Compensation Turkeys of the Year, and a RiskMetrics Update For Dessert
Just In Time For Thanksgiving - The Compensation Turkeys of the Year!
At Thanksgiving, our thoughts naturally turn to gluttony of all sorts. So it seems like a fitting time to recognize a few companies for granting awards to their executives that look so ridiculous they practically beg Congress to speed up compensation reform. A great place to look for these examples is the footnoted.org blog, which prides itself on posting the interesting stories "found in the footnotes" of SEC filings.
So pass the cranberry sauce and gravy, here are my nominees for the "Compensation Turkeys of the Year", all reported by footnoted.org in the past few weeks:
- Of course, Goldman Sachs makes the list for its announcement that it is setting aside around $17 billion for compensation and bonuses, calculated to be more than $700,000 on average for each of the company's 31,700 employees. I blogged about this last month. The bonuses are based on Goldman's financial results for the current year, and commentators disagree on how much the results were enhanced by the government bailout of AIG and other financial companies.
- Allis-Chalmers reported recently that healthcare benefit premiums and expenses for its CEO exceeded $72,000 last year. (That buys a lot of aspirin.)
- Microsoft announced that, for one new executive, they paid a relocation allowance of $4.1 million, and a related tax gross-up of $1.2 million.
These aren't the only examples of compensation that grab your attention, but they are just the most recent obvious ones. As Mark Borges pointed out at the NASPP Annual Conference and other presentations, when companies eventually are required to have advisory votes on executive pay (Say-on-Pay), most companies' compensation will be approved. However, to prevent a "no" vote, they will need to think about the compensation practices that appear the most excessive - personal use of corporate jets, tax gross-ups, etc. It will be interesting to see whether, in a couple of years, after compensation reform, the Compensation Turkeys of the Year will be extinct birds. Don't count on it.
If you have any other Compensation Turkeys of the Year you would like to report, send me an e-mail. (As with any other good whistleblower policy, I won't use your name unless you give permission.)
By the way, the picture above shows the family of wild turkeys that hung out in our back yard for the past few months. Leading up to Thanksgiving, though, I haven't seen them lately. Times are tough.
Anyway, have a fantastic Thanksgiving!
RiskMetrics Update
Last week I reported that RiskMetrics Group came out with its 2010 updates to its proxy voting guidelines, summarized here. The compensation policy has changed more in form than in substance from last year, integrating separate policies into a single policy. RiskMetrics also clarified its methodology when it has compensation-related recommendations for a company based on its analysis. If that company has a Say-on-Pay proposal on the ballot, RiskMetrics will generally apply its recommendations to that resolution. However, if egregious practices are identified, or if a company previously received a negative recommendation on a Say-on-Pay resolution and the issue is not resolved, RiskMetrics may recommend a withhold vote with respect to compensation committee members.
The new governance policy also changes RiskMetrics' standards when making recommendations with respect to shareholder rights plans and revises its director independence standards.
