Director Roundtable: Executive Compensation and the Utility of Peer Groups

January 18, 2013

In collaboration with:

University of Delaware’s John L. Weinberg Center for Corporate Governance

Professor Elson and Messrs. Ferrere and Kay will debate their differing perspectives on executive compensation, including the role of peer groups and answer the question, “Are CEOs Compensated Appropriately?”

 Speakers

  • Charles M. Elson, Edgar S. Woolard, Jr., Chair in Corporate Governance, and Director, University of Delaware’s John L. Weinberg Center for Corporate Governance
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  • Craig K. Ferrere, Edgar S. Woolard, Jr., Research Fellow, University of Delaware’s John L. Weinberg Center for Corporate Governance
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  • Ira T. Kay, Managing Partner, Pay Governance LLC
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Moderated by James D. C. Barrall, Partner & Co-chair, Benefits and Compensation Practice, Latham & Watkins LLP
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The Debate

  

Program Materials

C.E.O.’s and the Pay-’Em-or-Lose-’Em Myth
22 September, 2012 | The New York Times
Corporations are forever defending big executive paydays. If we don’t pay up, the argument goes, our sharpest minds will jump to our rivals.

Executive Pay At a Turning Point (Selected sections)
October, 2012 | Pay Governance LLC
Executive compensation at major U.S. corporations has become more complex and controversial than ever. The combination of the ongoing economic and financial crisis that started in 2008 and the ensuing legislation that created Say on Pay votes has created more controversy and more pressure on executives, companies and their boards of directors. Despite, or arguably due to, these pressures, the pay model appears to be highly aligned with performance and thus very successful. To download the complete book from Pay Governance, please click here.

Executive Superstars, Peer Groups and Over-Compensation – Cause, Effect and Solution
Spring 2013 (Forthcoming) | Journal of Corporation Law
In setting the pay of their CEOs, boards invariably reference the pay of the executives at other enterprises in similar industries and of similar size and complexity. In what is described as “competitive benchmarking”, compensation levels are generally targeted to either the 50th, 75th, or 90th percentile. This process is alleged to provide an effective gauge of “market wages” which are necessary for executive retention. As we will describe, this conception of such a market was created purely by happenstance and based upon flawed assumptions, particularly the easy transferability of executive talent. Because of its uniform application across companies, the effects of structural flaws in its design significantly affect the level of executive compensation.

Peer Groups Understanding CEO Compensation and a Proposal for a New Approach
05 April, 2013 | Director Notes
This report discusses the comparative peer benchmarking approach that most large companies rely on to design their executive compensation packages and suggests that boards consider an internally focused approach instead.

 

Additional Resources from The Conference Board

Achieving Pay for Performance
14 December, 2012 | Director Notes
This report discusses the three dimensions of pay for performance, demonstrates how to measure them using historical pay data, and presents a simple pay plan that achieves perfect pay for performance using annual grants of performance shares.

Myths and Realities of Say on Pay “Engagement”
01 December, 2012 | Governance Center Blog
This blog post from Charles Nathan of RLM Finsbury looks at the debate around say on pay engagement and positions the say on pay discussion as just the start of a longer dialogue about executive compensation.

2012 Executive Compensation Conference KeyNotes Report
17 October, 2012 | Conference KeyNotes
Navigating the Management/Shareholder Partnership: Making Performance Really Matter

Defining Pay in Pay for Performance
25 September, 2012 | Director Notes
This report examines pay-for-performance (PFP) issues to consider in making year-end compensation decisions, designing pay plans, and drafting 2013 proxies. It also offers examples of how to define “pay” for PFP analysis and disclosure purposes.

U.S. Top Executive Compensation Report: 2012 Edition
28 August, 2012 | Research Report
This report examines salary and compensation for the CEO and top executives of 2,411 publicly traded companies in the United States in 2011.

Influence of Proxy Advisory Firm Voting Recommendations on Say-on-Pay Votes and Executive Compensation Decisions
12 March, 2012 | Director Notes
This report examines evidence of the influence of proxy advisory firm voting recommendations on shareholder voting outcomes, particularly say-on-pay votes, and presents findings showing the impact of those firms on the design of executive pay programs.

 

The Conference Board Governance Center Director Roundtables are regular sessions focused on key issues that impact the boardroom. For upcoming programs, and to access past session, please visit http://www.conferenceboard.org/directorroundtables.


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