The Conference Board uses cookies to improve our website, enhance your experience, and deliver relevant messages and offers about our products. Detailed information on the use of cookies on this site is provided in our cookie policy. For more information on how The Conference Board collects and uses personal data, please visit our privacy policy. By continuing to use this Site or by clicking "OK", you consent to the use of cookies. 

07 Jan. 2010 | Comments (0)

There have been some developments on the executive compensation research front at The Conference Board. First, we have updated our Task Force on Executive Compensation Web site to include information about endorsing the Guiding Principles and secondly we have just this week released our Key Findings for the 2009 Top Executive Compensation Report. The Top Executive Compensation Report found, among many things, that the median CEO of the largest companies made $11.3 million in total compensation, more than 10 times that of the median CEO of the smallest companies. It also found that on average bonuses and stock options were down significantly in all but two industries. (The average share of compensation received in incentive pay increased in Energy and Food and Tobacco.) The Conference Board Governance Center members can access the Key Findings for free by clicking here. Non-Center members can purchase a copy here. The full report is also available for purchase by clicking here. As for the executive compensation task force Web site, in addition to pages on endorsing the Guiding Principles, we have included a list of endorsing organizations, a list of Task Force members, how to request a briefing on the Task Force report and endorsement process and media coverage. Of course, there is a link to the report itself.  The home page for the executive compensation task force is www.conference-board.org/knowledge/govern/executivetask.cfm. But one of the most helpful pages we created is a FAQ, which I have included in full with this post:

1. What are the principles established by The Conference Board Task Force on Executive Compensation?

Compensation programs should be designed to drive a company’s business strategy and objectives and create shareholder value, consistent with an acceptable risk profile and through legal and ethical means. To that end, a significant portion of pay should be incentive compensation, with payouts demonstrably tied to performance and paid only when performance can be reasonably assessed.

Total compensation should be attractive to executives, affordable for the company, proportional to the executive’s contribution, and fair to shareholders and employees, while providing payouts that are clearly aligned with actual performance.

Companies should avoid specified controversial pay practices, unless special justification is present.

Compensation committees have a critical role in restoring trust in the executive compensation-setting process and should demonstrate credible oversight of executive compensation. To effectively fulfill this role, compensation committees should be independent, experienced, and knowledgeable about the company’s business.

Compensation programs should be transparent, understandable, and effectively communicated to shareholders. When questions arise, boards and shareholders should have meaningful dialogue about executive compensation.

2. Why should I endorse these principles?

A significant regulatory reform debate has begun, and while the government has important responsibilities, trust in our corporate institutions can only be fully restored if private sector institutions take meaningful action. A key issue that private sector institutions must address is executive compensation.

We believe the Report establishes a set of guiding principles and recommendations, which, if appropriately implemented by private sector institutions, can restore credibility with shareholders and other stakeholders, and increase trust in executive compensation pay processes and oversight.

Further, there has been widespread recognition of endorsing companies’ proactive role with regard to executive compensation, through print, online and broadcast media coverage, continued profile raising with key influencers, among other efforts. This momentum will continue beyond the launch and into 2010.

3. Which organizations have endorsed the Task Force’s principles?

AFC Enterprises, Inc., AT&T Inc., California State Teachers' Retirement System, Cisco Systems Inc., Hewlett-Packard Co., NASDAQ OMX Group Inc., Securities Industry and Financial Markets Association (SIFMA) and Tyco International Ltd. Many other organizations are in the process of endorsement or are considering beginning the process.

4. What does endorsement mean?

It means that the organization has determined that the principles are rational and reasonable and agrees that it has already, or will shortly implement the principles into practice. The Task Force recognizes that actual implementation of the principles will vary based on their needs and context.

5. Who in my organization should be involved in the endorsement process?

Typically, bringing the question of endorsement of the principles can be brought forward in a myriad of ways—from individual directors or management or committees of the board.  Ultimately, endorsement of the principles is a decision for the full board of directors.  To assure the board has a full understanding of the principles and their implications for the company, the office of the Corporate Secretary, Chief Governance Officer or General Counsel typically evaluate the principles along with the relevant members of management and provide a report to the board, which includes the input of the CEO.

6. Do we need to completely comply with each of the Task Force recommendations to officially endorse it?

It is expected that implementation will vary by company and be dependent on the relevant company-specific facts and circumstances.  The Conference Board doesn’t place parameters on how the implementation of the principles is accomplished, nor refuse endorsement based on non-compliance of a single component of the recommendations.  Given the public scrutiny of executive compensation, however, each company should be prepared to explain its rationale for how it implements the principles.

7.  How will my public endorsement be communicated?

A list of public endorsements of the Task Force principles will be posted on The Conference Board Governance Center Web site and within all Task Force-related press releases. Any media questions about individual company endorsements that come to The Conference Board will be directed to the company.

8. What documentation will be required to endorse?

Once the organization has determined it will endorse the principles, The Conference Board will ask for a letter from the Chief Executive Officer or a board resolution indicating the company’s endorsement.  The Conference Board has not dictated the form of this endorsement confirmation. We have, however, provided a sample board resolution for your reference.

9. Who should I contact to about an endorsement?

Contact Paul DeNicola, Director of The Conference Board Governance Center. He can be reached by calling (212) 339-0221 or paul.denicola@conference-board.org.

  • About the Author:Gary Larkin

    Gary Larkin

    Gary Larkin is a research associate in the corporate leadership department at The Conference Board in New York. His research focuses on corporate governance, including succession planning, board compo…

    Full Bio | More from Gary Larkin

     

0 Comment Comment Policy

Please Sign In to post a comment.

    Subscribe to the Governance Blog
    SUBSCRIBE

    OTHER RELATED CONTENT

    RESEARCH & INSIGHTS

    What's Next for Employee Groups?

    What's Next for Employee Groups?

    January 08, 2020 | Executive Summary

    What's Next for Employee Groups?

    What's Next for Employee Groups?

    January 08, 2020 | Research Report

    WEBCASTS

    CONFERENCES & EVENTS

    Performance Management Conference

    Performance Management Conference

    December 08 - 09, 2020 | (New York, NY)

    2020 Succession Management Conference

    2020 Succession Management Conference

    November 05 - 06, 2020 | (New York, NY)

    The 2020 Executive Compensation Conference

    The 2020 Executive Compensation Conference

    October 22 - 23, 2020 | (New York, NY)

    Global Horizons

    Global Horizons

    October 06 - 07, 2020 | (Holborn, London)

    COUNCILS

    BLOGS

    PRESS RELEASES & IN THE NEWS