The Conference Board Task Force on Executive Compensation Recommends Corporate Practice Reforms

Press Release / News

Sept. 21, 2009

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The Conference Board Task Force on Executive Compensation today issued recommendations for corporate institutions to restore credibility and increase trust in pay practices and oversight.

The Task Force and its report continue the long history of principled leadership by The Conference Board – the global, independent business-membership and research association working in the public interest – and its Governance Center.

A significant regulatory reform debate has begun, and while government has important responsibilities, the Task Force believes that public companies and institutional shareholders also have a role and should take meaningful action to restore the trust that has been lost during the economic crisis.

"Shareholders of American companies and the public deserve to see executive compensation programs that serve shareholders' interests and are explained to shareholders in thoughtful dialogue. Implementing the compensation principles we recommend is an important step in restoring the damaged trust in American companies," said Robert E. Denham and Rajiv L. Gupta, co-chairs of The Conference Board Task Force on Executive Compensation. "At the same time, we believe compensation committees and boards must be free to develop compensation programs that reflect their shareholders' interests and fit their companies' business objectives."

Denham and Gupta continued, "Real – and perceived – abuses in executive compensation have contributed to this loss of trust, and the Task Force report provides a practical set of guidelines that, if appropriately implemented, can make significant progress in restoring credibility in our corporations. We believe that a rules-based, 'check the box' approach cannot substitute for thoughtful board action discussed with shareholders."

Convened earlier this year by The Conference Board Governance Center, the Task Force and its Advisory Group are comprised of corporate directors, shareholders, academics, and experts in compensation, governance and law. The full set of guiding principles and recommendations for compensation practices is outlined in the just released report: The Conference Board Task Force on Executive Compensation.

The Guiding Principles state that public companies should:

Establish a clear link between pay, strategy and performance;
Provide compensation that is fair, affordable and clearly aligned with actual performance;
Eliminate controversial compensation practices that conflict with the notions of fairness and pay for performance – such as excessive golden parachutes, overly generous severance arrangements, gross-ups of parachute payments or perquisites, and golden coffins – unless specific justification exists;
Demonstrate credible board oversight of executive compensation; and
Foster transparency with respect to compensation practices and appropriate dialogue between boards and shareholders.

The Task Force encourages public companies to act now to demonstrate their commitment to best practices in executive compensation by adopting the Guiding Principles. A number of corporations have already made this commitment.

"We believe the work of the Task Force can result in meaningful change in corporate compensation practices. A diverse group of leading public companies have not only endorsed our principles, but have also pledged to implement the report's recommendations, and we expect others to sign on," Denham and Gupta said. "Perhaps more importantly, we have significant support from investors and leading voices on executive compensation, reflecting that the report represents interests on both sides of the debate."

The full report of The Conference Board Task Force on Executive Compensation can be found here: http://www.conference-board.org/ectf

Task Force Members:

Robert E. Denham (co-chair) – Partner, Munger, Tolles & Olson LLP; Former Chairman and CEO, Salomon Inc; Director, Wesco Financial Corporation, Chevron Corporation, Fomento, Economico Mexicano S.A.B., The New York Times Company
Rajiv L. Gupta (co-chair) – Former Chairman and CEO, Rohm and Haas Company; Director, The Vanguard Group, Inc., Tyco International Ltd., Hewlett-Packard Company
David R. Andrews – Former Senior Vice President Government Affairs, General Counsel and Secretary PepsiCo, Inc.; Former Chairman, McCutchen, Doyle Brown and Emerson; Lead Director, Union Bank Corporation, Pacific Gas and Electric Company, James Campbell Company LLC
Peter C. Browning – Lead Director, Nucor Corporation, The Phoenix Companies, Inc.; Director, Acuity Brands, Inc., EnPro Industries, Inc., Lowes Companies, Inc.
Richard E. Cavanagh – Former President and CEO, The Conference Board; Director, Arch Chemicals, Inc., The Fremont Group, The Guardian Life Insurance Company of America; Non-executive Chairman, BlackRock Mutual Funds
David B. Dillon – Chairman & CEO, The Kroger Co.; Director, Convergys Corp.
Richard C. Ferlauto – Director, Corporate Governance and Pension Investment, American Federation of State, County and Municipal Employees (AFSCME)
David R. Goode – Director, Caterpillar, Inc., Delta Airlines, Inc., Texas Instruments, Inc., Russell Reynolds Associates; Retired Chairman, President and CEO, Norfolk Southern Corporation
Joel Hyatt – CEO, Current TV, LLC; Director, Hewlett-Packard Company
R. William Ide, III – Chairman, Governance Center Advisory Board, The Conference Board; Director, AFC Enterprises, Inc, Albemarle Company; Partner, McKenna Long & Aldridge LLP; Former President, American Bar Association and General Counsel of Monsanto Company
Lynn S. Paine – John G. McLean Professor of Business Administration, Harvard Business School; Director, RiskMetrics Group, Inc.
Lord Charles David Powell – Director, Caterpillar Inc., Hongkong Land Holdings Ltd., LVMH Moet Hennessy Louis Vuitton, Magna Holding International, Mandarin Oriental International Ltd., Matheson and Co., Northern Trust Global Services, Schindler Holding AG, Textron Inc.
Hans Wijers – Chairman and CEO, AkzoNobel N.V.; Non-executive Director, Royal Dutch Shell

Supporters as of September 21, 2009 include:

Organizations:

AFC Enterprises, Inc.
AT&T Inc.
California State Teachers' Retirement System
Cisco Systems, Inc.
Hewlett-Packard Company
NASDAQ OMX Group, Inc.
Securities Industry and Financial Markets Association (SIFMA)
Tyco International Ltd.

Individuals:

Robert Burrus – Director, Smithfield Foods
Professor Colin Mayer – Dean, Saïd Business School, University of Oxford
Roderick M. Hills – Former Chairman, U.S. Securities and Exchange Commission
Glenn Hubbard – Dean of Columbia University Business School
Sir Mark Moody-Stuart – Chairman, Anglo-American; Former Chairman, Royal Dutch Shell
Sir David Walker – Head, UK Government Review of Corporate Governance of the Banking Industry; Former Chairman, Morgan Stanley International

ABOUT THE CONFERENCE BOARD TASK FORCE ON EXECUTIVE COMPENSATION

The Conference Board Governance Center convened the Task Force on Executive Compensation in March 2009 to address the loss of public trust in the processes for oversight of executive compensation. The Task Force is co-chaired by: Raj L. Gupta, former Chairman and Chief Executive Officer of Rohm and Haas and a Trustee of The Conference Board; and Robert E. Denham, Partner in the law firm of Munger, Tolles & Olson LLP and former Chairman and Chief Executive Officer of Salomon Inc. Bill Ide, Chairman of the Advisory Board of The Conference Board Governance Center, former General Counsel of Monsanto Company and President of the American Bar Association, is serving as Director of the Task Force. Barbara Blackford of Superior Essex Inc. served as counsel for the Task Force. The report of the Task Force on Executive Compensation is the view of the Task Force and does not necessarily represent the views of the companies or organizations with which members of the Task Force are affiliated.

ABOUT THE CONFERENCE BOARD

The Conference Board is a global, independent business-membership and research association working in the public interest. Our mission is unique: To provide the world's leading organizations with the practical knowledge they need to improve their performance AND better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. For additional information about The Conference Board, visit our website at www.conference-board.org.

Also on this topic:

The Conference Board publishes research reports each fall on Top Executive Compensation, Directors' Compensation and Board Practices, and Salary Increase Budgets in publicly traded U.S. companies. It also produces a wide range of additional research in the areas of compensation and governance, and convenes five compensation-focused Councils around the world.

For further information contact:
Frank Tortorici
(1) 212 339 0231
f.tortorici@conference-board.org