Course Level:

Intermediate

Advance Preparation:

Print and review course materials

Method of Presentation:

On-demand Webcast (CLE)

Prerequisite:

General knowledge of executive compensation

Course Code:

149879

NY Category of CLE Credit:

Areas of Professional Practice

Total Credit:

1.0 CLE

Ken Foulks, Senior Associate
ClearBridge Compensation Group

Richard Liu, Manager
Hugessen Consulting

Ken Foulks, Senior Associate

ClearBridge Compensation Group

and

Richard Liu, Manager

Hugessen Consulting

1. 1. Designing compensation programs in an uncertain world:
      • Given the seemingly unprecedented macroeconomic factors and turbulence affecting the business community at-large (e.g., COVID-19, supply chain issues, inflation, geopolitical events), Comp Committees are re-assessing their compensation philosophies and incentive plan designs to ensure it continues to meet the company’s (potentially competing) business and compensation objectives (e.g., attracting and retaining talent, maintaining alignment between pay and performance)
      • The application of Board discretion to adjust formulaic incentive outcomes is rising. Many companies have, whether formally or informally, adopted a framework that allows for the use of judgment and discretion to be applied to the corporate scorecard to arrive at the "right" incentive plan outcome
      • Significant stock price volatility can present challenges for managing equity grants and equity compensation plans, such as determining the number of shares to grant, desired value to deliver to executives, and setting TSR performance goals. There are various tools Comp Committees can consider to managing these plans during a volatile market
   2. War for talent and pressures on compensation
      • In context of the “war for talent”, companies are in need of ensuring pay is competitive. From an incentive design standpoint, this includes assessing the degree of leverage in the incentive plan – i.e., ensuring appropriate pay opportunity for delivering on key performance objectives. In addition, pay should serve as a tool to encourage employee retention
   3. ESG and impact on incentive design
      • As emphasis on Environmental, Social, and Governance (ESG) factors is increasing, and many companies have or are considering adopting ESG-related objectives in the executive compensation program in order to align with their evolving business strategy. The prevalence of ESG metrics in the short-term and long-term incentive plans is increasing, and companies are in need of assessing and calibrating ESG metrics in their incentive compensation
      • There’s also been an increase in shareholders using proxy proposals as a tool to advance ESG-related initiatives, including proposals on disclosing pay equity, etc. In addition, shareholders and shareholder advisory firms are starting to scrutinize the use of ESG metrics in incentive plans more closely (e.g., not just a “check the box”, but rather need to demonstrate rigor on any goals, rationale for metric(s), and impact of performance on payouts)
   4. Increase in use of “front-loaded” or “mega” equity grants:
      • There’s been an increase in recent years in the broad market in the use of large, one-time mega equity grants to hyper-focus CEOs and executive teams on long-term business and shareholder value creation objectives. Inn designing such high risk/reward compensation programs, companies need to consider all internal and external perspectives and be aware of potential design pitfalls

• Employee Benefits Consultants and Lawyers
• Labor and Employment Lawyers
• Human Resource Executives
• Human Resource Managers
• Human Resource Directors
• Vice Presidents and Directors – Executive Compensation, Compensation, and Benefits