Top 10 Compensation Committee Agenda Items for 2011

After focusing in recent years on so-called problematic and indirect pay practices such as tax gross-ups, severance benefits and perquisites, Compensation Committees are shifting their primary focus back to the issue of pay-for-performance. 

A major catalyst is Say on Pay, the newly required shareholder advisory votes on executive pay, part of an ongoing evolution in the competitive and regulatory landscape affecting the design, delivery  and disclosure of executive compensation.  Recent volatility and uncertainty in the market have led to varied approaches to designing short-term and long-term incentives and have made vehicle determination, performance metric selection, goal setting, and payout slope calibration more challenging. 

Expanded proxy disclosure requirements also make it more important than ever that companies make a compelling case to their shareholders concerning how executive compensation programs align pay with performance.  Effective analyses and communications also can counter the often-flawed approaches used by some pay critics and shareholder advisory firms to evaluate – and often criticize – program designs.   

The Top 10 Compensation Committee Agenda Items for 2011 from Pearl Meyer & Partners provides an overview of the key compensation issues and approaches to effectively addressing these challenges. 

• Validate the alignment of relative pay and performance and re-calibrate as necessary.
• Balance traditional “target” pay analysis with forward-looking sensitivity analyses
• Challenge your long-term incentive design
• Review peer group composition and basis for selection
• Discuss the role and parameters for using discretion in executive compensation programs
• Assess policies and practices regarding executive and outside Director share ownership
• Revisit your executive compensation governance building blocks
• Be aware of how ISS will evaluate your executive pay program
• Assess the impact of Say on Pay and Say on Frequency vote results
• Prepare for the new disclosure and governance requirements under Dodd-Frank

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