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Since Say on Pay went into effect in 2011, the concept of “pay for performance” has been the foremost trend in executive compensation, both in principle and practice. In response to regulation and pressure from proxy advisors and investors, companies have moved away from discretionary annual bonuses and stock options and toward performance share grants over the last five years.
Say on Pay (SOP) and shareholder advisor vote recommendations have caused a increase in the use of relative total shareholder return (TSR) as a long-term incentive (LTI) plan performance metric. Relative TSR prevalence in LTI plans has nearly doubled over the past 5 years, used by approximately 50% of companies of all sizes and industries. This is largely due to shareholder advisors, such as Institutional Shareholder Services (ISS), using TSR as the primary metric in their relative pay for performance (P4P) quantitative evaluations. ISS is appropriately attempting to enhance its company performance assessment model by adding 6 metrics. [1] This new approach is clearly a response to critics, but it presents a new set of challenges.
Progress achieved using quotas and targets, according to research
Women are still largely under-represented on corporate boards globally, despite continued efforts to improve boardroom gender diversity. Our 5th edition of our Women in the Boardroom report outlines efforts in over 60 countries to increase the number of women occupying board seats.
Just as with the relationship with the CEO, CFOs should not expect the board to trust them automatically. Rather, CFOs have to earn the board’s trust through sustained demonstration of transparency and regular communication about financial, audit and strategic issues, according to Charles Holley, retired CFO of Walmart. A CFO's ability to convey a sense of authority, wisdom and depth of knowledge of the business is key to establishing a trusted and solid relationship with the board.
Gatekeeper liability—the framework under which actors such as law firms, investment banks, and accountants face liability for wrongs committed by their corporate clients—is one of the most widely used strategies for controlling corporate wrongdoing. It nevertheless faces several well recognized flaws: gatekeepers may seek more to escape liability than to prevent wrongdoing by their clients; gatekeepers depend financially on the clients whose conduct they must monitor; and multiple gatekeepers act on major transactions, interacting with one another in ways that may produce gaps and overlaps in the gatekeeping net, undermining its deterrent force.
A growing number of countries, such as UK and France, have adopted tenure-related guidelines or tenure restrictions for independent directors. Most countries adopt a comply-or-explain approach to regulating tenure recommending a maximum tenure for a corporate director between nine and twelve years. In the United States however, where explicit limits are absent, a recent survey by GMI Ratings, the leading independent provider of global corporate governance and research, shows that 24% of independent directors in Russel 3,000 firms have continuously served in the same firm for fifteen years or more.
In 2016, the National Association of Corporate Directors (NACD) and Protiviti co-hosted a series of roundtables that brought together more than 60 directors to discuss current challenges and effective practices in board-level mergers and acquisitions (M&A) oversight. Based on insights from the roundtables and our experience serving clients in the M&A space, we offer the following keys to the board’s M&A oversight.
The corporate governance spotlight, at least in some circles, has often been on directors and shareholders. Today, the classic problems of some holding ‘other people’s money’, or the ‘separation of ownership and control’, have grown.
OF LIFE’s two certainties, death cannot be dodged even by the well-to-do. Taxes are another matter. Quantifying quite how much they manage to keep from the taxman, however, has always been tricky. One common approach governments take is to conduct randomised audits of tax returns.
Global leaders in infrastructure development confront a multi-trillion dollar gap in investment. New analysis from MGI estimates US$69 trillion of investment will be needed between now and 2035, write Jan Mischke and Diaan-Yi Lin in The Business Times of Singapore.
On April 26, 2017, the Conference of State Bank Supervisors (“CSBS”) sued the Office of the Comptroller of the Currency (“OCC”) in federal court in Conference of State Bank Supervisors v. OCC, alleging that the OCC’s plan to charter fintech companies as special purpose national banks is unlawful because the process the OCC used to develop the plan was procedurally defective and because issuing such charters would exceed the OCC’s authority.
In In re Appraisal of PetSmart, Inc. (May 26, 2017), which related to the acquisition of PetSmart, Inc. (the “Company”) by funds managed by private equity firm BC Partners, Inc., the Delaware Court of Chancery determined “fair value” for appraisal purposes to be equal to the merger price.
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While there has been considerable public focus and academic research on executive compensation, boardroom compensation has received relatively little attention. Boards perform increasingly crucial functions of advising and monitoring the executive team. Consequently, boardroom performance has important implications for corporate decisions. As a result of the 2008 financial crisis boardroom functioning, including director expertise, oversight practices, compensation, and board structure, has been under careful scrutiny by shareholders as well as by regulators, requiring directors to be more actively involved in strategic decision-making.
In this essay -- prepared for a Washington & Lee symposium on corporate law, governance, and purpose -- I propound a simple thesis: Corporate governance is best seen not as a subset of economics or even law, but instead as a subset of moral psychology.
With Ontario and Alberta set to raise their minimum wages to $15 an hour, the unintended consequences of this kind of fast and sizable increase may hurt low-income families
Boards have an important role to play in guiding their organizations’ culture. Learn some of the practices for directors to consider to ensure their oversight of culture is effective, and how they contribute to the organization’s “tone at the top.”
Read the latest edition of On the board’s agenda, a bi-monthly publication focused on topics that are top of mind for board members.
It’s easy for boards to get bogged down discussing financial and compliance risks. But that can mean that they’re not paying enough attention to risks that are truly critical. Directors need to make sure they’re focusing on the right key risks—the ones that could spell success or failure for the company.
"We are willing to engage. We want to be better," Procter & Gamble CEO David Taylor tells CNBC.
Greenlight Capital wants auto maker to split stock into two classes
In this final program in the Proxy Season webcast series, Latham & Watkins and Georgeson join together again to review the 2017 proxy season and the prospects for the balance of 2017.
The 2008 financial crisis was catastrophic for the U.S. banking industry. Between 2007 and 2014, 510 banks failed. Another 700-plus banks received some type of federal monetary assistance. Unsurprisingly, this led to calls to hold bank directors and officers legally accountable for harm they may have caused.
Matt Cropp, Associate Director of the Vermont Employee Ownership Center and Marjorie Kelly, Executive Vice President of the Democracy Collaborative, discuss employee and community ownership, with a specific discussion of the Keep BT Local Campaign.
While the importance of Physical Capital, Human Capital, and Intellectual Capital in corporations is well understood, there is another type of capital, perhaps equally important, which has received a lot less attention: Social Capital—broadly defined as the quality of the relationships that a firm, and its executives and employees, have built with other stakeholders. To date, most research on social capital has focused on the social capital of countries (or regions within countries), generally measured by the civic engagement of the population or the willingness of people in a society to trust each other, concluding that regions with more social capital enjoy higher economic growth. In a review article forthcoming in the Oxford Review of Economic Policy, we argue that the notion of social capital can also be applied to corporations.
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