Compensation: boards need to act on executive perks.The Securities and Exchange Commission "has just issued a wake-up call to boards and compensation committees on their disclosure of perquisites Fringe benefits or other incidental profits or benefits accompanying an office or position. The abbreviation perks is used in reference to extraordinary benefits afforded to business executives, such as country club memberships or the free use of automobiles. ," following a review of former General Electric Co. CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Jack Welch's pay package, says Bruce Ellig, an advisor to corporate boards and author of The Complete Guide to Executive Compensation. Ellig has formulated 12 Rules for Board and Compensation Committee Action, which will likely increase good corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. ratings by those watchdogs keeping score: 1. Select a qualified executive compensation expert (who does no other work for the company) to work with management, but be responsible to the committee. 2. Convert the board-approved pay philosophy and performance measures into specific pay programs for the CEO and at least the others on the proxy, but preferably all elected corporate officers. 3. Determine the changes, if any, that will result in the approved plans because of unexpected changes in stock price and/or company financial performance. 4. Ensure all stock plans are performance-based, with no value below threshold performance. 5. Stock plans (including options) should not be longer than five years. 6. Everyone "on proxy" should be required to hold value in excess of acquisition cost until they are off the proxy. 7. Proxies should strive for complete disclosure, not simply complying with SEC requirements. 8. Communicate the specific performance parameters (threshold, target and maximum), and the pay for each, to the CEO before the beginning of the business year and require he or she do the same for others approved by the committee. 9. Assure that the definitions of the financial measurements are clearly explained and understood by all those affected. 10. Communicate the performance (after attested at·test v. at·test·ed, at·test·ing, at·tests v.tr. 1. To affirm to be correct, true, or genuine: The date of the painting was attested by the appraiser. 2. to by the audit committee) and the resulting pay actions face-to-face with the CEO, and require he or she do the same for others approved by the committee. 11. Review all employment contracts for elected corporate officers before they are validated to ensure that "clawback Clawback 1. Previously given monies or benefits that are taken back due to specially arising circumstances. 2. A retraction of stock prices or of the market in general. Notes: 1. " clauses, as well as conditions and amounts of severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when , are clearly defined. 12. Review all executive pay programs quarterly in light of changes in the company life cycle, stakeholder stakeholder n. a person having in his/her possession (holding) money or property in which he/she has no interest, right or title, awaiting the outcome of a dispute between two or more claimants to the money or property. priorities and laws/regulations for possible future changes. |
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