Tag Archives | executive compensation

Glass Lewis 2018 Proxy Advice Update

Glass Lewis 2019 proxy advice updates address many issues. See 2019 Proxy Paper Guidelines: An Overview of the Glass Lewis Approach to Proxy Advice.

I have reproduced much of the summary of changes below, leaving off the section discussing clarifying amendments. One that stands out for our small group of so-called ‘gadflies’ addresses our concern that several boards hijacked shareholder proposals this past season by seeking ratification of existing policies and the exclusion of a shareholder proposal though a no-action request. In an email, John Chevedden noted the following: Continue Reading →

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Moskowitz Winner: CSR & Executive Compensation

Moskowitz Prize Winner Announced

Moskowitz prize winner for 2017 was announced today by the Center for Responsible Business at the Haas School of Business, University of California, Berkeley, in collaboration with The SRI Conference (). The prize is named after research pioneer Milt Moskowitz, one of the first researchers to look for the connection between good corporate citizenship and profitability. Sustainable and responsible investing remains the focus.
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Governance and the Valeant Flea

ValeantGovernance and the Valeant Flea: The Art of Not Living Dangerously

“You may well say, that’s a valiant flea that dare eat his breakfast on the lip of a lion.”

-William Shakespeare

Valeant: Cautionary Tale

There’s a good reason that no bestselling novels or blockbuster movies about corporate governance exist. It’s because doing corporate governance right is frankly boring. Figuring out which companies are well governed is not a beautiful or riveting process, but for investors it’s critical to make the effort. Why? Because identifying companies that are skating too near the edge may help preserve portfolio value. At Pax World, we experienced this first-hand when we eliminated the drug company Valeant (VRX) from our portfolios last fall. Continue Reading →

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Florida SBA Increases Shareowner Value Through Active Ownership

FloridaSBA

Mike McCauley

Michael McCauley

The State Board of Administration of Florida (Florida SBA) is the fourth largest public pension fund in the US and was early to announce their votes in advance of annual meetings. Those announcements can be found on the Florida SBA site, as well as on Proxy Democracy. The following is from a press release that Florida SBA issued out last week on their accomplishments during the recent proxy season. They certainly did a lot to  shift us to more democratic forms of corporate governance. Congratulations to Ash WilliamsMichael McCauley and all those working at Florida SBA. Continue Reading →

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Fiduciary Duty to Announce Votes (Part 3): Take Action

PD-CkMutualVotingRecord

Take Action: Ask your mutual fund, pension fund, and/or endowment to:

  1. Send you a copy of their proxy voting policies and their proxy voting record.
  2. Report their votes in advance of annual shareholder meetings to ProxyDemocracy.org.  
  3. Make a small donation (not tax deductible) to ProxyDemocracy.org to keep that valuable service going or contact Andy Eggers to make a tax-deductible contribution through their 501(3) affiliate. I’ll match donations up to $2,000 until the end of June.

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Reasonable Compensation: We Propose a Role for Investors in Taking on the Income Inequality Challenge

The following is a guest post by Michelle de Cordova, Director, Corporate Engagement & Public Policy, NEI Investments. The article originally appeared on the NEI Investments website and is reproduced here with permission from both the author and the firm. NEI Investments (NEI) is a mutual fund company that “makes excellent, independent portfolio managers accessible to Canadian retail investors through two award-winning fund families: Northwest Funds and Ethical Funds.” It also has Canada’s largest team of in-house socially responsible investing specialists. Continue Reading →

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Video Friday: Clawback Invoked

With the passage of the Dodd-Frank and the Sarbanes Oxley Acts, clawback policies have become increasingly prevalent among public companies. However, it is rare to find a company actually put a clawback policy into effect. Citing Equilar’s findings from the 2012 Clawback Policies Report, we review what a clawback policy is and we examine what triggered one major U.S. bank to put their clawback policy into action. Continue Reading →

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Executive Compensation: Its Complicated

Andrew Liazos, writing for CFO magazine, argues that a law enacted years ago in response to Enron poses new tax risk for deferred compensation in that Section 409A could inhibit desirable restructuring of executive pay in response to possible “say on pay” no votes.

A 2009 notice from the IRS granted special relief to TARP recipients, stating:

the application of 409A(a) in these circumstances would produce a disincentive for TARP recipients to comply with the Special Master’s advisory opinions and act in accordance with the public interest, severely diminishing the Special Master’s ability to fulfill his intended role and damaging the entire TARP program.

However, no such relief has been granted to other companies now that say on pay is Continue Reading →

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CEO Compensation Rose Sharply in 2010

In the aftermath of last year’s passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act and its requirement that public companies hold shareowner votes on executive compensation in 2011, many sustainable investors and other shareowner activists anticipated that this year’s proxy season could result in a watershed year for corporate governance. As Lisa Woll, CEO of the Social Investment Forum (SIF) said following the bill’s passage, “The most recent financial crisis highlighted for all Americans the urgent need to instill greater discipline among corporate boards and in financial markets…say on pay will help address these failures and strengthen America’s financial markets.”

via Institutional Shareowner, 6/10/2011. I’m on my way to the Yale Governance Forum so no time to blog. (Follow the conference on Twitter at #YaleGovForum. See my Continue Reading →

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Banking Pay

Sanjai Bhagat and Brian J. Bolton study the executive compensation structure in the largest 14 U.S. financial institutions during 2000-2008 for their paper, Investment Bankers’ Culture of Ownership? Their results are mostly consistent with and supportive of the findings of Bebchuk, Cohen and Spamann (2010), that is, managerial incentives matter – incentives generated by executive compensation programs led to excessive risk-taking by banks leading to the current financial crisis.

They refer to this as the Managerial Incentives Hypothesis: Incentives generated by executive compensation programs led to excessive risk-taking by banks leading to the current financial crisis; the excessive risk-taking would benefit bank executives at the expense of the long-term shareholders.

Their results are generally not supportive of the conclusions of Fahlenbrach and Stulz (2009) that the poor performance of banks during the crisis was the result of unforeseen risk. They refer to this as the Unforeseen Risk Hypothesis: Bank executives were faithfully working in the interests of their long-term shareholders; the poor performance of their banks during the crisis was the result of unforeseen risk of the bank’s investment and trading strategy.

The authors recommend the following compensation structure for senior bank executives:

  • Executive incentive compensation should only consist of restricted stock and restricted stock options – restricted in the sense that the executive cannot sell the shares or exercise the options for two to four years after their last day in office.
  • However, managers should be permitted to annually liquidate about 5% to 15% of their ownership positions, but these annual ownership position liquidations should be restricted to an amount of $5 million to $10 million.
  • This compensation structure will provide managers stronger incentives to work in the interests of long-term shareholders, and avoid excessive risk-taking.

While their focus is on banks, corporate board compensation committees of firms in other industries should also give the above executive incentive compensation structure serious consideration say the authors. Additionally, they suggest that directors should adopt a similar incentive compensation structure with regard to their own incentive compensation.

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