Headlines about "Executive benefits"
Gathered from the web by the editors at BenefitsLink.com.
Will the SEC Apply New Executive Compensation Disclosure Rules for 2010 Proxy Season?
Excerpt: "[On November 5, 2009], John White (former Director of the SEC's Division of Corporation Finance, now with a small NY law firm known as Cravath) and Paula Dubberly (currently Associate Director) each commented that: 'you probably ought to begin drafting your officers and directors questionnaire based on the new rules.' It doesn't sound promising." (Executive Compensation Blog by Michael Melbinger of Winston & Strawn)
[Guidance Overview] Towers Perrin Monthly Regulatory Round-Up: Executive Compensation (PDF)
Excerpt: "The Monthly Regulatory Round-Up is a high-level summary of legal and regulatory developments that occurred during the past month that may be relevant to large employers." (Towers Perrin)
[Guidance Overview] Federal Reserve Board Enters Executive Pay Debate with Proposal for Oversight of Incentive Compensation
Excerpt: "The proposal does not create specific compensation guidelines or impose specific limits on executive pay. Rather, the Fed has advanced a series of principles for supervisory review of incentive pay programs. Under the proposal, incentive compensation arrangements must (i) provide incentives that do not encourage excessive risk-taking beyond the organization's ability to effectively identify and manage the risk, (ii) be compatible with effective controls and risk management and (iii) be support by strong corporate governance, including active and effective board oversight." (Kilpatrick Stockton)
[Guidance Overview] IRS Begins Section 409A Audits
Excerpt: "This news may come as an unwelcome surprise to many who were hoping that the complexities and uncertainties of Section 409A might delay the IRS's enforcement efforts until more guidance was available and practices further developed. Information Document Requests ('IDRs') from the IRS to companies undergoing audits reveal that the IRS requires an audited company to disclose details of pay practices that could be subject to Section 409A and also to consider the possible application of Section 409A to these practices." (Jones Day)
[Guidance Overview] California Supreme Court Affirms Employer's Right to Offer Voluntary Equity Plan
Excerpt: "In a decision strengthening the right of employers and employees to negotiate the terms of employees' compensation, the California Supreme Court in Schachter v. Citigroup, Inc. . . . . affirmed summary judgment against an employee who claimed that his incentive compensation plan violated the California Labor Code." (Morgan Lewis)
Towers Perrin U.S. Legislative Tracking Chart: Retirement and Executive Compensation (PDF)
Excerpt: "Thousands of bills are introduced in Congress but only a select few are summarized on this chart. This selection represents our best judgment on the likelihood of enactment and the relevance of the issue for employers." (Towers Perrin)
[Guidance Overview] Section 409A Errors That Can Still Be Corrected by December 31, 2009
Excerpt: "Although December 31, 2008, was the official deadline for bringing all deferred compensation plans and agreements into compliance with the new IRS regulations under Code ?409A, there are still several steps an employer can take by the end of 2009 to correct, or at least mitigate the effect, of failures to comply with ?409A." (Seyfarth Shaw)
Executive Pensions Reportedly Soar as Companies' Value Plummets
Excerpt: "Massive executive-pension growth was driven in part by generous pension formulas and little-scrutinized arcane techniques, the Wall Street Journal reported Tuesday." (Fox News)
[Guidance Overview] Deadline Approaches to Bring Qualified Performance-Based Compensation into Compliance with Section 162(m)
Excerpt: "In 2008, the Internal Revenue Service . . . issued Revenue Ruling 2008-13, which held that compensation arrangements that permit payment of performance-based compensation upon termination of the covered employee's employment (regardless of whether the performance goals are achieved) will not constitute qualified performance-based compensation, which is exempt from the $1 million per year deduction limit under Section 162(m) of the Internal Revenue Code . . . . Compensation arrangements covered by this Revenue Ruling generally should be amended by December 31, 2009 to avoid this adverse treatment." (Troutman Sanders)
[Guidance Overview] The Perfect Storm Swirling Around Executive Compensation and the Related Corporate Governance
Excerpt: "In addition to [SEC and IRS] regulation, the Financial Accounting Standard Board issued Statement 123(R) in 2006 requiring companies to estimate the amortized expenses of stock options on their income statements and has continued to regulate the disclosure of post-retirement medical and other benefit obligations under FASB Statement 158. All these measures are ways in which executive compensation has been subject to increasing regulation and disclosure requirements." (Haynes and Boone)
[Guidance Overview] Perform Year-End Review of Nonqualified Deferred Compensation Plans for 409A Operational Failures
Excerpt: "Employers that maintain nonqualified deferred compensation plans should strongly consider adding a review of operations for Section 409A non-compliance to their end-of-the-year to-do lists. If operational failures are identified and corrected before the year has run out, it may be possible to avoid some or all of the adverse consequences that would otherwise result under 409A by taking advantage of the relief provided under IRS Notice 2008-113." (Faegre & Benson)
[Guidance Overview] Last Chance to Fix Bonus Plans and Severance/Employment Agreements
Excerpt: "For those companies who have not yet revised their bonus plans or severance/employment agreements to comply with the IRS interpretation of Internal Revenue Code (Code) section 162(m) in Rev. Rul. 2008-13, 2008-10 IRB 518, now would be the time to do that in order to avoid a deduction disallowance for the 2010 annual bonus (and for long-term bonuses with a performance period beginning January 1, 2010)." (Miller & Chevalier)
[Guidance Overview] Federal Reserve Proposes Supervisory Initiatives Over Compensation Practices at Banks (PDF)
5 pages. (Buck Consultants)
More 409A Relief Coming?
Excerpt: "A hot new rumor in the world of executive compensation professionals is that the IRS will be announcing a 'one last chance to fix your documents for 409A' program in the very near future (okay, so we tend to get excited by little things). IRS Senior Counsel Stephen Tackney made the announcement at an ABA meeting. Apparently the document correction program would function like the operation failure correction program in IRS Notice 2008-113. That is, plan sponsors would have to self-correct the errors and bear any costs associated with the correction. However, Mr. Tackney also suggested the plan sponsors must attach information about their corrections to their tax returns for the year and affected participants must attach the same information to their personal returns." (Michael Melbinger via Winston & Strawn LLP)
[Guidance Overview] Federal Reserve Proposed Supervisory Initiatives Over Compensation Practices at Banks (PDF)
5 pages. Excerpt: "Comments Requested: The FRB is seeking comments on whether the proposed guidance would impose undue burdens on, or have unintended consequences for, banking organizations and, particularly, regional and small organizations. It has been estimated that the proposed guidance, if adopted in final form, would apply to 3,002 small banking organizations (defined as banking organizations with $175 million or less in total assets). Comments are requested by November 27, 2009. Conclusion: In light of the FRB's proposed guidelines, all banking organizations, large and small, should start to take immediate steps to evaluate their incentive compensation arrangements and related risk management, control, and corporate governance processes and immediately address deficiencies." (Buck Consultants)
Details on the Pay Czar's Cutbacks on Executive Pay
Excerpt: "[O]ne aspect of the Special Master's process troubled me. By his own account, the Special Master did not consult one person in the private sector (i.e., those of us actually working with executive compensation issues on a daily basis in the real world, as opposed to pondering them in the abstract). The professors with whom he consulted are brilliant people no doubt, but I wonder whether any of them have actually attended a Compensation Committee meeting or negotiated an employment agreement?" (Michael Melbinger via Winston & Strawn LLP)
[Opinion] Crackdown on Executive Pay: Too Much or Not Enough?
Excerpt: "Last week, the Obama administration's 'pay czar,' Kenneth Feinberg, announced that the government will impose caps on compensation for the 25 highest-paid executives at seven companies that received 'exceptional assistance' through the Troubled Asset Relief Program -- including American International Group (AIG), Bank of America, Citigroup, Chrysler, Chrysler Financial, General Motors and GMAC. Under the new regulations, salaries will be reduced by an average of 90%, and total compensation (including bonuses and stock options) will be lowered by 50%. Knowledge@Wharton spoke with Wharton accounting professor Wayne R. Guay and then with finance professor Alex Edmans about what these changes could mean for Wall Street, company shareholders and taxpayers. The [target page] is an edited transcript of the interviews." (Wharton School of the University of Pennsylvania)
Pay Czar Cuts Total Compensation, Increases Base Pay for Some Executives
Excerpt: "While Treasury Department pay czar Kenneth Feinberg cut by half total executive compensation at seven firms that received bailout packages, he substantially increased regular salaries or base pay, according to the Wall Street Journal. An analysis of government data by the Journal shows that on average, base salaries climbed to $437,896 a year as a result of Feinberg's review, compared with $383,409 previously - a 14% increase. Of the 136 employees under Feinberg's review, 89 saw their base salaries increase." (PLANSPONSOR.com; free registration required)
Last Chance for Some Companies to Amend Incentives to Secure 162(m) Deductions
Excerpt: "Employers that want to deduct incentives granted to executives in 2010 without hitting Section 162(m)'s $1 million cap on deductible pay should act now to review these arrangements. Incentive plans that guarantee payment on termination for good cause, involuntary termination or retirement may not qualify as performance-based compensation exempt from the 162(m) limit. IRS transition relief for many arrangements expires at the end of 2009." (Mercer LLC)
IRS Personnel Share Unofficial Comments on Compliance Issues with ABA Employee Benefits Committee
Excerpt: "IRS representatives shared their unofficial views on certain benefits issues that were presented earlier this year by the Employee Benefits Committee of the Tax Section of the American Bar Association. Although the views cited by the IRS representatives are not binding and do not represent the policy of the agency, they provide useful insight into areas of concern. Some of the notable unofficial and non-binding views shared by the IRS representatives were the following . . . ." (Deloitte via BenefitsLink.com)
What Sponsors and Advisors Should Know About Retirement Plans
Excerpt: "According to a 2007 U.S. Labor Dept. survey, 68% of small business owners feel unprepared for retirement and just 42% maintain a retirement plan. Here are four frequently overlooked tips about retirement plans for plan sponsors and their advisors." (BusinessWeek)
TARP Special Master Cuts Executive Pay
Excerpt: "Steep pay cuts will have to take place at the seven companies receiving exceptional TARP assistance -- AIG, Citigroup, Bank of America, Chrysler, General Motors, GMAC and Chrysler Financial -- Kenneth Feinberg, special master for TARP executive compensation, has ruled. While the pay curbs affect a limited number of employees and employers, the underlying compensation principles may draw wider attention from other regulators and stakeholders." (Mercer LLC)
Prevalence and Design of Executive and Director Stock Ownership Guidelines Among the Top 250 Companies (PDF)
21 pages. Excerpt: "The past year may prove to be another important year in the evolution of stock ownership guidelines and their prevalence among the Top 250 companies. The dramatic market decline has once again refocused investor attention on reinforcing alignment of interests between executives and directors and long-term shareholders. In addition, the fall in stock prices has affected executives' and directors' abilities to comply with stock ownership guidelines, encouraging companies to reexamine their policies. As presented in this report, the Top 250 companies commonly employ value-based ownership guidelines under which the number of shares required to be owned fluctuates based on changes in stock prices." (Frederic W. Cook & Co., Inc.)
Curbing Excessive Executive Compensation by Making It Non-Deductible
Excerpt: "Aaron Zelinsky . . . proposes curbing excessive executive compensation by making it nondeductible. The best part: the IRS can do it by simply re-interpreting an existing provision of the tax code, so there's no need for a bruising political battle in Congress." (Workplace Prof Blog)
Some Retiring CEOs Take Good Stock Prices with Them, Study Says
Excerpt: "A new study indicates that companies that use Supplemental Executive Retirement Plans (SERPs) could see their shares suffer when the CEO departs. The study found that for Fortune 1000 companies in the 1997-2006 period, stock prices lagged those of peers by 8.3% over three years following the retirements of CEOs whose SERPs were based on their performance in their last years, Reuters reports. Professor Paul Kalyta of McGill University in Montreal, author of the study, said the CEO 'has strong incentives to make accounting choices that increase firm short-term income and, therefore, amplify the value of his/her pension,' leaving the shares of companies with big CEO SERPs 'temporarily overpriced.'" (PLANSPONSOR.com; free registration required)
Bailed-Out Firms Ordered to Slash Top Pay
Excerpt: "The Treasury Department today ordered seven companies that received billions of dollars in government bailouts to halve total compensation for their top executives. But the big reductions will not apply to pay earned before November. Kenneth Feinberg, the Treasury official leading the pay review, told reporters that average salaries for the top 25 executives are being cut 90 percent starting next month. The action will apply to the top executives at Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial." (DelawareOnline)
Government to Order Pay Cuts at AIG, Other Firms
Excerpt: "The Obama administration reportedly will order American International Group Inc. and other bailed-out companies to slash the compensation of their highest-paid executives. The New York Times and the Wall Street Journal, citing people familiar with the administration's plans, reported Wednesday that the move stems from the growing furor over executive pay at companies that have received federal bailouts." (Business Insurance)
IRS Mounts Audit Initiative Targeting Misclassification and Fringe Benefits
Excerpt: "In the next few months, the IRS will commence an audit initiative intended to study compliance in the areas of payroll taxes, independent contractor (IC) status and fringe benefits/executive compensation arrangements. One of the goals is to reduce: (1) the tax gap by increasing tax compliance' and (2) the number of 'misclassified' ICs. A likely secondary objective, and one urged by the Government Accountability Office (GAO), is to ensure benefits coverage and 'labor protection' associated with employee status." (Thompson Publishing Group, Inc.)
Executive Compensation: Facts
Excerpt: "In this paper we describe the important features of executive compensation in the US from 1993 to 2006. Some confirm what has been found for earlier periods and some are novel. Important facts about compensation are that: the compensation distribution is highly skewed; each year, a sizeable fraction of chief executives lose money; the use of equity grants has increased; the income accruing to CEOs from the sale of stock has increased; regardless of the measure we adopt, compensation responds strongly to innovations in shareholder wealth; measured as dollar changes in compensation, incentives have strengthened over time, measured as percentage changes in wealth, they have not changed in any appreciable way." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
At Rescued Banks, Chief Executive Perks Keep Rolling with Fringe Compensation Rising 4 Percent Last Year
Excerpt: "Even as the nation's biggest financial firms were struggling and the federal government was spending hundreds of billions of dollars to save many of them, the companies as a group were boosting the perks and benefits they pay their chief executives. The firms, accounting for more $350 billion in federal bailout funds, increased these perks and benefits 4 percent on average last year, according to an analysis of corporate disclosures filed in recent months." (The Washington Post; free registration required)
[Guidance Overview] Many Companies Need to Amend for 162(m) by Year End (PDF)
2 pages. Excerpt: "Many companies will need to amend their employment agreements, equity plans and awards, and other incentive plans and agreements by December 31, 2009, to preserve the deductibility ofperformance-based awards and amounts under Code Section 162(m) [the $1 million limit on public companies' ability to deduct compensation payments to their named executive officers] in light of Rev. Rul. 2008-13. . . . Companies generally do not need to review or revise arrangementswith employees who are not subject to Code Sec. 162(m) ? and are highly unlike ever to become subject to Code Sec. 162(m). However, a company should cast its net broadly, because Code Sec. 162(m) applies in the year the award or other compensation becomes taxable ? and deductible by the corporation ? which may be several years in the future, after certain employees have been promoted." (Winston & Strawn LLP)
[Guidance Overview] Public Companies Face Deadline to Amend Incentive Pay and Preserve Tax Deductions
Excerpt: "Many public companies . . . will have to comply with the Revenue Ruling for incentive plans and arrangements having a 2010 performance period. Public companies should review their executive employment agreements and compensation plans and arrangements to determine whether any modifications are needed to ensure the deductibility of incentive pay. For calendar year plans, action by the board of directors or the appropriate committee may be necessary before January 1, 2010." (Pillsbury Winthrop Shaw Pittman LLP)
[Guidance Overview] Executive Compensation Tax Rules May Require Year-End Planning
Excerpt: "As 2009 winds down, companies should consider a number of executive compensation tax rules that are sensitive to year-end deadlines. This Commentary discusses (i) planning opportunities under Code Section 409A to address potential tax rate increases on deferred compensation, (ii) how typical severance benefits, including bonus termination payments, may cause problems under the Code Section 162(m) $1 million deduction cap (the '$1 Million Cap'), and (iii) the need to consider the IRS' corrections program for Code Section 409A operational failures." (Jones Day)
2009 Director Compensation: NASDAQ 100 vs . NYSE 100 (PDF)
27 pages. Excerpt: "For the first time in the seven years that Frederic W. Cook & Co. has conducted its annual study of outside director compensation,median compensation for directors at the 100 largest NYSE companies exceeded that provided by the 100 largest NASDAQ companies. New to this year's report is an analysis on the prevalence of mandatory retirement policies for outside directors." (Frederic W. Cook & Co., Inc.)
[Guidance Overview] Montana Supreme Court Upholds Award in Executive Pension Plan Case
Excerpt: "The Montana Supreme Court has upheld a $21.4 million award in a case filed by 15 retired Montana Power Co. executives whose supplemental retirement benefits were cut off in 2005 without notice. With a purchase agreement between NorthWestern Corp. of South Dakota and Montana Power Co. in 2002, NorthWestern Corp. assumed responsibility for the supplemental pensions offered to some Montana Power employees for taking early retirement. . . . However, after NorthWestern emerged from bankruptcy reorganization in late 2004, its board of directors decided to stop paying the supplemental pensions, without telling retirees." (PLANSPONSOR.com; free registration required)
Physical Exams for Executives: Effective? Inequitable?
Excerpt: "The theory is the extensive series of medical tests and exams are more likely to expose health risks, perhaps even life-threatening ones. Identifying these concerns early helps ensure executives aren't sidelined, thus minimizing chances for leadership disruptions and productivity losses. Considering this bundle of benefits, who would oppose executive physicals?" (Human Resource Executive Online)
[Guidance Overview] Many Companies Need to Amend for 162(m) by Year End
Excerpt: "Many companies will need to amend their employment agreements, equity plans and awards, and other incentive plans and agreements by December 31, 2009, to preserve the deductibility of performance-based awards and amounts under Code Section 162(m) [the $1 million limit on public companies ability to deduct compensation payments to its named executive officers] in light of Rev. Rul. 2008-13." (Winston & Strawn)
IRS Begins 409A Audits!
Excerpt: "Frighteningly, the IRS is already conducting audits of companies' compliance with the complex requirements of Code Section 409A. [A redacted copy of an Information Document Request from the IRS] asks more than 15 separate questions on 409A compliance, including . . . ." (Michael Melbinger via Winston & Strawn LLP)
[Guidance Overview] Year-End Deadline for Bonus and Performance-Based Equity Fast Approaching
Excerpt: "An important deadline for amending executive bonus and other performance-based compensation arrangements is approaching quickly. Public companies should review performance-based arrangements (e.g., bonus plans and equity awards) now to ensure compliance with changes announced by the Internal Revenue Service (IRS) under section 162(m) of the Code. Generally, any necessary amendments to address these changes should be made by December 31, 2009." (Groom Law Group)
Executive Pay Reform: Beyond the Corporate and Financial Institution Compensation Fairness Act of 2009
Excerpt: "Compensation committees serving public companies are facing unprecedented scrutiny as they react to recent executive pay reform efforts led by federal lawmakers and agencies, institutional shareholders and corporate governance watchdogs. Most recently, leaders of the G-20 endorsed reforms that, among other things, would curb bonuses at financial firms and grant regulators greater power over those firms' compensation practices. In this Q&A, Pillsbury Executive Compensation & Benefits partner Scott Landau explores the issues Compensation Committees of public companies must consider under the rapidly evolving landscape of compensation design and implementation." (Pillsbury Winthrop Shaw Pittman LLP)
[Guidance Overview] Towers Perrin Monthly Regulatory Round-Up on Executive Compensation, September 2009 (PDF)
3 pages. Excerpt: "The Monthly Regulatory Round-Up is a high-level summary of legal and regulatory developments that occurred during July 2009 that may be relevant to large employers. Developments are sorted according to federal legislative developments, federal regulatory guidance, other developments (e.g., significant litigation, studies, select state law developments)." (Towers Perrin)
[Guidance Overview] What is the Top-Paid Group Election?
Excerpt: "Even when using the 'top-paid group election' to determine highly compensated employees, the 5% owners rule must be considered since 5% owners may not be in the top 20% group. How can these rules be reconciled?" (McKay Hochman Co., Inc.)
[Opinion] What Do You Mean by Compensation Plan Risk?
Excerpt: "The following are a few very simple examples of compensation program features that could provide too much incentive for executives to take risk or otherwise manipulate financial results: The Company's annual (or long-term) bonus plan that provides for a payout equal to 100 percent of base salary if the Company achieves a specified EPS Target -- and no payout if the Company fails to achieve that target. Executives are already under enormous pressure to achieve announced or expected EPS figures. This all-or-nothing approach would only exacerbate the problem. Instead, the Company should consider bonus payouts at 90 percent of base salary for achieving EPS that is barely below the Target and straight-line interpolation downward for other, lesser performance targets." (Michael Melbinger via Winston & Strawn LLP)
The 2009 Top 250 Survey on Long-Term Incentive Grant Practices for Executives (PDF)
30 pages. Excerpt: "Key findings from the Frederic W. Cook & Co. 2009 Top 250 report include the following: The shift from the use of stock options (and stock appreciation rights) and time-vesting restricted stock awards tolong-term performance awards (performance shares and performance units) appears to have stabilized, though long-term performance awards continue to grow in prevalence. Long-term performance awards are almost as common as stock options (combined with stock appreciation rights). Design variations to 'plain vanilla' stock options remain virtually extinct.? Vesting periods of awards remain fairly stable while performance periods for performance awards have decreased slightly. Use of profit measures in long-term performance plans has increased in prevalence and remains the most widely used performance measure category." (Frederic W. Cook & Co., Inc.)
Cost-Cutting Moves at Computer Sciences Corp. Have Included Freezing the Company's Pension Fund and Ditching Executive Car Perks
Excerpt: "[To mitigate the effects of capping the earned benefit of the defined benefit pension plan] to the U.S. employee population, we took a big portion of our savings and enhanced our contribution to the 401(k). We literally doubled our match in the 401(k) program, which in today's workforce is probably more meaningful. That's because, unlike for our forefathers, in today's world it's unlikely that the younger employees will spend their length of service with any one company. The workforce is much more mobile, company-to-company, and the 401(k) program is more meaningful because they can take their contributions with them." (CFO.com)
[Guidance Overview] Say on Pay Is Coming: Are You Ready? (PDF)
7 pages. Excerpt: "Executive compensation and increased communication and transparency for shareholders are among the hot-button issues in economic reform. One need only look to the discussions at the recent G20 London Summit or the responses to Securities and Exchange Commission (SEC) calls for comments to understand that momentum is swinging toward allowing shareholders more access in matters of compensation. This memorandum will address recent legislative and regulatory developments in executive compensation as they relate to Say on Pay Proposals and will analyze ways in which companies can position themselves to better prepare for mandatory shareholder input into executive compensation." (Sutherland Asbill & Brennan LLP)
Executive Compensation Limits on Health Insurance Providers: Lincoln Amendment to The America's Healthy Future Act (PDF)
1 page. Excerpt: "This amendment would create a special rule under Section 162(m) regarding the deductibility of excessive remuneration (including deferred deduction remuneration) by a health insurance provider, if at least 25 percent of the health insurance provider's gross premium income isderived from health insurance plans that meet the minimum creditable coverage requirements in the Chairman's mark ('covered health insurance provider'). Employers with self-insured plans are excluded from the definition of covered health insurance provider." (American Benefits Council)
Changes in Change-in-Control Practices (PDF)
12 pages. Excerpt: "Our research found that the largest corporations in the United States have begun to restrict their change-in-control arrangements in response to corporate governance reform pressures from shareholder activist groups. The most significant changes made by companies over the past three years were: 11% eliminated the excise tax gross-up altogether and 8% moved from a full gross-up to a modified gross-up; 9% moved from single-trigger vesting to double-trigger vesting of their equity awards; 8% raised the acquisition threshold percentage, typically to 30%; and 7% reduced the severance multiples for the CEO and other proxy officers, typically from 3X to 2X." (Frederick W. Cook & Co., Inc.)
Towers Perrin U.S. Legislative Tracking Chart -- Retirement and Executive Compensation (PDF)
11 pages; updated September 24, 2009. (Towers Perrin)
[Guidance Overview] Legal Alert: IRS Approves 'Longevity' Annuity (PDF)
Excerpt: "In Private Letter Ruling 200939018 (June 18, 2009), the Internal Revenue Service (IRS) ruled favorably on an annuity product providing benefits only in the event the annuitant lives to a specified date." (Sutherland)
[Guidance Overview] SEC Votes to Change Proxy Disclosure Rules
Excerpt: "The Securities and Exchange Commission (SEC) has voted unanimously to propose several important changes to the proxy disclosure rules that could take effect for the 2010 proxy season. The proposal calls for new disclosures about risk and more information about directors and compensation consultants. " (Watson Wyatt)
[Guidance Overview] FASB Launches New Accounting Standards Codification All Preexisting Non-SEC Accounting Standards Are Superseded (PDF)
2 pages. Excerpt: "The purpose of this letter is to alert compensation professionals to a significant development in the reorganization of U.S. generally accepted accounting principles (GAAP). Beginning with interim and annual periods ending after September 15, 2009, all financial statements will make reference to the Financial Accounting Standards Board's (FASB) new Accounting Standards Codification (ASC or Codification) rather than previously existing accounting standards such as FASB Statement No. 123R. The reorganization does not create new accounting standards or guidance, but the structure of the Codification is significantly different than that of previous accounting standards. This letter provides a brief overview of the Codification and identifies citations that are relevant to executive compensation." (Frederick W. Cook & Co., Inc.)
[Guidance Overview] Get a Head Start on Compensation Plan Risk Assessment for 2010 Proxy Season
Excerpt: "The SEC is expected to publish final rules later this Fall, which will apply to companies' 2010 proxy statements, and require that every company: [1] Evaluate whether any of its compensation plans or practices, including non-executive officer compensation plans and practices, include risk-taking incentives that may have a material effect on the company, and [2] Disclose the results of that evaluation and any steps the company has taken to manage or mitigate those risk-taking incentives" (Winston & Strawn LLP)
[Guidance Overview] Step-by-Step Action Plan for Conducting Executive Compensation Risk Assessments (PDF)
2 pages. Excerpt: "The most important year-end 2009 task for Companies, Boards of Directors, and Compensation Committees may be to begin to establish a process for assessing the risk of the Company's executiveand employee compensation programs. The U.S. Securities and Exchange Commission ('SEC') is expected to publish final rules later this Fall (the proposed rules were issued in July), which will apply to proxy statements for fiscal years ending after December 15, 2009, and require that everycompany: Evaluate whether any of its compensation plans or practices, including non-executive officer compensation plans and practices, include risk-taking incentives that may have a material effect on the company, and Disclose the results of that evaluation and any steps the company has taken to manage or mitigate those risk-taking incentives." (Winston & Strawn LLP)
Bank Regulators Moving Forward on Executive Compensation Restrictions
Excerpt: "The industry's effort to fight a crackdown on compensation could be blunted by a speedy implementation time line from the Federal Reserve Board. A source at the central bank said Monday the public would have 30 days to comment on guidance that could be released in a matter of weeks. The Fed's goal is to finalize the guidance by year-end. The Office of the Comptroller of the Currency, meanwhile, is also developing a proposal that would target pay at national banks. Few details are available on that plan but a knowledgeable source said the agency has begun to sketch out a proposal on paper." (American Banker via On Wall Street)
[Guidance Overview] May a QNEC of 100% of Compensation Be Given to an Employee Who Only Worked One Week During the Year?
Excerpt: "The final 401(k) regulations, effective for plan years starting on or after January 1, 2006, generally restrict the targeted QNEC [qualified non-elective contributions] to up to 5% for any employee. If a QNEC of more than 5% is desired, then [a specific] formula must be satisfied." (McKay Hochman Co., Inc.)
Federal Reserve Proposes Executive Compensation Policies for Financial Institutions
Excerpt: "The Federal Reserve would have to approve executive compensation policies set by financial institutions as part of its proposal designed to curb excessive risk-taking. The Wall Street Journal reports that under the proposal, the Fed could reject any compensation policies it believes encourage bank employees -- not just chief executives, but also traders and loan officers -- to take too much risk. The bank would set the pay of individuals, but the Fed would review and, if necessary, amend each bank's salary and bonus policies to make sure they do not create harmful incentives, the Journal said." (PLANSPONSOR.com; free registration required)
Executive Pay Reform Poses Complex Risks for Compensation Committees (PDF)
11 pages. Excerpt: "[The White Paper]explores issues facing compensation committees under the proposed Corporate and Financial Institutional Fairness Act of 2009 (the Act) and other reforms." (Pillsbury Winthrop Shaw Pittman LLP)
[Opinion] A Modest Proposal to End Those Outlandish Bonuses at Financial Institutions
Excerpt: "The financial system might well work better if most pay at financial institutions came in the form of fixed salary, not sharply varying bonuses. Bankers' pay might be too high or too low -- that is another question -- but the mix between fixed and variable looks oddly skewed in favor of the variable. Many bankers accept that their remuneration practices -- bonuses often being a big multiple of base salaries -- are anomalous in modern economies. When employees of large companies get bonuses, they are typically relatively small: 10 percent to 40 percent of base pay. But bankers think their business is different, for three reasons. Actually, they are more like three myths." (The New York Times; free registration required)
[Opinion] Comments on Proposed Amendments to Requirements for Compensation and Corporate Governance Disclosures (PDF)
16 pages. Excerpt: "On July 17, 2009, the Commission published in the Federal Register proposed amendments to its rules regarding compensation and corporate governance disclosures (the 'Proposed Rule').1 This letter sets forth the comments of Frederic W. Cook & Co., Inc. with respect to the proposed amendments. In addition, the Proposed Rule generally requestedcomments on what other changes in proxy disclosures would improve the disclosure process with respect to executive compensation. This letter also responds to that request." (Frederic W. Cook & Co., Inc.)
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