In light of the probable strong interest executivecompensation will receive this year, law firm Wachtell, Lipton, Rosen & Katz hasreleased a memo to shed some light on a few key recommendations for director toconsider as they address such matters in 2008.
The memo, Executive Compensation 2008, focuses on several areas directors should pay heedto: focusing on the long-haul, pay-for-performance as well as retention, successionplanning, and wealth accumulation and internal pay equity, among others.
The memo stresses that employee retention at companiesshould be deemed just as important as pay for performance. “Attracting andretaining key employees in a competitive marketplace is essential to thesuccess of any business enterprise,” the note reads. “Given the recentdifficulties in the financial markets and economy generally, pre-establishedperformance goals may yield low or no bonuses.”
While activist investors continue to emphasize short-term gains, the memoexplains, companies should still focus on designing pay arrangements thatmotivate managers to focus on long-term objectives.
The note also touches on the subjects of compensationconsultants, Compensation Discussion and Analysis (CD&A), and disclosureand performance targets.