investor and regulatory scrutiny of rising executive pay, especially perks that aren't tied to a company's performance. Since 2011, shareholders have had a say in how much executives are paid, including golden-parachute payments. "Say on pay" votes are now required by the Securities and Exchange Commission, and while they aren't binding, boards are under pressure from regulators and shareholder-advisory firms to consider investor views when crafting executive-pay packages.
As a result, "we're certainly seeing a more conservative approach by companies" to change-of-control payments, said Dan Wetzel, a managing director at consulting firm Pearl Meyer & Partners.
Cash severance payments, which once commonly exceeded three times an executive's annual salary and bonus, have been trimmed. Other perks have all but disappeared. One such example are gross-ups, which obligate a company to pay the high taxes levied on corporate perks, in effect letting the executive take home the full amount. Just seven of the 50 largest U.S. companies allowed tax gross-ups in 2012, down from 21 companies in 2006, according to Pearl Meyer & Partners. Mr. Wetzel said the number is likely lower now.
June 2, 2014
A Bonus Onus: Peek at Peers
Long-term incentives are the largest component of a typical executive compensation package, and by mid-2013, total shareholder return (TSR) was the most prevalent performance metric for long-term incentives at the 250 largest U.S. companies. However, when reviewing the structure of long-term incentive plans for senior executives, both business cycle and the manner in which a selected peer group company makes its money are also important considerations.
“Absolute goals are still far more common, but relative goals are gaining in popularity,” said Peter Lupo, managing director at pay consultants Pearl Meyer & Partners. But the review shouldn’t end there, Lupo said. Companies also need to review their competitors. Historically, compensation committees have looked at companies similar in size based on revenue. But Lupo said two other criteria are more important: business model and cycle.
Business cycle is particularly important for a company whose cycle involves peaks and valleys. If it peaks when companies in its peer group are in valleys, then its performance comparisons would be skewed. A company also wants to make sure the firms in its peer group make money the same way as it does, otherwise they could perform differently.
San Francisco Business Times
May 15, 2014
At the WomenCorporateDirectors Global Conference - Here’s a Concept for Corporate Boards: Pay CEOs Fairly and Save Yourselves from Controversy
Beyond branding, the biggest concern facing board members is how to determine executive compensation — a procedure that is often skewed when committees set salaries based on incorrect or poor benchmarks. There are a lot of outside influences involved in the process, including everything from the input of advisory firms and institutional investors to regulatory actions and even activist shareholder activities, noted Melissa Means, a managing director at Pearl Meyer & Partners.
The compensation packages at other companies also come into play, she said. “There is a lot of pushback on selecting the right peer company to compare yourself to, but boards need to remember that is just a piece of information,” said Means.
Means argued that boards need to realize that just because a peer company may pay its CEO $500 million, that shouldn’t automatically become the magic number for their own CEO. Instead, she emphasized that boards need to gauge factors such as how a company has performed relative to its peers.
May 5, 2014
Boards Boost Director Pay Disclosure as ISS Raises Scrutiny
“I think in some cases where compensation committees are sensitive to proxy advisory firms and are benchmarking executive pay to median and board pay to median, it’s a simple disclosure and addresses a question that might arise later on,” explains Peter Lupo, managing director and head of the New York office at Pearl Meyer & Partners.
April 6, 2014
Bosses' One Way Bet
"If we start to have a bull run you are going to see the bonus numbers expanding," said Simon Patterson of Patterson Associates, part of the American pay consultancy Pearl Meyer & Partners. "I'm skeptical that the ratio of executive pay, compared to the ordinary worker, is going to come down."