compensation, Uncategorized

SEC Releases proposed compensation clawback rules

The Securities and Exchange Commission is considering new rules and regulations for compensation claw back policies. If the proposal is adopted, it will implement specific requirements from the Dodd-Frank Wall Street Reform and Consumer Protection Act, where companies listed with national securities exchanges and associations will have to develop and implement clawback policies.

In general, all listed companies must maintain a written claw back policy for the recoupment of certain compensation awarded to executive officers. Some of the specific terms of the executive summary include:

  • The claw back policy is triggered when an accounting restatement corrects a material error in a previous financial statement
  • The policy applies to incentive-based compensation granted within the preceding three years of the accounting restatement
  • Fault or lack thereof is irrelevant to the implementation of the clause

Under the proposal, the claw back clause must contain the following elements:

  • Description of the specific type of restatement that triggers the claw back clause;
  • Definition of what “incentive-based compensation” is subject to recovery under the claw back clause;
  • Statement of the specific time period covered in relation to when the compensation was received by the executive officer;
  • Explanation regarding who is covered under the clause;
  • Explanation about the amount of recovery authorized under the clause; and
  • Statement that recoupment is mandatory unless it is “impracticable.” meaning that the cost of recovering exceeds the total amount of recovered compensation.

For questions about this proposed regulation and possible implications for your company, contact our office to speak with an attorney.

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Uncategorized

Median CEO pay passes $10 million

For the first time ever, median CEO pay among the Standard & Poor’s 500 topped $10 million annually, marking the fourth straight year that CEO compensation rose.

The rise in CEO pay can largely be attributed to the strong performance of stocks in the past 12 months. Because executive compensation is increasingly tied to company performance, the success of the S&P index resulted in the stock component of executive compensation packages propelling median CEO pay above the $10 million threshold.

With bigger money on the table via stock options grants and performance rewards, it is becoming increasingly important to keep up with and understand the labyrinth of CEO pay. If you have any questions about how your executive compensation works, or are negotiating a new deal, contact us at Gordon Law Group.

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Uncategorized

Early Data for 2013 shows rise in CEO compensation

By now, you’ve heard all about Pay for Performance – executives’ bonuses are not predetermined anymore but instead based on the performance of the company in both the long and short-term. But by and large, shareholders have supported executives and paid them accordingly.

Here are some key statistics that show data in 2013 compared to 2012 (data from http://www.capartners.com):

  • Shareholder support at 97%, up from 95%
  • Median CEO bonus 100% of target in 2013 compared to 97% in 2012
  • 51% of executives rewarded with more than 100% of target bonus (meaning they exceeded target), compared to 47% in 2012
  • 49% of bonuses related to long-term incentives, up from 45%
  • 50% of companies modified the peer group
  • So what does the data tell us? It seems pretty evident that executive pay is rising, predominantly through meeting targets. Executive pay is also increasingly tied to the long-term success of the company, with executives rewarded for meeting long-term goals (usually over a three year period).

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