The study—which looked at 170 Fortune 1000 companies whose annual meetings were on or after January 21, filed proxies by late March 2011 and whose CEOs were in their role for the last three years—found that 74.7 percent of the companies’ say-on-pay proposals were supported by at least 90 percent of voters. Only 2.7 percent of the companies had did not have majority support on their proposals.

“One of the most common questions we were being asked was: would proxy advisors like Institutional Shareholder Services be influential on these new votes?” said James Kroll, a senior consultant in Towers Watson’s Executive Compensation Practice, in reference to the say-on-pay and say-on-frequency votes that many companies are facing for the first time this proxy season.

While most companies’ investors approved say-on-pay practices, the 14 percent of companies who received negative ISS recommendations received above-average shareholder opposition. At companies where ISS encouraged a “for” vote, 94 percent also voted “for.” But the 20 companies surveyed who ISS recommended a “no” vote on their say-on-pay provisions received on average 71 percent positive votes; four were rejected by shareholders.

Annual say-on-pay votes have been popular among shareholders so far this proxy season, with annual votes receiving majority support at three quarters of the companies surveyed. Of the companies that recommended triennial votes, a majority of shareholders agreed to only a third.

Doug Friske

Of the decisions made so far, 46 companies chose annual, one chose biennial and 14 chose triennial say-on-pay votes.

“In early January and February, most proxies recommended triennial votes, now most are recommending annual,” continued Kroll. “Companies may be seeing the majority support for annual [votes] from shareholders, which may be driving more businesses to make the annual vote recommendation.”

The study also reported that the median annual base salary for executives increased by three percent. “The pay mix has stayed the same,” explained Olivia Wakefield Lee, a senior consultant at Towers Watson’s Executive Compensation practice. “What has changed is the long- term incentive mix,” with companies using stock options for 33 percent of the mix, as opposed to 39 percent in 2008. Restricted stock has stayed relatively constant, while performance plans make up a higher percentage at 41 this year, over 37 and 36 in 2008 and 2009, respectively.

“Options are not on the verge of extinction, but they will decrease in percentage of the mix,” predicted Wakefield.

Compensation committees and consultants were recently handed new regulations stemming from the Dodd-Frank Act regarding their independence and possible conflicts of interest. Steve Seelig, executive compensation counsel for Towers Watson’s Research and Information Center, advised companies to be on the lookout for more regulations. “We don’t anticipate things to be too tumultuous when it comes to regulations from Washington,” he said, but “there are some regulations pending, and it’s not too early for companies to focus on complying with them, since the rules are somewhat cumbersome.”

While there is currently legislation in the House to repeal the mandated disclosure of CEO pay vs. median employee pay, Seelig said: “I don’t see it going through the Senate or being approved by the President.”

Considering the combination of these types of increased disclosures and shareholder say on pay, companies must be especially cognizant of how they present their compensation practices in their proxies.

There is no formulaic method to encourage shareholders to approve say-on-pay plans, Seelig said. Rather, companies must look at their own shareholders and determine what their concerns are, and what the proxy advisors that most shareholders listen to are recommending.

“The results will change every year,” Seelig explained. “Stay committed to your principals and practices; shareholders will support your approach if they see it’s been thought through.”

Directors like to joke that in the “old days” before Dodd-Frank, the audit committee handled most of the board’s heavy work. Not any more. Some compensation committee members, investors and their advisors believe the most profound and lasting impact of Dodd-Frank is to shift the balance of power from management to the shareholder, as new and pending regulations empower compensation committees as never before.

“We have to keep the intent of Dodd-Frank front and center,” says Robin Ferracone, the founder and executive chair of the compensation consulting firm Farient Advisors. “The intent was to encourage shareholder communication more directly, frequently and openly with their directors and Dodd-Frank is the catalyst for that. The law is not trying to become the dominant force. The law is trying to facilitate this communication. And we should not lose sight of that.”

There’s no doubt, however, that the effect of Dodd-Frank on boardrooms—more specifically the pay-for-performance proxy disclosures effective last year and the new rules expected this year for “say on pay,” clawbacks, and compensation committee and advisor independence—“is a seminal change,” says Catherine R. Kinney, a public company director who retired from NYSE Euronext in 2009 as president and co-chief operating officer and now serves on the boards of MetLife, MSCI (the parent company of ISS Governance Services) and NetSuite. “I think it’s a huge power shift in the boardroom… The fact that an investor can look at the CD&A and vote against a director is one of the biggest changes relative to performance around the boardroom table.” She sees it as one more step in the direction of progress, that is, “management and the board working together to find the right performance for the shareholder.”

Click here to view the full Director’s Guide to Compensation

More stories in the Director’s Guide to Compensation:
New Risks and Rewards
An Investor’s Point of View
Executive Pay and the Boardroom After Dodd-Frank

Says one Fortune 100 director, who asked not to be quoted by name, “Management can no longer ask the HR person and the top three directors they like to serve on the compensation committee. Today, the compensation committee is chosen by the independent directors and working on behalf of the shareholder. It’s dramatically different and as a result, most compensation committees today are scrambling for information and education.”

Stephen W. Sanger, retired chairman of General Mills and a prominent public company director whose board service currently includes Target, Pfizer and Wells-Fargo, concurs. He says Dodd-Frank dramatically transforms the compensation committee role from “compliance to advocacy.” David Lynn, a partner at the law firm Morrison Foerster, notes that in addition to new disclosure, “what shows up in the proxy statement is more important because of the environment we’re in.”

Most compensation committee chairs are seeking direction and education on implementing both new and pending rules, and how the language of disclosure in the annual proxy statement should read. Like their audit committee brethren, compensation committee members are being encouraged to set their own budgets and retain independent compensation consultants and advisors.

“There’s a lot of trial and error—and learning— in the compensation process right now,” observed Ferracone during a meeting of the NACD Advisory Council on Compensation (See below for complete participants’ list). “As a compensation committee member, you have to be sensitive and attuned to the issues being faced from an emotional and dynamic standpoint. It takes a lot of skill to not let the mechanics of the discussion overwhelm the process and leave you with a dysfunctional result.”

New rules for all publicly traded companies— including say on pay and say-on-pay frequency in effect for the upcoming proxy season—stipulate greater disclosure, while opening the door for boards to communicate more often with shareholders. By one count, Dodd-Frank requires regulators to create 500 rules, conduct 81 studies and issue 93 periodic reports. The stated objective of the legislation is “to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail,’ to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices and for other purposes.”

One of the “other” purposes is to rein in risktaking promoted by excessive compensation or by compensation that is tied too closely to short-term financial performance—especially in the financial services sector, the main focus of the law.

A Long Way to Go
A recent study commissioned by the Council of Institutional Investors (CII) found that while the pay-forperformance link on Wall Street has strengthened somewhat since the global financial crisis, banks still are not tying compensation to long-term gains in performance. CII comissioned the report, “Wall Street Pay: Size, Structure and Significance for Share-owners,” to gain a better understanding of pay at big Wall Street banks and how it differs from executive compensation at other large U.S. companies. “While many banks have strengthened their pay practices, there’s still a long way to go,” says Ann Yerger, CII executive director. “The report suggests they need to do more to make sure that executive compensation rewards performance over the long term.”

Ann Rhoades

Implementation of Dodd-Frank will be difficult at those companies where boards have been reluctant to delineate details on the composition of executive compensation with employees and shareholders, for whatever reason. It is also about holding directors more accountable for their own actions and for the behavior of senior executives.

Of note, for example, is one incident recently that put the case for Dodd-Frank rules in stark relief. The Wall Street Journal reported that millions of dollars would be added to an executive’s pay to compensate him for giving up the corporate jet for personal use, which will soon be subject to public disclosure. Nothing about this appeared to have anything to do with compensating the CEO for the performance of the company—it was merely about the optics of him converting company assets to personal use, a distressingly common behavior.

Dodd-Frank attempts to prevent these types of excessive executive behaviors that add nothing to shareholder value. This is a laudable goal and one that I believe directors will find mostly beneficial for their companies, especially in terms of performance. Yes, shareholders will have more input on compensation packages, especially in regard to concepts such as “say on pay,” the one- to three-year window and golden parachutes. But having some limitations on executive pay may actually force companies to be creative in compensation, basing it more on performance measures that shareholders can understand. Many CEOs have gotten used to extraordinarily generous packages that include perks that are simply no longer going to be available and directors, particularly those on the compensation committee, will need to learn to design benefits packages that will enhance performance, are accountable to shareholders and yet are attractive and competitive for executives.

The best metrics are simple to understand, few in number and focused on the most important indicators of corporate success for the company.

Fortunately, it has been shown, fairly convincingly, that greater accountability is a corporate value that can also lead to greater profitability. For example, at P.F. Chang’s, if executives don’t achieve specified goals, they know that it will be directly reflected in their bonuses. It’s just as simple as that. At P.F. Chang’s, we don’t anticipate that say on pay will be a problem to implement. Like some other companies, a culture has been built on the communication of shared values and transparency. Therefore, shareholders probably feel more confident that compensation and bonuses are directly based on performance. In organizations such as these, boards hold everyone (including themselves) accountable for living the values, and thus Dodd-Frank is not an overwhelming issue.

At JetBlue, as well, we’ve historically published both goals and dashboard metrics for the company and top executives’ performance in relation to those goals. Because of that, when compensation and bonuses are paid, there are no surprises. Executive compensation at JetBlue is tied to performance metrics—and as a result, during the last shareholders’ meeting there was not a single comment by a shareholder on issues related to executive pay. I believe we make the connection to performance clear for shareholders and others by being transparent regarding total rewards.

And who can argue with the results of either of these companies? JetBlue is one of the only airlines that remained profitable during the recession and P.F. Chang’s has posted increased revenue for many years, even in 2009, when Chairman Rick Federico said in the annual report that he had expected a 20-percent loss. Both P.F. Chang’s and JetBlue are examples of organizations where the behaviors of top executives reflect the values of the organization and, I believe, the outcomes of the company as a whole.

Knowing that shareholders will now have a specific vote on things like golden parachutes is likely to make them problematic after Dodd-Frank is fully implemented. Unacceptably high, above-market pay packages for new CEOs will also probably not be as typical anymore, nor will the immediate vesting of pensions for C-suite players. Dodd-Frank rules on salary multiples will be hard to implement even at Jet- Blue and P.F. Chang’s, but perhaps not as difficult as at many other companies where executive compensation has moved far from reality.

What makes these companies so different from the norm? In my opinion, it is quite simple: the companies that will have the easiest time with Dodd-Frank are those where the corporate culture rewards the directors and executives for placing the welfare of the company and its employees above personal profit. Dodd-Frank calls for public companies to tie bonuses to goals that were published prior to year-end; no longer will the criteria for executive bonuses be an unknown.

In my book, Built on Values: Creating an Enviable Culture that Outperforms the Competition, we demonstrate that one of the keys to building a values-based culture is making performance metrics available to all employees at the beginning of each fiscal year. Leaders have access to a dizzying supply of metrics. Directors can exert influence by insisting that metrics be totally transparent to shareholders and employees. The best metrics are simple to understand, few in number and focused on the most important indicators of corporate success for the company. And it is absolutely amazing how CEO compensation, particularly bonuses, is perceived as fair when directly tied to accurate and measurable performance metrics.

Too many leaders, though, feel that tying compensation to goals and values is a low priority, especially when compared to running the business day-to-day. My colleagues in values-rich companies would respectfully disagree. “The best companies—those with clearly articulated values and a sense of direction—have a constant sense of urgency but they’re not frantic and under enormous stress,” observed Joel Peterson, chairman of the board of JetBlue and the former CEO of Trammell Crow, in Built on Values.

Dodd-Frank became politically viable because of the failure of corporate governance to rein in companies who took massive losses and still managed to find a way to justify huge payouts for executives. In other words, a lot of Dodd-Frank is aimed at encouraging honesty with shareholders. Shareholders, particularly institutional ones, are likely to applaud that and reward early cooperators with additional investment.

Directors and CEOs who resist these changes are likely to find themselves challenged by activist shareholders. Despite the work and change of heart involved on the part of executives, it will almost surely be easier to simply adopt transparency and accountability as new values. At the end of the day, Dodd-Frank is all about accountability; a bonus is that it will make it less difficult for boards to refuse outrageous demands.

Ann Rhoades is chairman of the board compensation committees at JetBlue and P.F. Chang’s. She is also president of People Ink (www.peopleink.com), a culture-change consulting firm and author of Built on Values: Creating an Enviable Culture that Outperforms the Competition (Jossey-Bass, 2011).

Stephen L. Brown

What do you like most about the changing boardroom landscape?
The passage of the corporate governance reforms included within Dodd-Frank was a watershed event that affects boards, management and shareholders alike. Boards and management will now have to take more interest in investors’ viewpoints. And shareholders must take on greater responsibility in monitoring boards with the tools provided to them by Congress.

Are the new requirements being embraced or resisted?
Both. The best practitioners—issuers who have always addressed governance into their road shows, for example—are continuing to do the right thing, and I don’t think Dodd-Frank has raised their blood pressure much. You have another category of issuers who are new to engaging with shareholders and they’ve embraced the challenge and are sincerely attempting to understand how to be more responsive to shareholders. And then there is this third category of what I like to call “the governance cavemen and cavewomen.” These are folks who are still in the Stone Age about the need for regular dialogue with their key shareholders.

Why did it come to the necessity of enacting a law?
Many would have preferred private ordering to achieve reform. However, when market participants can’t find consensus, regulation follows. With respect to say on pay, a few years ago we approached some of our largest portfolio holdings and asked them to voluntarily adopt an advisory vote with hopes that the rest of the market would follow. Many responded that they preferred to wait for legislation; not wanting to be a first mover. The lack of widespread voluntary adoption mixed with public angst over executive compensation, and the onset of a financial crisis, yielded an inevitable response by public policymakers. So, here we are.

Click here to view the full Director’s Guide to Compensation

More stories in the Director’s Guide to Compensation:
New Risks and Rewards
Executive Pay and the Boardroom After Dodd-Frank
New Rules Give Power To The Compensation Committee

Do governance practices differ among companies according to market capitalization?
The fact is that over the last decade the larger-cap companies have been the focus of large institutional investor activism; so those companies have responded to the various viewpoints of shareholders with respect to governance best practices. However, most of the mid- and small-cap companies have had the cover of the large caps. It’s likely to be different now. No more cover. The mid and small caps will have to raise their governance IQs and address governance more proactively.

How often do problems in corporate governance relate to CEO compensation?
It’s often a red flag rather than a cause. We define problems not by the absolute amount of compensation, but focus on whether or not the compensation program is aligned with our interest in creating long-term sustainable shareholder value. Compensation issues can be indicative of misaligned risk/reward incentives, lack of long-term focus, or simply show that there’s not enough counter balance in the boardroom.

Directors could take the outcome of a say-on-pay vote and bring it in with them to a meeting with the CEO saying, “Listen, this is what shareholders are thinking.”

You might have read that Rob Feckner [president of the California Public Employees Retirement System] said CalPERS would no longer publish its watch list and that they would approach companies privately because they thought it would be more effective. Do you agree with this kinder, gentler activism?
We absolutely agree that it’s more effective. Quiet diplomacy has always been TIAA-CREF’s style of issuer engagement. In our experience, you can achieve optimal outcomes when you can get a company to focus solely on key governance issues and avoid public embarrassment over being targeted. A sense of partnership and respect are elements that should exist when engaging with issuers to bring about changes aimed at long-term value creation. More aggressive approaches may be warranted at times, but it is certainly not the starting point for long-term focused institutional shareholders.

What are the means or methods that you’ve seen in which directors are effectively communicating with TIAA-CREF?
We appreciate clear and meaningful proxy disclosures. Disclosure should not simply be viewed as regulatory mandates, but rather as an opportunity for directors and management to make their case to shareholders. TIAA-CREF takes care to intelligently execute our proxy-voting duties and we can do so effectively and efficiently when we are able to understand with confidence how directors exercised their duties on our behalf. Providing clear, concise and meaningful disclosure in the [Compensation Disclosure & Analysis] section of the proxy is one such opportunity with respect to compensation. The newly required enhanced disclosure related to board leadership, director qualifications, risk oversight and other related corporate governance issues is another opportunity to tell your story. The arrival of mandatory say-on-pay votes this proxy season heightens the importance of providing good disclosure.

Direct dialogues should complement good disclosure. While we do speak with companies during proxy season, the most constructive dialogues occur at governance “road shows” outside of proxy season when there is more time.

How can a company prepare for a governance road show?
It’s common for issuers to create an agenda with us prior to the meeting. That way both sides can manage expectations and ensure that the issuer has the right people in the room. The right people include those senior executives who can speak knowledgeably about issues on the agenda—we are starting to see more heads of executive compensation in these meetings in order to address detailed compensation questions. Although we know it is not always feasible all the time, having independent directors as part of these meetings is an invaluable emerging best practice. Finally, prior to embarking on a road show, it can be helpful for issuers to host their own mock dialogue with their outside advisors such as compensation consultants.

That’s an excellent idea. Tell me, what do you think of say on pay?
We think a shareholder vote on executive compensation policies empowers both investors and boards. It allows board members to use investor sentiment as expressed through its advisory votes in their conversations with the C-suite. It arms the compensation committee chairs with real feedback. Directors could take the outcome of a say-on-pay vote and bring it in with them to a meeting with the CEO saying, “Listen, this is what shareholders are thinking.” And by the way, these shareholders have the power to vote directors off the compensation committee and out of office, particularly if directors are elected by a majority of votes in uncontested elections.

Are there areas of frustration for you that were not addressed in Dodd-Frank?
I think many people are unhappy that majority voting was taken out of the corporate governance provisions of Dodd-Frank. But the vast majority of your large-cap companies have already adopted this best practice. And the rest of the issuers who have yet to adopt will likely see significant shareholder pressure to do so this year.

But in the days and months ahead, this lingering disconnect between those suffering financial hardship and those many blame for bringing it about is likely to be leveraged by activist investors who are newly-empowered by the Dodd-Frank law. While strictures requiring U.S. corporations to hold non-binding “say on pay” votes and disclose the ratio between CEO pay and that of their employees don’t mandate action on executive compensation issues, they may very well have the same effect by intensifying the reputational hazards faced by companies whose pay policies do not align with results.

At such a time, the symbolic power of sacrifice looms large
Most people know the score. Employees, investors, and the public understand that economies rise and fall and they expect companies to have good years and bad. They will grant more latitude than you might expect to companies struggling with financial challenges, provided that top managers are open and honest with the numbers and are willing to share in the sacrifice.

This commentary is excerpted from the book, The Communicators: Leadership in the Age of Crisis, by Richard S. Levick and Charles Slack (Watershed Press, 2010).

But they will never understand or forgive corporate executives who prosper or appear to prosper while the balance sheet bleeds red, the stock price tumbles, and the company takes bailout money from taxpayers.

Consider John Thain, one of the more brilliant financial minds of our time. The son of a small town doctor in the Midwest, Thain enrolled at MIT with plans to become an engineer. He turned instead to Wall Street, where hard work and innovative decisions hoisted him up the ladder at Goldman Sachs and on to the top spot at the New York Stock Exchange. His appointment in late 2007 to lead Merrill Lynch out of the financial mess left by previous Merrill CEO Stan O’Neal was almost universally hailed as a major step toward a turnaround.

And then came the $1,400 wastebasket.

When it surfaced that Thain, hired specifically to bring financial discipline to the ailing brokerage, had spent $1.22 million of company money to decorate his office, critics of corporate greed went into overdrive. The tab included $87,000 for an area rug, $68,000 for an antique credenza, and $25,000 for a pedestal table. But nothing quite hit home like that wastebasket. Thain quickly apologized and refunded the company for the entire renovation out of his own pocket. Unfortunately, the damage was done.

Later, when reports surfaced that Thain had approved sizable bonuses to his executives (though not to himself) just before a distressed Merrill was sold to Bank of America, the public didn’t need to hear specifics in order pass judgment. They had already heard all the specifics they needed.

Thain did not cause the financial catastrophe that brought down Merrill Lynch, but the saga will most likely follow him for the rest of his life. Why? Because a man who’d even consider buying a $1,400 wastebasket cannot by definition be a man capable of sharing in sacrifice.

Sadly, Thain’s story is hardly unique. This financial crisis has abounded in tales of executives flying private jets to beg for bailouts, partying at exclusive spas or reaping bonuses while shareholders suffer. In virtually every case, the amount of money involved is negligible compared with the symbolism and the damage to the reputations of the individuals and companies involved.

Less well-known, and too few in number, are stories such as that of Boston’s Beth Israel Deaconess Medical Center and its former CEO Paul Levy.

In early 2009, the downward economy left the Beth Israel Deaconess, a legendary Harvard teaching hospital, with a $20 million budget gap and the prospective layoff of 600 of its 6,300 employees. They were mainly lower-paid workers in food services, transportation, and other departments.

At many companies, the CEO might have squirreled away in a conference room with the CFO and a few other top executives, crunching numbers and preparing the layoff announcement. Determined to save as many jobs as possible, Levy took the opposite approach. First, he sent out mass emails to employees offering full, clear details on the problems the hospital faced.

Every employee, at every level, was given full access to the numbers. Levy subsequently posted the figures on his blog, “Running a Hospital.”

Why such candor? Levy explains, “To me, it is so commonsensical. People need to understand the dimensions of the problem to help solve the problem. If you’re going to ask them for advice and actions, they have to know the real story.”

Once all the numbers were on the table, Levy turned to the employees and asked if they’d be willing to accept lower pay in return for saving the jobs of their co-workers. Crucially, Levy and other top managers led the way by talking voluntary cuts in their own pay. “Absent that, people would have felt they were being taken advantage of, that they were saps,” Levy says. “If you’re asking people to make sacrifices, and they think you’re not doing the same, then they’re going to say, ‘Well, there goes top management again, taking advantage of us.’”

The response, from celebrated physicians and department heads on behalf of clerical and maintenance workers, was overwhelming. Employees took pay cuts, accepted a freeze on 401(k) contributions, scaled back vacation days, and returned recent raises. Many employees dug into their personal bank accounts and mailed checks. “I wasn’t surprised by the nature of their response,” Levy says. “But I was surprised by the intensity. It was very, very sweet.”

Most of the 600 jobs were saved. As an ancillary (but hardly inconsiderable) benefit, the story generated positive publicity and goodwill for the hospital and for Levy himself. A CBS News report captured the sentiment: “The staff at Beth Israel Deaconess Medical Center in Boston made its name by caring for its patients,” the segment began, “but these days, they’re caring for each other.”

Now that the hospital has overcome its financial troubles, one lesson seems inescapably clear: let your constituents suffer alone and you may carry a black mark forever. Take the lead in sacrificing, and they’ll follow you proudly.

Richard S. Levick, Esq., is the president and chief executive officer of Levick Strategic Communications, a crisis and public affairs communications firm. He is the co-author of The Communicators: Leadership in the Age of Crisis and Stop the Presses: The Crisis & Litigation PR Desk Reference, and writes for Bulletproofblog. Levick is on the prestigious list of “The 100 Most Influential People in the Boardroom,” which is compiled by NACD Directorship Magazine. Reach him at rlevick@levick.com.

“Wall Street engineers must get ahead of what comes down the pike,” said Becky Quick, co-anchor of CNBC’s “Squawk Box,” who introduced Hu. Quick noted that SEC Chair Mary L. Schapiro tapped the University of Texas professor 13 months ago to head the first new division created by the Commission in 37 years because she had “identified someone that first started warning us about derivatives.”

Hu’s remarks focused on his “decoupling” concept as well as the importance of the Dodd-Frank Act, which he labeled the “most comprehensive change in generations… representing a new era for corporations and boards that introduces new challenges and opportunities. It is important to get the balance between corporate governance and financial innovation right.”

Less than two weeks after Hu addressed the NACD audience, his resignation was announced by SEC Chair Mary Schapiro. No replacement was immediately named and Hu told Bloomberg News the decision to depart was “completely my own. This seemed like a very natural point in terms of having accomplished the very basic goals” of setting up a new division, he said. Hu’s unit was created through the merger of separate SEC units that conducted economic analysis and identified emerging financial risks. He hired people who previously worked at hedge funds and on Wall Street, adding to an SEC staff primarily made up of securities lawyers. “I am deeply grateful to Henry for the great start that he has given the division, and for his valued judgment on a wide range of important substantive issues,” Schapiro said in the SEC’s statement. Hu told Bloomberg he looks forward “to going back to what I have loved for 20 years, which is research.”

Sugar Joins Apple Board
Apple Inc. has appointed Ronald D. Sugar, former chairman and CEO of Northrop Grumman Corp., as its board’s audit and finance committee chairman. The appointment expands the board to seven members, including Apple CEO Steve Jobs, Intuit Inc. Chairman Bill Campbell and former U.S. Vice President Al Gore.

Gender Differences Noted in Board Decision-Making
Greater board diversity may help improve the public’s trust in corporate boards after the financial crisis, perhaps in part because there are strong differences in opinion between how men and women directors view certain issues. A study conducted by Heidrick & Struggles, WomenCorporateDirectors and Dr. Boris Groysberg of Harvard Business School found that 65 percent of women and 35 percent of men believe increased boardroom diversity would be beneficial. However, only half of both groups believed that their board was adequately advancing diversity. Female directors were also more critical of their board’s performance and competitive compensation practices, but had greater faith that executive compensation and proxy access regulations would have positive effects.

Rise Seen in Third-Party Litigation Funding
Investors are looking to court battles as a new way to earn profits, by supporting medical malpractice claims, divorces and class action lawsuits and retaining a portion of the winnings, The New York Times reports. A review by the newspaper and the Center for Public Integrity found that while funds from banks, hedge funds or private investors make it possible for those with minimal financial resources to take their cases to court, investors can also become too involved in the court proceedings; interest paid to the investor could eventually total more than the winnings.

Director Comp Steady
Director compensation has remained relatively constant this year, according to a survey of board compensation practices of 600 mid-market public companies by the accounting firm BDO. The annual study found that directors had a median compensation increase of just two percent. Last year’s study predicted that compensation would normalize as the current economic situation and boards’ reactions to it shifted. The stability of director pay this year “can be attributed to the survival mode that a lot of companies are in, a lot of them are just holding the line,” said Randy Ramirez, Northeast practice leader for the Compensation and Benefits Practice at BDO. “They’re not trying to push the envelope.”

FedEx Giving 1.5 Percent of Profits
FedEx designates about 1.5 percent of its pretax profits for corporate giving, compared with the average 0.9 percent, a fact that CEO Frederick W. Smith said in a recent interview with The New York Times pays off for those they help as well as for shareholders. “It’s good business to be a good corporate citizen,” said Smith. “People absolutely make business decisions toward companies that have good corporate responsibility records.”

CalPERS to End ‘Focus List’
The California Public Employees’ Retirement System (CalPERS) has decided to change its method of pursuing companies that it feels are underperforming or have poor corporate governance practices. Previously, CalPERS released an annual “Focus List,” spotlighting companies that were unwilling to make improvements in corporate governance. Because a Wilshire Consulting study found that the firms CalPERS worked with privately to make changes outperformed the ones named on the publicly released Focus List, CalPERS has decided to dedicate more effort to private collaboration.

M&A on Track for Biggest Year Since 2007
The increase in mergers and acquisitions will continue in 2011, with global M&A deals expected to reach $3.04 trillion, according to a report from Thomson Reuters and Freeman Consulting Services, based on interviews with 150 executives. Although the numbers are unimpressive when compared to pre-recession figures, it would be the biggest year for M&A since 2007, when deals reached $4.28 trillion. Deals are expected to finish out this year at $2.23 trillion, an increase of 12.6 percent from the recent low achieved in 2009.

Moving On Up
The number of public company directors being promoted to CEO has significantly increased, a new study from Heidrick & Struggles finds. Between July 2009 and mid-October, 2010, 13 Fortune 1,000 companies named their own directors as permanent CEOs, and three were named interim CEOs. Four directors were named to the CEO position in the previous year.

To Thwart Poaching, Google Raises Salaries
Google bumped all 20,000 employees’ salaries up by 10 percent and promised a $1,000 holiday cash bonus, according to an internal email from CEO Eric Schmidt that was sent to Business Insider by an employee, who later was fired for the leak (and will not be receiving the salary increase or bonus). The move, which is expected to cost the internet giant around $1 billion a year, is described by analysts as an attempt to retain employees being wooed by Facebook and other competitors.

Director Quits Metha Energy Over Governance Issues
David P. Meachin resigned from the board of Metha Energy Solutions because of “disagreements with the company in relation to corporate governance matters,” according to the company’s 8-K filing to the SEC reporting his resignation, filed on November 9. Meachin’s resignation letter, dated October 11, specifies that he “lost confidence in Jesper Toft’s role as the CEO of the company based on his performance.”

CEOs More Confident
CEOs feel positive about the economic outlook for the next six months, according to a quarterly study on CEO confidence from the Young Presidents’ Organization. Only 12 percent of CEOs surveyed felt that economic conditions would worsen, while nearly half of executives were optimistic. CEOs also reported more frequently that their companies are planning on hiring; one in four had hiring plans this quarter, while only one in three did in the previous study. Sixty percent believed sales would increase over the next year.

Pressure to Donate
Sixty percent of business leaders surveyed feel pressure to contribute to political efforts, finds a poll conducted by Zogby International, commissioned by the Committee for Economic Development. Business leaders also reported concern about undisclosed donations to third-party political organizations, with 77 percent believing that companies should disclose all political spending. Half of the respondents familiar with the Supreme Court’s Citizens United decision in January to allow unlimited and undisclosed political spending disagreed with the ruling.

Fewer New Directors Are Also CEOs
Only 26 percent of new directors are active CEOs, compared with 53 percent 10 years ago, according to the latest edition of Spencer Stuart’s annual board study. The report finds that boards are more independent now, with a ratio of 3:1 outside to inside directors when the firm began its studies, to 5:1 today. Diversity has become more important to boards, with 44 percent seeking women and 47 percent reporting looking for minorities. In contrast, only 21 percent of new directors this year are female, and 12 percent are minorities.

McChrystal Joins JetBlue Board
JetBlue Airways has appointed retired General Stanley A. McChrystal to its board of directors. McChrystal is a 34-year U.S. Army veteran who most recently commanded the U.S. and NATO security mission in Afghanistan. McChrystal retired from the Army shortly after a Rolling Stone article earlier this year portrayed him in a light that “does not meet the standard that should be set by a commanding general,” said President Barack Obama at the time. JetBlue Corporate Secretary James Hnat cited McChrystal’s “depth of experience and the track record of leadership” as reasons for his appointment.

Total Realized Comp for CEOs Falls
Annual compensation rates for executives edged up 1.6 percent in 2009, while total realized compensation — which adjusts for changes in value realized on stock options and other vested equity income — slipped 0.3 percent, according to a recent report from The Corporate Library.

The results indicate a continued increase in base salaries and a modest increase in the number of bonuses that were handed out last year. Meanwhile, the category of all other compensation, in which companies typically disclose CEO perks, fell 18 percent from 2008, due in large part to fewer CEOs receiving tax reimbursements for certain perks.

Who’s Tops In CEO Pay
The Wall Street Journal released findings from consulting firm Hay Group on the top 10 most highly compensated CEOs in 2009:

• Liberty Media’s Gregory B. Maffei – $87,095,900
• Oracle’s Lawrence J. Ellison – $68,649,800
• Occidental Petroleum’s Ray R. Irani – $52,181,400
• Yahoo’s Carol Bartz – $44,613,900
• CBS’s Leslie Moonves – $38,932,700
• Viacom’s Philippe P. Dauman – $33,728,900
• Thermo Fisher Scientific’s Marc N. Casper – $33,048,200
• Boston Scientific’s J. Raymond Elliott – $32,102,500
• Polo Ralph Lauren’s Ralph Lauren – $27,024,300
• McKesson’s John H. Hammergren – $24,464,800

“The only explanation we can envisage for the continued major governance failings that have characterized the board’s stewardship is that the board, as currently composed, suffers from entrenchment and ossification, which renders each of its members incapable of functioning as vigorous and independent shareholder representatives,” the letter reads.

Occidental’s board is expected to scale back its executive compensation plans. Spencer Abraham, a former senator from Michigan who chairs Occidental’s executive compensation committee, told the Los Angeles Times, “We will make substantial changes to the structure of compensation to something that is much more in line with our peers.”

News Corp Drops Hurd, Names Lead Director

News Corp. said in its proxy statement that former Hewlett-Packard CEO Mark Hurd “has not been nominated for re-election to the board.” The media conglomerate ruled by Chairman and CEO Rupert Murdoch also named Sir Roderick I. Eddington—a director since 1999 and chairman of the audit committee—to a newly established lead director post. Murdoch has served as the global media company’s CEO since 1979 and as chairman since 1991. In considering its leadership structure, according to the proxy statement, “the board believes that the combined roles of chairman and CEO are appropriately balanced by the designation of a lead director with substantive responsibilities, the substantial majority of independent directors that comprise the board and the company’s strong corporate governance policies and procedures.”

Basel III Rules To Phase In Through 2018

Although global regulators have reached an agreement on Basel III, The New York Times reports that officials still need to reach agreements on limits for short-term bank risks and how to deal with banks and other firms deemed “too big to fail.” The Basel III Accord will triple the capital held by banks to cover risks, increasing it to 7 percent from 2 percent of assets. However, the rules will be phased in through 2018. Additional rules are on the horizon to deal with cross-border banks that could have adverse effects on the financial markets when they get into financial trouble.

Lead Directors Gain Clout

Lead directors are gaining clout on U.S. boards,” The Wall Street Journal’s Joann S. Lublin reports, “a development that gives the boards the potential to become more effective counterweights to powerful chief executives.” Lead directors today increasingly challenge top executives about risks, hold veto power over board agendas and often help settle disputes between companies and key institutional investors. “Lead directors’ increased stature is also evident in the number of times they’re tapped as temporary chief executives.” A King & Spalding analysis shows that 16 lead directors have assumed acting command since 2006.

Surge Seen In Fraud Tips

New awards for informants who help the Securities and Exchange Commission uncover fraud have resulted in a surge in tips. “The Dodd-Frank financial law passed in July provides for the larger bounties,” The Wall Street Journal reports, as “the program aims to get timely information from insiders close to a fraud so the SEC can bring a case quickly, limit the damage, and recover funds for victims.” Defense attorneys, though, caution that the program could spawn a flood of frivolous cases. The large bounties could also spur employees to report problems to the government rather than working through normal corporate channels and letting the company self-report any issues. William Jordan, a corporate defense attorney at Atlanta-based Alston & Bird, says, “It adds a level of inefficiency and hyper legalism to the way you’d want an ethical company to work.”

SEC: Moody’s Won’t be Charged

The SEC has decided not to charge Moody’s Investors Service for violating securities laws by failing to comply with its own procedures for rating complex derivative securities in 2007, The New York Times reports. The decision followed an SEC probe; the Commission used the opportunity to caution all of the national credit-rating agencies that it would use its new authority under Dodd-Frank to take action against similar conduct “even if it occurred outside the United States, as the Moody’s case did.”

Bank Bonuses to Come Earlier

With the specter of higher taxes looming in 2011 and banks still reeling from last year’s U.K. bonus tax, executives at some financial-services companies are considering whether to pay year-end bonuses­—traditionally doled out starting in January—sooner. Many firms are indeed looking to move part of their bonus payments from early 2011 to late 2010. Jones Day attorney Mike Shah told the WSJ: “It’s something companies ought to consider because it enhances employee morale and therefore shareholder value.” The early bonus might be a way for U.S. banks to soften the blow of likely smaller incentive payments as a result of softer revenue during the first eight months of the year.

Better Pay For Nonprofit CEOs

A compensation study by Charity Navigator that looked at the salaries of CEOs at 3,000 mid-to large-sized charities shows the median salary of top leaders was $147,273 in 2008, a 4.7 increase from the previous year, according to the Philanthropy Journal. A related story in the Houston Chronicle reported on the questionable increase in compensation for the top executive of the YMCA of Greater Houston, who is the highest paid CEO of any nonprofit human-service organization in the country. According to the Chronicle, “Compensation of charity executives has always been a hot-button issue for donors, who believe their dollars should mostly support programs and services. But federal and state officials are now expressing similar concern, especially as they try to provide services with fewer dollars.”

Director Compensation Barely Increases

Compensation for outside directors at the nation’s largest corporations remained relatively flat last year, as most companies continued a cautious approach to spending compensation dollars, according to a new analysis by Towers Watson. The analysis found that 2009 pay packages of directors at S&P 500 companies climbed just 1 percent over 2008 levels. Doug Friske, head of executive compensation consulting at Towers Watson, explained that companies have been hesitant to drastically alter pay for directors but added that the study “found that most of the handful of companies that reduced pay for their directors in 2008 have reinstated pay to levels set prior to the economic crisis.” Total compensation for outside directors at the companies studied increased to $200,698 last year, up slightly from a median value of $199,949 in 2008.

Authors Question

Shareholder Moxie on Proxy

Shareholder “say on pay” is one of the most notable portions of the landmark financial-reform legislation passed in July, because it aims to bring accountability to executive payrolls for all publicly traded U.S. corporations, reasoned Sarah Anderson and Sam Pizzigati in a recent Los Angeles Times op-ed. The co-authors of the new Institute for Policy Studies report, “Executive Excess 2010: CEO Pay and the Great Recession” assert that the legislation has codified almost the entire shareholder-driven agenda for pay reform by mandating independent corporate board compensation committees, clamping down on compensation consultants who have conflicts of interest and requiring corporations to disclose how their executive pay relates to actual financial performance. Still, the authors say that they suspect this legislative action will fail to end all of the outrageous incentives for reckless executive misbehavior, because it assumes that shareholders “once suitably empowered, will rise up and end executive pay excess.”

Whither Perqs

More than one-third of the Fortune 100 companies included in Equilar’s “2010 CEO Benefits & Perquisites Report” eliminated at least one perquisite program.  By comparing proxy information from 2005 to 2009, the Equilar report confirms what most of us already know: perqs are in a steady decline, prompted by SEC requirements for fuller disclosure.  In 2009, 34 percent of the Fortune 100 companies reported the complete elimination of certain programs.  Perqs that were discontinued most frequently? Tax reimbursements (so-called “gross ups”), insurance premiums and financial planning.

Jay Lorsch is the Louis E. Kirstein Professor of Human Relations at Harvard Business School. This post on The Harvard Law School Forum  on Corporate Governance and Financial Regulation blog is based on an article by Professor Lorsch and Professor Rakesh Khurana that first appeared in Harvard Magazine.

Like previous criticisms, the current complaints focus on two issues: executives are paid too much, and current incentive-pay schemes are flawed because the connection between executive pay and company performance is mixed at best—and at worst has led to a series of dysfunctional behaviors.

Whether executives are paid too much is highly contested. Some institutional shareholders, politicians, and the public (as measured by opinion surveys) believe that CEOs are overpaid, while other shareholders, board members, and executives themselves disagree. What cannot be disputed is that American CEOs make more money than CEOs in other countries, largely because of a greater reliance on incentive pay (see the details in the chart above). Further, American CEOs are paid increasingly large amounts relative to the average employee and their immediate subordinates. Finally, it is clear that the rise in executive pay contributes to the skewing of income distribution in the United States.

Less clear is evidence about the link between executive compensation and performance. The most comprehensive survey examining the link between CEO pay and performance found that changes in firm performance account for only 4 percent of the variance in CEO pay. [1] This may in part reflect CEOs’ ability to game the system, or even the perverse effects of incentives that promote dysfunctional behavior.

The solutions offered for the problems of excessive levels of executive pay and the need to strengthen the link between pay and performance often hit on the same themes: strengthen the independence of directors and compensation committees; increase the shareholders’ rights to elect directors and to express their views on compensation plans, to discourage gaming and align incentives more closely with the aims of the owners. It is also tempting to suggest that these problems can be solved by better compensation schemes or improved techniques to link CEO pay to stock performance.

We disagree with the premises underlying these remedies. Instead, we find that the current compensation trouble stems in large part from unexamined assumptions that have fundamentally changed the nature of executive compensation and radically shifted the way that boards, executives, and even the larger society regard the corporation and its broader purpose.

In fact, the problems of executive compensation are symptomatic of larger societal questions. They cannot be resolved without considering the purpose of executive compensation—what behaviors, attitudes, and values we are trying to motivate in our business leaders—and indeed the larger purpose of business in American society. We assert that the current approach to executive compensation is an outgrowth of a pervasive paradigm that boards, senior executives, and indeed even those of us educating future and current business leaders have adopted about the purpose of the corporation, what it means to be a business executive, and to whom and for what executives are responsible.

Click here for the entire post.

CEOs should be good at many things, but there is really only one thing they must be good at—that is thinking through complex problems and designing equally powerful solutions. It is time they applied their great minds to finding some obvious solutions to the perception of compensation. It would materially help regain lost ground and public confidence.

Don’t Like the Cards? Shuffle the Shareholder Deck
We get the shareholders we deserve. How much time do CEOs spend during ordinary times finding a better class of longer-term shareholders? Goldman Sachs’ Lloyd Blankfein understands the importance of building the right shareholders better than most, so he made sure in the crisis period that Buffett was on the roster. Other CEOs should be regularly visiting with and canvassing smart shareholders about holding their stock for longer periods with lock ups and benefits. In the theater business they call it papering the house, having a few friends in the right seats. It can bring on a round of applause just when the company needs it most.

While a global systemic breakdown has been declared the culprit by most leading economists, including Federal Reserve Chairman Ben Bernanke, popular opinion and the media have focused on the failure of risk-management processes at our leading banking institutions, and the cascade effect that had on all companies. Thus, the scrutiny and criticism towards management and board directors has been more pointed than in previous declines. While directors are moving swiftly to restore confidence in their institutions’ corporate governance, there is an equally urgent need to set the record straight with regard to how most boards performed versus the few in the spotlight, as well as the significant contributions now being made towards recovery.

To embark on such a mission, directors need to know what people are thinking and saying, and why. To obtain these important insights, Directorship and Deloitte collaborated to study the matter in detail, and in conjunction with Korn/Ferry International, set out to determine how the broader community—defined as “Main Street”—views the boardroom. In the course of our research, the opinions of teachers, laborers, policy makers, doctors, students, academics, and community leaders were sought (see Methodology, opposite). To gauge and compare those data with inside-the-boardroom views, we also asked the opinion of the C-suite, which includes board directors, chairmen, CEOs, and members of management.

The objective of “What Society Thinks? (about boards and business)” was principally to establish a baseline that, reviewed over time, would record changes in perceptions and point to where education and reform are needed, in terms of public opinion. Independent directors, says Henry Ristuccia, Deloitte & Touche LLP partner and U.S. leader of Governance & Risk Management, need to step back and determine the motivating factors for this perception and to the extent that there is genuine longer-term reputational risk. “The reason we contributed to this study is because we sensed a shift in perception, but wanted to be able to point to the exact causes. How dramatic has the change been? That will be answered by the research and subsequent studies every six months. What matters most are the lessons we can learn. It’s the same old issue that, if you don’t address the problem, then the regulators and legislators will do it for you.”

While many studies have focused on the more obvious question of “what the boardroom thinks,” there was a growing sense on the part of Directorship’s editors that a new measurement could be used to inform boards of directors what others think about them. As the data was analyzed, it was clear the results were instructional and constructive for its implications to directors and the C-suite at large. “There are always lessons to be drawn from challenging times, and today is no exception,” says Ray Lewis, managing partner, Deloitte LLP’s Center for Corporate Governance. “There are areas that proactive boards will focus on improving, whether they are about processes, sensitivities, or simply risk vs. reward metrics. In reviewing the data, we cannot predict whether societal attitudes will change quickly upon recovery or whether this is a longer-term shift. But providing directors and CEOs with a deeper understanding of the environment in which we are working is an important step.”

The institutions and organizations that share a commitment to good corporate governance are well aware of a shift in the public’s perception about boards and business, and have already taken action to address the issue proactively. In the fall of 2008, for example, the National Association of Corporate Directors (co-publisher of NACD Directorship) released Key Agreed Principles to Strengthen Corporate Governance for U.S. Publicly Traded Companies to show that boards are “leading the way” in restoring public and investor confidence in American boardrooms and C-suites. The initiative has led to a series of white papers, peer-to-peer meetings and, most recently, a Blue Ribbon Commission on Risk Governance.

Directors should also be willing to engage in a role that helps shape public opinion, says Steve Mader, vice chairman and managing director, of Korn/Ferry, if for no other reason than it is good for business. “We spend all our time on shipwrecks. Few would dispute that based on results, a small number of boards did not perform for their shareholders and their companies,” Mader says. “But my point is everyone, and especially directors, should join in the fight to shape public opinion rather than allowing it to be shaped for them. In the capital markets, value goes up and down by trillions of dollars driven by simple sentiment. That’s a trillion-dollar capital-formation challenge every morning.”

Seeking Answers
The specific objective of “What Society Thinks?” was to distinguish the views of   select groups on a variety of board-specific topics now the subject of intense debate, study, media attention, and regulation: for example, public opinion on issues ranging from accountability and transparency to environmental and social responsibility. Also examined was how well society understands the board’s role in dealing with issues such as corporate governance, compensation, labor, ethics, risk management, and the environment. How does society perceive the board’s role vs. the CEO? And how do the board and management see themselves in these contexts? These are the questions that the research set out to explore. “The intensity of negative publicity around American business, particularly in the automotive and financial-services sectors, has created a ripple effect at the corporate-governance level,” says Nels Olson, managing director of Korn/Ferry’s Eastern region and senior client partner in the CEO and Board Services practice. “On an annual basis, Korn/Ferry advises hundreds of boards on their composition and the selection of new directors. At the end of the day, consumers are the shareholders and we need to understand their perceptions, so we can properly guide our clients.”

The Directorship/Deloitte survey was organized into five broad categories: board duties and compensation, board responsibilities, opinion of board directors and CEOs, the economic crisis, and director and CEO compensation. In all, 39 questions were asked, including:

• How would you assess the credibility of board directors and CEOs today and how effective have they been during the economic crisis?

• Did CEOs and directors adhere to good corporate governance standards?

• How many hours do directors work and how much should they work?

• Is what directors and CEOs get paid fair?

• Should CEO compensation be capped and tied to company performance?

• How familiar are different constituencies with the responsibilities of a public-company board director?

• Should the role of the chairman and CEO be separated?

• What motivates CEO performance?

• Was criticism in the media of board directors during the economic crisis fair?

• Was criticism in the media of CEOs fair?

• Who was most responsible for the economic crisis?
  ]]> http://www.directorship.com/main-street-meets-c-suite/feed/ 1 http://www.directorship.com/cisco-chambers/ http://www.directorship.com/cisco-chambers/#comments Fri, 25 Sep 2009 14:56:25 +0000 News Editor http://www.directorship.com/cisco-ceo-chambers-received-14-2m-in-2009/ Cisco Systems CEO John Chambers received $14.2 million in compensation for the last fiscal year, up 16 percent from last year, reports the Associated Press. Cisco’s low revenues left executives with no payments from the company’s cash incentive plan this year, which in 2008, awarded Chambers $3 million. The board gave Chambers a discretionary bonus of $2 million for fiscal 2009, a reward for “vision and leadership” in guiding the company through the economic crisis, according to a Securities and Exchange Commission filing.
  ]]> http://www.directorship.com/cisco-chambers/feed/ 0 http://www.directorship.com/microsoft-ballmers-salary/ http://www.directorship.com/microsoft-ballmers-salary/#comments Mon, 21 Sep 2009 14:27:15 +0000 News Editor http://www.directorship.com/?p=10736 Microsoft increased CEO Steve Ballmer’s salary by four percent, according to the Associated Press. Ballmer’s salary increased to $665,883 from $640,833, according to a Securities and Exchange Commission filing. Last year, Ballmer took home a $700,000 bonus. Microsoft did not disclose Ballmer’s 2009 bonus, stock awards, or other performance-based pay in the filed proxy statement. The filing also laid out proposals to be voted on at Microsoft’s next shareholder meeting in November. A final version of the proxy statement with additional details is expected around October 1.
  ]]> http://www.directorship.com/microsoft-ballmers-salary/feed/ 0 http://www.directorship.com/sara-lee-barnes/ http://www.directorship.com/sara-lee-barnes/#comments Thu, 17 Sep 2009 13:50:35 +0000 News Editor http://www.directorship.com/?p=10627 Sara Lee CEO Brenda Barnes’ compensation rose 60 percent to $15.2 million for fiscal 2009 despite a 20 percent decline in the company’s stock price, reports Crain’s Chicago Business. The increase is due to $8.3 million in stock awards, which vested when she reached Sara Lee’s retirement age November 11. In its proxy statement, the company reported that Barnes received $4.4 million in “realized compensation” last year, or 41 percent of her possible compensation, because she failed to achieve incentive targets and her stock options remained under water.
  ]]> http://www.directorship.com/sara-lee-barnes/feed/ 0 http://www.directorship.com/ceo-corporate-perks-prevalent/ http://www.directorship.com/ceo-corporate-perks-prevalent/#comments Wed, 09 Sep 2009 15:42:28 +0000 Gretchen Michals Salois http://www.directorship.com/?p=9939 It’s no surprise that companies are scaling down perquisites for their chief executives. Throughout 2008 and early 2009, executive compensation became one of the highlights of what was wrong with Corporate America. Excessive paychecks and expensive perks fueled the anger of a downtrodden public. With shareholders experiencing extensive financial losses and companies receiving tax-payer-funded bailouts, the public demanded that the c-suite curtail spending and focus on rebuilding a sustainable financial future. A new report by Equilar demonstrates that during the year leading to 2009′s economic downturn, the prevalence of “key” perquisites actually increased overall from 2007 to 2008. Only compensation and nonqualified deferred compensation plans saw a drop in 2008.

  Among Equilar’s findings:

  • In 2008, CEOs at Fortune 100 companies received $348,101 in total other compensation compared to $356,175 in 2007.
  • Use of the corporate aircraft by Fortune 100 CEOs rose by 28.9 percent from 2007 to 2008, increasing from $109,743 to $141,477.
  • In 2008, 74 percent of Fortune 100 companies reported an increase in pension benefits for their CEO–$10.7 million in 2008 compared to $10.3 million in 2007.
  • Median value of nonqualified deferred compensation plan balanced fell from approximately $4.8 million in 2007 to $3.6 million in 2008.
  • In 2007, 21.1 percent of Fortune 100 companies reported eliminated perquisites, compared to 29.2 percent in 2008.

  In 2009, public backlash led to the decline of many of these perquisites. David Sasaki, associate research manager at Equilar notes that overall perquisites began to decline after the big three automakers used corporate planes to travel to Washington while requesting a taxpayer-funded bailout. “The area that has seen the most scrutiny is tax gross-up payments on perquisites, where companies pay for the taxes incurred from the receipt of a benefit such as personal aircraft usage,” adds Sasaki. “At least 11 Fortune 100 firms have cut this benefit and there are likely more since the data for this report was gathered.”

  With new Securities and Exchange Commission disclosure rules in effect for three years, it is now possible to compare data from fiscal years 2007 and 2008. In 2008, 29.2 percent of Fortune 100 companies reported the elimination of certain perquisite programs. These cuts either occurred during 2008 or will occur in the upcoming 2009 fiscal year. According to Equilar, among companies eliminating executive perquisites in 2008 and 2009, tax reimbursements, financial planning, and personal use of corporate aircraft were discontinued most frequently.

  ]]> http://www.directorship.com/ceo-corporate-perks-prevalent/feed/ 0 http://www.directorship.com/ca-swainson-retires/ http://www.directorship.com/ca-swainson-retires/#comments Wed, 02 Sep 2009 20:39:46 +0000 News Editor http://www.directorship.com/?p=9387 CA Inc. announced that CEO John Swainson plans to retire at the end of the year, reports the Associated Press. He may retire earlier if a successor if found before that time. While the company’s committee searchs for an appropriate successor, Swainson leaves the company with a $14 million severance package, according to the AP. Swainson is credited with rebuilding the company’s reputation after a $400 million accounting fraud scandal that sent former CEO Sanjay Kumar to prison two years ago from his role. Swainson has worked for the information technology management software company for five years. He will step down from the company’s board after he retires. William McCracken, who previously served as non-executive chairman of the board, will act as interim-executive chairman until a successor is found.
  ]]> http://www.directorship.com/ca-swainson-retires/feed/ 0 http://www.directorship.com/cfos-ceos-and-earnings-management/ http://www.directorship.com/cfos-ceos-and-earnings-management/#comments Wed, 02 Sep 2009 15:39:10 +0000 News Editor http://www.directorship.com/?p=9239 John (Xuefeng) Jiang, Kathy Petroni, and Isabel Wang of the Eli Broad College of Business, Michigan State University investigated whether CFO equity incentives are associated with earnings management in The Harvard Law School Forum on Corporate Governance and Financial Regulation blog. Research usually focuses on CEO equity incentives and how they affect earnings management, however, both commentators and policymakers have expressed a concern that CFO equity-based compensation might also contribute to earnings management. The results suggest that future research should consider compensation of CFOs when investigating incentives for earnings management. Most notably, the results confirm policymakers’ concerns over CFO compensation and provide indirect support for the SEC’s new requirement for disclosures of CFO compensation–which could be useful for investors and analysts to assess the quality of firms’ financial reporting.
  ]]> http://www.directorship.com/cfos-ceos-and-earnings-management/feed/ 0