Wachtell, Lipton Issues Advisory on Pay

In light of the probable strong interest executive compensation will receive this year, law firm Wachtell, Lipton, Rosen & Katz has released a memo to shed some light on a few key recommendations for director to consider as they address such matters in 2008.

The memo, Executive Compensation 2008, focuses on several areas directors should pay heed to: focusing on the long-haul, pay-for-performance as well as retention, succession planning, and wealth accumulation and internal pay equity, among others.

The memo stresses that employee retention at companies should be deemed just as important as pay for performance. “Attracting and retaining key employees in a competitive marketplace is essential to the success of any business enterprise,” the note reads. “Given the recent difficulties in the financial markets and economy generally, pre-established performance goals may yield low or no bonuses.”

While activist investors continue to emphasize short-term gains, the memo explains, companies should still focus on designing pay arrangements that motivate managers to focus on long-term objectives.

The note also touches on the subjects of compensation consultants, Compensation Discussion and Analysis (CD&A), and disclosure and performance targets.