Tag Archives | CEOs

Compensation: The Difference it Makes

Compensation:  The Difference it Makes

Compensation. Most Americans think CEOs of the 500 largest publicly traded corporations are overpaid, even though they think CEOs made less than a tenth of what they actually earn. The Rock Center for Corporate Governance at Stanford University conducted a nationwide survey of 1,202 individuals — representative by gender, race, age, political affiliation, household income, and state residence — to understand public perception of CEO pay levels among the  Key takeaways are:

  • CEOs are vastly overpaid, according to most Americans
  • Most support drastic reductions
  • The public is divided on government intervention

Americans and CEO Pay: 2016 Public Perception Survey on CEO Compensation found 74% believe that CEOs are not paid the correct amount relative to the average worker. Only 16% believe that they are.

A brave panel tackled the topic, Compensation: The Difference it Makes, at the Corporate Directors Forums I attended in San Diego last month. Like all Corporate Directors Forums, this one operated under the Chatham House Rule, so you will not find any direct quotes below. These are my notes on Compensation: The Difference it Makes. As such, they include my opinions as well observations made by speakers panelists and others in attendance at the Forum. This is certainly not a transcript. However, I hope even those who attended the Forum will find the post useful, especially my attempt to provide additional context through links and commentary. Continue Reading →

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Gordon Gekko and Governing Small-Caps: Greed Works

Greed Works

Greed Works

    Few who have seen it can forget the iconic scene from the movie Wall Street when Michael Douglas’s character Gordon Gekko stands up, microphone in hand, at Teldar Paper’s shareholder meeting and says: “The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works.” Cinematic legend. What if it’s also the key to better small-cap corporate governance? Continue Reading →

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    Small Gains by Women in California Companies

    Women in California Companies: 1 woman for every 7 men in top leadership at California's largest firmsWomen in California companies continue to make slight progress. More of California’s largest 400 public companies public companies than ever have women chief executive officers (CEOs), and fewer have no women in their C-suites and boardrooms. However, the annual University of California, Davis, study shows women still hold just one in eight of the senior executive and director positions in corporate California.

    Overall, women hold 12.3% of the highest-paid executive positions and board seats in the state’s 400 largest public companies — a scant 0.75% point increase over last year, according to the UC Davis Study of California Women Business Leaders.

    At that rate it will take fifty years for women in California companies to reach parity. I’ll be long dead. In the meantime, I’ll continue investing a disproportionate of my portfolio in companies with women at the top, betting such companies have better corporate governance and will outperform my other investments. Continue Reading →

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    The Power of Shame Applied to CEOs and Corporations

    FidoRobert A.G. Monks, concerned with shameful corporate behavior today blogged When a Child Rules the Parent: The Problem of Corporate Domicile in a Global World.

    Corporations are creatures of the state but the social contracts that made them attractive in serving human interests are breaking down…

    Either we need to reign corporate operations in within a state and country or laws must transcend those borders to oversee a corporations across the globe. Which will it be?

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    Wayback: Five, Ten and Fifteen Years Ago in Corporate Governance

    Mr. Peabodys WayBackMachine

    Mr. Peabody and Sherman prepare to go back in time to visit corpgov.net 5, 10 and 15 years ago.

    Five years ago in Corporate Governance

    In the year-end reflections two contributing factors deserve more attention. First, “prophetic warnings” from religious groups on the dangers of subprime loans via shareowner resolutions. Second, a call from Sanford Lewis for boards to revoke implicit policies of “don’t ask, don’t tell” with regard to liability issues. (Two Overlooked Lessons From the Financial Crisis)

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    California Women Business Leaders: Discrimination Continues

    stop discrimination nowUCD Study California Women Business LeadersThe rewards of corporate leadership accrue faster for men. Not only do women hold just one in nine of the executive and board positions in California’s top 400 public companies, an annual University of California, Davis, study shows that that the women in top executive roles are not being promoted to the highest levels, and earn less than their male counterparts.

    Overall, women hold 11.5 percent of the highest-paid executive positions and board seats in the state’s 400 largest public companies — a 0.6 percent increase over last year, according to the UC Davis Study of California Women Business Leaders. The UC Davis Graduate School of Management has found an essentially flat trend line during the decade it has tracked the representation of women in these key decision-making roles. Together, the 400 companies represent more than $4.5 trillion in stock market value, up more than 30 percent over last year. Continue Reading →

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    Should CEO Des Hague be Fired for Kicking Puppy?

    Des Hague and puppy about to be kicked

    Des Hague and puppy Sade about to be kicked

    Sports catering giant Centerplate fined and censured CEO Des Hague last week after an internal review of surveillance video showing him kicking and yanking his friend’s puppy by its leash in a Vancouver elevator.(ESPN) Should the board fire him? Maybe we need more videos of CEOs and board discussing global climate change, slave labor and disdain for their employees and customers. Or is it only kicking puppies that brings outrage? Continue Reading →

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    Directors&Boards: Digital Advisors & Knowledge Capture

    Directors&BoardsDirectors&Boards is one of our “stakeholders.” No, that doesn’t mean they own part of us or that we own part of them and it doesn’t mean we always agree with each other. But they are included in our primary reference groups, those who contribute regularly to our “vocabulary of meaning.” The current edition begins to address two topics that need more attention. Continue Reading →

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    Stanford Academics Focus on Wrong Problems at ISS

    StanfordRockIn a recent Stanford “Closer Look” publication (How ISS Dictates Equity Plan Design), Ian D. Gow (Harvard but graduated from Stanford), David F. Larcker, Allan l. Mccall, and Brian Tayan argue ISS dictates pay equity plans. ‘Nonsense,’ was my first reaction. ISS policies generally reflect the will of its customers. The authors have a point but they miss the main problem. Their arguments begin in familiar territory. Continue Reading →

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    SVNACD Event – Corporate Boards: Strategy, Not Just Operations Review

    Bob Frisch photoBob Frisch is the managing partner of Strategic Offsites Group. He has more than 29 years of experience working with executive teams and boards worldwide on their most critical strategic issues. He has published three articles on teams and decision making in the Harvard Business Review: “Who Really Makes the Big Decisions in Your Company” (12/11), “When Teams Can’t Decide” (11/08) and “Off-Sites That Work” (6/06). Bob’s work has been profiled in publications from Fortune to CFO to the Johannesburg Business Report. He is a regular contributor to Bloomberg Business Week and The Wall Street Journal and his blog appears at HBR.org. Continue Reading →

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    Boys' Club Still in Charge of California Businesses

    Photo of Amanda Kimball

    Amanda Kimball

    The 400 largest companies headquartered in California, representing almost $3 trillion in shareholder value, still resemble a “boys’ club” with women filling fewer than 10 percent of top executive jobs, a University of California, Davis, study has found. Incremental gains have been pitiful, in my opinion.

    The Graduate School of Management’s eighth annual UC Davis Study of California Women Business Leaders — a yearly benchmark for the Golden State’s lack of progress in promoting women business leaders — paints a dismal picture for women in leadership during fiscal year 2011-2012. Some of the best known among these top companies, or the California 400, have no women leaders. Continue Reading →

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    Corporate Governance Bites

    Continuing challenges to exclusive forum bylaw provisions – Lexology

    An increasingly popular trend in recent years has been the adoption by Delaware public companies of an exclusive forum provision in their bylaws. An exclusive forum provision generally provides for the Delaware Court of Chancery to be the exclusive forum for certain disputes (including derivative actions, breach of fiduciary duty claims, claims arising pursuant
    to the company’s charter or bylaws and other shareholder litigation) against the company — and prohibiting such suits in other jurisdictions. Expected benefits cited by companies of adopting exclusive forum bylaw provisions include decreased litigation costs, avoiding parallel litigation in multiple jurisdictions and the predictability of Delaware courts. Continue Reading →

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    New CEOs: The Diversification of the Corner Office

    Sociologists Richard Zweigenhaft and G. William Domhoff began studying ascendance to the top corporate office 20 years ago and, while the population of CEOs is far from diverse, they report that they have been surprised to see as many women and minorities as they have.  Today there are 80 white women, African Americans, Latinos, and Asian Americans at the head of Fortune 500companies. Continue Reading →

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    Emotional Intelligence

    We need to do a better job of evaluating the emotional competency or our leaders. “A fine balance has to be maintained between technical and emotional competency of the individual and organization objectives and culture, wrote Sonia Jaspal back in 11/16/2011. Here is an excerpt from her argument, which deserves wider circulation.  Continue Reading →

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    When the CEO Really Must Go

    It is often said that “the most important function of a board is to hire and fire the CEO.” Yet the experience of many is that boards do a pretty good job on the hiring front and a not-so-good job on the “exit.” An exciting SVNACD session in Palo Alto focused on the pitfalls of CEO changes and how to avoid them. The panel couldn’t have been more timely. (Bartz fired at Yahoo…may have violated disparagement clause: Kathleen Peratis, Outten & Golden)

    This program, like all SVNACD programs, was subject to the Chatham House Rule: “Participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.” In this case, the panelists had already been identified publicly.

    As with many SVNACD events, the audience was frequently as informative as panelists. My report will give you just a flavor of what went on. To get the whole meal, you’ll have to Continue Reading →

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    CEOs: Not the Best Directors

    The new 2011 Corporate Board of Directors Survey from Stanford University’s Rock Center for Corporate Governance and Heidrick & Struggles has uncovered surprises about who makes the best board directors: it’s not necessarily the current CEOs that most companies seek out.

    “The popular consensus is that active CEOs make the best board members because of their current strategic and leadership experience,” says David Larcker, professor at the Stanford Graduate School of Business. However, when asked about Continue Reading →

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    When the CEO Really Must Go

    It is often said that “the most important function of a board is to hire and fire the CEO.” Yet the experience of many is that boards do a pretty good job on the hiring front and a not-so-good job on the “exit.”

    The Silicon Valley Chapter of the National Association of Corporate Directors will hold a session on September 15, 2011 focusing on the pitfalls of CEO changes and how to avoid them. There will be a candid discussion between an experienced CEO and an experienced chairman of a board, facilitated and led by Rich Moran, a member of our board of directors.

    Location: Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, CA 94304. This program, like all SVNACD programs, is subject to the Chatham House RuleRegister Now!

    7:30-8:00 a.m. Continental Breakfast; 8:00-9:30 a.m. Program

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    Power Struggles Over Pay

    Gary Larkin’s recent post, 2011 CEO Succession Report: Dismissals Up, Outside Hires on the Rise, informs Conference Board readers that Institutional Shareholder Services has launched an executive compensation database service for its client subscribers. Say on Pay rules were the driving force behind the new service.

    The database includes historical CEO and NEO (named executive officer) compensation data for more than 4,000 U.S. companies, together with Say on Pay data Continue Reading →

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    Video: Abe Friedman on CEO Pay

    CEOs at the biggest U.S. companies saw their pay jump sharply in 2010, as boards rewarded them for strong profit and share-price growth with bigger bonuses and stock grants.

    The median value of salaries, bonuses and long-term incentive awards for CEOs of the 350 biggest companies (that filed proxies between May 1, 2010, and April 30, 2011) surged 11% to $9.3 million, according to a study of proxy statements conducted for The Wall Street Journal by management consultancy Hay Group.

    CEO pay was measured as total direct compensation — salary, bonuses and the granted value Continue Reading →

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    CorpGov and Exec Pay

    GovernanceMetrics International recently sampled large corporations and found that CEO pay jumped 27% in 2010 to a median of $9 million.

    According to William Lazonick, professor at the University of Massachusetts, in 2010 the S&P 500 jumped 12.8%, capping a two-year gain of 39.3%. Companies in the S&P 500 boosted profits by 47% in 2010, not from boosting sales of goods and services, which rose only 7%, but by cost-cutting and layoffs, says Lazonick. (CEO pay soars while workers’ pay stalls, USA Today 4/1/2011) ) Continue Reading →

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    Excess-Pay: Beyond the 2% Solution

    Excess executive pay can impose substantial costs on companies and shareowners even if manipulation or misconduct isn’t involved. Executive pay is the biggest lightening rod in corporate governance, prompting Dodd-Frank to include clawback requirements, mandatory say on pay, and say when on pay votes, as well as the coming ratio between executive pay and the pay of a company’s median employee.

    Jesse Fried and Nitzan Shilon’ s important paper, Excess-Pay Clawbacks, highlights the problem of “excess pay” to executives arising from errors in earnings and compensation-related metrics. Although addressed in part by Dodd-Frank, significant additional measures are still needed.

    The paper examines excess-pay clawback policies in S&P 500 firms prior to Dodd-Frank.

    We find that nearly 50% of S&P 500 firms had no excess clawback policy whatsoever. Of those firms with clear policies, 81% did not require directors to recoup excess pay but rather gave directors discretion to let executives keep excess pay. Of the remaining Continue Reading →

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    CEOs Should Get Out Vote Among Employees Says Daly

    In remarks before the National Press Club, the CEO of Broadridge, the nation’s largest shareholder communications company, called on all CEOs to encourage individual shareholders, including employee shareholders, to vote their proxies.

    In 2010, just one in 20 individual retail investors voiced their opinions about the  companies they invested in by exercising their fundamental shareholder right. That compares to recent historical levels four to five times as high. Public companies need to understand the seriousness of this issue and act to reverse this troubling decline to get each of their individual investors — and all individual investors generally — engaged with their companies.

    Richard J. Daly went on to explain that as an initial step in an overall strategy to increase individual shareholder voting, he is calling on CEOs of American businesses to

    join with us in launching a nationwide effort to encourage their employees  — numbering in the tens of millions  — to exercise a fundamental shareholder right  — and need  — to vote their proxy ballots, whether  it be proxies relating to their employer or proxies relating to other companies in which they invest

    As part of the effort, he is contacting the chief executives of America’s top 1,000 public companies to encourage them to motivate their employee shareholders to vote their shares.  Broadridge will inform shareholders —- within the constraints of regulatory boundaries —- that they have the ability to take action online, eliminate the paper, have all information stored in any format they want, have access to it anywhere they want and vote at any time they want, even on such new devices as Android™ phones and the iPad®.

    A relatively small increase in voting participation by employees could meaningfully increase individual investor voting participation from 5% per year to 20% or more per year. Companies that can distinguish their investors’ opinions from others’ will more easily have the strength and confidence to stay on course and create value. There is no greater show of support than the ballot, or in this case, the proxy.

    While I certainly agree with Daly that steps need to be taken to ensure more retail shareowners vote, I didn’t like the thrust of his remarks, which appeared to assume that more retail votes would mean more votes for management… or am I reading too much in when he says:

    Better to hear from actual owners — whose interests are likely aligned with the company — than from outsiders whose agendas may be in conflict with shareholders’ long-term interests.

    Additionally, it would have been nice if he would have emphasized the usefulness of sites that help inform shareowners on the issues.

    If it is a public relations move that Daly is after, he might recommend that companies take a page from Prudential Financial. They’re rewarding their voting shareowners with totebags or by planting a tree. Last year, the company got an additional 68,000 shareowners to vote, mailed 120,000 bags and planted more than 112,000 trees.

    This year, Prudential added information in its proxy materials on sustainability, corporate citizenship and shareowner engagement. Shareowners who cast their proxies online can view the directors’ bios and the supporting statements for shareowner proposals. More importantly, Prudential’s board supported a shareowner proposal from John Chevedden to eliminate the company’s supermajority voting provision.

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    Video Friday: Financial Crisis & CEO Input Into Board Selection

    In response to growing concerns on the spread of the financial crisis, the Yale School of Management, in partnership with the Wall Street Journal and CNBC, organized a roundtable discussion in New York on September 23, 2010 that brought together business leaders and scholars from Yale, Wharton, NYU, and the Columbia and Harvard business schools to discuss the unfolding situation in the markets and the economy more broadly, as well as the proposed federal bailout plan. Click Here. Hat tip to Simoleon Sense; I didn’t realize it had been posted.

    For a completely different take on the financial crisis, Arthur Benjamin asks, what if we put probability and statistics at the top of the pyramid instead of calculus?

    On This Week in the Boardroom (TWIB), co-hosts TK Kerstetter, President, Corporate Board Member, and Scott Cutler, Executive Vice President, NYSE Euronext review what nominating/governance committees should know about including the CEO in the board recruitment process. Additionally, hear why Hewlett Packard’s new CEO and nominating committee are under fire by proxy advisory firms. For our take on these issues, see The Appearance of Legitimacy: Board Elections and HP Nomination Committee Under Fire.

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    Effective Chair-CEO Relations

    The number of U.S. companies that separate the chairman and CEO roles is at a historic high: 40% of the S&P 500 now separate the roles, up from 23% a decade ago, according to Spencer Stuart. Of the 40%, 19% may be classified as independent Chairs, up from 9% five years ago. A new report published by the Millstein Center for Corporate Governance and Performance at the Yale School of Management is among the first to outline how chairs and CEOs work effectively together in these interdependent roles, providing useful guidance as the chair-CEO leadership structure becomes more prevalent.

    The Effective Chair-CEO Relationship: Insight from the Boardroom, authored by management expert Elise Walton, is based on interviews with 35 chairs, CEOs, and stakeholders. Participants identified key factors that contribute to a successful working relationship between the chair and CEO: good chemistry, a clear framework for the relationship, and having effective people and practices in place.

    “Separate board leadership is still emerging in North America,” said Walton. “There is no Continue Reading →

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    HP Nomination Committee Under Fire

    I recently got this from an anonymous member (here are related thoughts from Cydney Posner and Marty Lipton):

    You may have seen the stories regarding ISS’ recommendation that shareholders withhold against the entire Hewlett-Packard nominating committee for the way new directors were selected. I haven’t seen the ISS report, but the news stories (eg. WSJ article) probably describe it pretty well.

    At issue seems to be the fact that five new directors of H-P were identified by an ad hoc committee, which according to H-P’s proxy statement “consisted of the CEO and three non-employee directors, which was formed in November 2010 to assist in identification of new director candidates and to facilitate the process of evaluating those candidates as potential directors.”

    ISS and Glass Lewis criticize the addition of the CEO to this committee, since only the independent directors of the Nominating and Governance Committee are supposed to responsible for director nominations. While CEOs play a role in nominations, it does seem unusual to formally include the CEO on the search committee. It likely also didn’t help that, as according to this Bloomberg article, many of the new directors had connections to the CEO. None of those relationships are disclosed in the proxy, as much of it relates to the CEO’s former company.

    In additional soliciting materials filed on Friday, H-P responds to ISS’s recommendation. (How You Find New Directors: “True Independence” Under the Microscope – TheCorporateCounsel.net Blog, 3/14/2011)

    Go to theCorporateCounsel.net/Blog article to read the links. I highly recommend the one by Cydney Posner. Personally, I come down on the side of ISS on this one, although their action might have been better with some warning. At least now other companies have it. Don’t involve your CEO in a search committee pre-screening candidates. And some people wonder why shareowners favor split chair/CEO positions and proxy access.

    Taking a quick glance at CII corporate governance policies, the action at H-P appears to be at least an attempt to circumvent:

    2.5   All-independent Board Committees:  Companies should have audit, nominating and compensation committees, and all members of these committees should be independent.  The board (not the CEO) should appoint the committee chairs and members…

    7.2   Basic Definition of an Independent Director: An independent director is someone whose only nontrivial professional, familial or financial connection to the corporation, its chairman, CEO or any other executive officer is his or her directorship.  Stated most simply, an independent director is a person whose directorship constitutes his or her only connection to the corporation.

    Much more from J. Robert Brown Jr. on this subject at theRacetotheBottom.org under “The Myth of an Independent System for Nominating Directors” in several posts.

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    It Takes a Daughter

    Male CEOs in Denmark who have a daughter are more apt to close the gender pay gap at their companies, reports the Wall Street Journal. Overall in Denmark, there is a gender wage gap of 21.5 percent. But the birth of a daughter to a male CEO caused that gap to close by 0.5 percentage points. Moreover, the birth of a first daughter caused the gap to close by 0.8 percentage points, and if that daughter was also the first child, the gap closed by 2.8 percentage points. Women with college degrees benefited from the births more than women with high-school or primary educations.

    via Male CEOs with daughters treat women better | Directorship | Boardroom Intelligence, 3/4/2011.

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