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SIMPLIFYING DISCLOSURE OF EXECUTIVE PAY MAY NOT BE EASY FOR MOST COMPANIES

 SIMPLIFYING DISCLOSURE OF EXECUTIVE PAY
 MAY NOT BE EASY FOR MOST COMPANIES
 NEW YORK, Oct. 15 /PRNewswire/ -- Fine print, obtuse language, and inconspicuous footnotes are now a figment of proxies past due to a Securities and Exchange Commission overhaul of executive compensation reporting. And just as these changes will make it easier for shareholders and investors to interpret proxy statements, it will make it tougher for public companies to report -- and justify -- executive compensation.
 "Executive compensation now more than ever must take into consideration corporate performance and value created for shareholders," says KPMG Peat Marwick's Peter Chingos, national director of performance and compensation management consulting. "Due to new SEC rules, companies need to rethink executive compensation plans to make sure they can stand up to close scrutiny."
 Companies need to prepare for SEC rules now by validating their compensation strategy, advises Chingos. Here are a few pointers:
 -- Identify one peer group to compare both compensation and financial performance. Many companies use well-defined peer groups to establish compensation levels but they track financial or total shareholder return performance against different peer groups. KPMG Peat Marwick recommends merging the two groups thereby establishing a more valid comparison between compensation and financial performance and providing boards of directors with a consistent benchmark for pay and performance. This will also help prepare for the performance graph in the company proxy.
 -- Evaluate total cash compensation (base salary and annual incentives) against peers. Do not track salary in isolation of bonuses, rather combine the two when comparing to peers. This ensures that a company is not focusing on pay without looking at relative performance. For instance, when a company performs at the 75th percentile (based on its peer group), its total cash compensation should reflect this strong competitive position. On the flip side, cash compensation should also reflect corporate performance that is below that of its peers.
 -- Measure long-term incentives against increased value to shareholders. And stay away from large options grants where modest gains result in more than modest executive income. Also be leery of granting restricted stock to senior management without performance requirements. Instead, consider total value of compensation packages, including the present value of stock options.
 -- Re-examine the standards used in annual and multi-year plans. Compensation committees will be questioning if companies are focusing on the right standards. Many plans are based on internal profit or strategic objectives and the difficulty and stretch of these internally developed standards will soon be questioned, measured and validated.
 -- Test recent compensation decisions against financial and peer performance based on 1991 data or 1992 estimates. In other words: Do a dry run now before the proxies come out. And make sure analysis of base pay and annual incentives includes the balance of annual and long-term opportunities and stock option and other equity grants.
 Through 135 offices in the United States, KPMG Peat Marwick provides compensation and benefits consulting services to a broad range of businesses and other organizations in the financial, commercial and service sectors. KPMG has more than 76,000 people worldwide and operates in 125 countries.
 -0- 10/16/92
 /CONTACT: Beth De Lisi of KPMG Peat Marwick, 212-909-5128/ CO: KPMG Peat Marwick ST: New York IN: FIN SU: ECO


TS-SH -- NY023 -- 0897 10/16/92 11:15 EDT
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Date:Oct 16, 1992
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