About Four Years Ago

Fred Whittlesey

Compensation Venture Group, Inc.

I was updating my website this weekend, and revisited some "old" articles I had authored.  Way back in late 2007 through early 2008.

The field of equity compensation has gone through such tremendous upheaval over the past four years, I was ready to delete these links until I pondered for a moment the titles, that could have been written and be relevant just this week:

"Who are your peers?  The SEC Wants to Know"

"The New Era of Equity Compensation:  Performance Plans"

"The Return of Cash Long-Term Incentives"

Because these were all written at the time for Salary.com (now Kenexa) where I was a Fellow, whatever that is or was, I can't update them, per se.

Then I read them, and realized they hardly need updating.  In fact, the premise of each has been strengthened over the past 4 years and there are even more pressures on the three topics. Sure, the data references need to be recent and there are more inputs to the issue - primarily the new Dodd-Frank disclosures (CEO pay ratio and CEO pay-for-performance).

Consider, since 2007/2008:

• Investor, proxy adviser, and SEC scrutiny has extended from how executives are paid versus peers, to which companies are actually in the peer group and how that peer group was determined.
  
  
• Performance plans, somewhat avant garde back in 2007, are fast becoming a mandated approach in the US as we are now in the say-on-pay era - exactly the pattern we saw in the UK with the advent of say-on-pay.  Now this solution has become yet another problem, as I have written and presented on.
  
  
• And cash long-term incentives, still under the radar due to compensation survey firms' and proxy data services' inadequate tracking of them, are growing in prevalence faster than reported, due to the odd combination of shareholder concerns about dilution and many companies with large amounts of cash on their balance sheet.

Taken together, these issues create chaos for trying to understand how much an executive was "paid" so that everyone can chime in on whether the number is just too big, too big relative to the average worker, and/or too big relative to company performance.  When very different forms of compensation are awarded, we run into the issue of "granted" vs. "earned" vs. "realizable" vs. "realized"...and more.

Each of these three written pieces deserves an update, I mean a fresh authoring, which I will do over the next few weeks.  While I'd like to pat myself on the back for being prescient on these issues, I think we all should have seen these three things coming and now we have even more to discuss.

Anyone want to predict what we'll be discussing in 2015?  Yikes.