ProfNet Wire: Business & Technology: Executive Compensation Plans

Released: 2/5/2007 4:45 PM EST
Source: ProfNet

ROUNDUPS

Executive Compensation Plans (27 responses)

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LEADS

1. Business: China Offers More Opportunity Than Threat
2. Marketing: Emotional and Sensory Content Incorporated into Marketing

ROUNDUP: EXECUTIVE COMPENSATION PLANS

Rep. Barney Frank, chairman of the House Financial Services Committee, has said he will push legislation to require shareholder approval of executive compensation plans. A separate bill before the Senate to raise the minimum wage would fund accompanying tax breaks to ease the burden on small businesses by capping executives' tax-deferred pay packages at $1 million a year. Following are experts who can comment:

**1. DEBORAH WALLACE, principal of WALLACE CONSULTING, is an executive board consultant who has 20 years of experience advising boards on developing executive compensation plans and a wide range of ethical, corporate and strategic issues associated with boards of directors and business leadership: "Barney Frank's proposed legislation has finally lit the fire under the issue of how to rein in CEO compensation packages. I support the effort and the intent. The bill also raises a most fundamental governance question: Who has the power to shape the direction of our public corporations -- the board, the shareholders or a combination of both? Right now, all the power sits with the board, but this bill proposes that shareholders have more control over their vested interests. Allowing shareholders to vote on CEO pay and/or giving shareholders the right to nominate their own candidates for board seats would be a way to give them more control." Wallace can shed light on current ethical themes, trends and issues affiliated with shareholder approval of executive compensation plans. News Contact: Barbara J. Rudolph, bjr@rudolphandcompany.com Phone: +1-781-229-1811 Web site: http://www.wallaceboardconsulting.com (2/5/07)

**2. ANDREW GIBSON, JD, LLM, CPA, is the regional leader in the compensation and benefits practice at BDO SEIDMAN LLP (U.S. member firm of the fifth largest accounting organization in the world), and can discuss executive compensation and the new, old and suggested laws governing it: "Congress should, at least, wait to consider any legislation impacting executive compensation until the new executive compensation proxy disclosures kick in this spring and shareholders have had a chance to react. Congress has attempted, in the past, to provide legislation under Tax Code Section 280G -- relating to payments on account of a change in control -- and Section 162(m) - - relating to the $1 million tax deduction limit for non-performance-based compensation for key executives -- to affect executive compensation, but these changes made minimal impact on such compensation." Gibson consults on executive compensation strategy and program design, management incentive systems, long-term incentive stock-based compensation, executive contract and severance payment design, directors' compensation, tally sheets and compensation reviews of non-profit organizations for the firm's vast client base, including Fortune 500 companies. He can also discuss Section 409A and the other new laws and pending legislation affecting executive compensation plans and trends. News Contact: Cortney Rhoads, cortney@walshcom.com Phone: +1-212-221-4617 (2/5/07)

**3. BOB SHEPLER, director of corporate finance and tax at the NATIONAL ASSOCIATION OF MANUFACTURERS (NAM), is a lead advocate against the Senate amendment that would effectively eliminate the ability of employers to use deferred compensation as a retention tool of valued employees: "The NAM estimates a broad number of employees and benefit plans will be impacted due to the broad definition of 'deferred compensation' under the proposal. This definition also encompasses any earnings that may have built up in the benefit plan. Under the Senate proposal, if interest in any one year, plus contribution in any one year, exceed the employee's taxable average annual salary for the previous five years or $1 million, all previous deferred amounts, plus interest, are included in income and the employee is responsible for a 20 percent excise tax." News Contact: JP Fielder, jfielder@nam.org Phone: +1-202-647-3089 (2/5/07)

**4. JACK DOLMAT-CONNELL, a nationally recognized expert in compensation, is president of DOLMATCONNELL & PARTNERS, INC., a compensation consulting firm: "The executive compensation issues today are not the result of boards acting egregiously or nefariously, but rather stem from boards not spending enough time to fully understand the complexities of executive pay and all of the potential outcomes of a pay package. If boards have difficulty understanding the subtleties and complexities involved in the design of executive pay packages, which take hundreds of hours of work by consultants, lawyers and accountants to design, how is John or Susan Q. Public going to understand them enough to vote on them? The answer is, they won't. The vote will be emotional, not rational and fully informed." Formerly, Dolmat-Connell was managing director and head of the national high-technology and life-science practice for Pearl Meyer and Partners. Dolmat-Connell: +1-781-647-2739 News Contact: Erik Beucler, ErikB@DolmatConnell.com Phone: +1-781-647-2740 Web site: http://www.DolmatConnell.com (2/5/07)

**5. MICHAEL S. MELBINGER, partner and global head of the Employee Benefits and Executive Compensation Department at the law firm WINSTON & STRAWN, LLP, in Chicago: "In my opinion -- and experience -- legislation like this will not reduce the amount of executive compensation packages. It will only restructure their form. I firmly believe that the SEC's approach is the right one: Don't tell companies how much to pay, but require them to disclose every item of pay, and let the marketplace decide whether it is too much. Despite the bad apples out there, I feel those of us pushing for responsible pay practices -- including investors and the media, as well as boardroom lawyers like me -- have halted the out-of-control growth of executive pay and have begun to get the pendulum swinging the other way." Melbinger has written numerous articles on executive compensation and benefits, is author of the definitive treatise "Executive Compensation" (CCH, 2004) and its regularly revised Internet version, and is editor of the quarterly newsletter Executive Compensation Update. Melbinger: mmelbinger@winston.com Phone: +1-312-558-7588 News Contact: Neil Allen, neil.allen@wolterskluwer.com Phone: +1-847-267-2179 (2/5/07)

**6. PATRICIA CAIN, chair of Neal Gerber Eisenberg LLP's employee benefits and executive compensation practice group: "Executive compensation is fundamentally a corporate governance issue. It should not be dealt with through tax code penalties, although Congress has already shown a predilection to do exactly that through its limits on the deductibility of pay for the top officers at public companies and the excise taxes that are imposed on large golden parachute payments when there is a change of control. The SEC has already adopted rules to require more clear and transparent disclosure of executive compensation that are effective during this 2007 proxy season. These rules may well prove the adage of Justice Brandeis that sunshine is the best disinfectant. In its search for more revenue, Congress should not pile on by imposing a complex regulatory scheme on executive compensation. Let the sunshine do its job." Cain advises employers on a broad range of employee benefit matters, including counseling employers on the design, implementation, and administration of broad-based pension and health care plans, executive compensation arrangements and early retirement programs. She represents clients in ruling requests and controversies before the Internal Revenue Service, Department of Labor and Pension Benefit Guaranty Corporation. She also represents clients in litigation arising out of disputes involving benefit plans. News Contact: Stephanie Simon, ssimon@webershandwick.com Phone: +1-312-988-2081 (2/5/07)

**7. DAVID SILVERSTEIN, CEO and founder of BREAKTHROUGH MANAGEMENT GROUP: "Executive compensation should be controlled, absolutely. Controlled by legislation? Absolutely not. It's the board's obligation to establish controls that ensure the compensation packages motivate and reward the best possible performance. The real problem is what needs to be addressed. First, there are many problems with stock options, and they don't serve as a good proxy for the 'best interests' of the shareholders as they're intended to. Secondly, as opposed to viewing executive compensation as being too high, I find that, in many cases, directors' compensation is too low and is also not well tied to the best interests of the shareholders. It's the way the packages are structured that needs work -- not that they're too big or too small. They simply need to be better aligned, and there are definitely ways to do that." News Contact: Cassel Kroll, cassel@lexicommgroup.com Phone: +1-212-300-2143 Web site: http://www.BMGi.com (2/5/07)

**8. STEVE MADER, vice chairman and board governance advisor for CHRISTIAN & TIMBERS: "Legislating compensation and having shareholders at large ratify it is virtually un-American. The success of business over 200 years has been built on free enterprise. We need legislation only when forces try to get in the way of the system, as with shareholders with small proportions of total ownership trying to become unwelcome strategists for an organization instead of making their money by aligning with winners they believe in. Stockholders vote with their feet. Their decisions to buy and/or sell have total impact on the destiny of a public company. The real problem is with performance criteria that optimize the value creation of the company but don't match up with shareholders who demand that the stock price react upwards on a quarterly basis. Shareholders supporting performance criteria for CEOs that are not just about quarterly stock price is the answer, not legislation." News Contact: Anita Buchanan, anita@m1pr.com Phone: +1-561-471-6890 (2/5/07)

**9. SHELDON BLUMLING, partner at FISHER & PHILLIPS LLP in Irvine, Calif.: "Efforts to legislate restrictions on executive compensation have not proven successful. These efforts seek to restrain compensation by imposing tax disincentives, such as the loss of a deduction by the employer or the imposition of a penalty tax on the executive. Employers and executives find ways to overcome this by designing compensation that avoids the disincentives and/or including a so-called tax 'gross-up' provision, so the executive won't bare the economic burden of any penalty taxes. These gross-up provisions add to an executive's gross compensation, which is precisely what a penalty tax disincentive is seeking to prevent. In my view, it is just a matter of time before natural market forces will succeed in reining in excessive executive compensation." News Contact: Kevin L. Sullivan, ksullivan@laborlawyers.com Phone: +1-404-240-4248 Web site: http://www.laborlawyers.com/Bio/SheldonBlumling.asp (2/5/07)

**10. PETER POLACHI is a managing partner at POLACHI & COMPANY, a Boston-area executive search firm: "The marketplace should control executive compensation, while being directly tied to company performance objectives. Federal legislation would be expensive and counterproductive. No investor is forced to invest in any company. BOD governance should dictate compensation policy." Polachi has been a senior executive for sales and marketing in high-growth and emerging technology companies since 1977. He is an active advisor to several angel- and venture-backed Boston-based technology companies. Polachi: peter@polachi.com Phone: +1-508-650-3609 News Contact: Liz Bradley, liz@kelandpartners.com Phone: +1-508-366-2099, ext. 119 Web site: http://www.polachi.com (2/5/07)

**11. ROBERT CHRISTENSON, partner at FISHER & PHILLIPS LLP in Atlanta: "I'm skeptical about legislation designed to limit compensation. In 1993, when sections of the tax code were changed in an effort to rein in executive compensation, the result was a tremendous increase in compensation. The marketplace is the best arbiter of compensation packages. In public companies, shareholders should decide if an executive is performing up to compensation levels. I think what we are seeing now in Congress is the usual grandstanding, now flavored from the Democratic side. Fat-cat executives are a pretty easy target. I suspect legislative changes will be made, and compensation lawyers will find a way around them very quickly, just as they have in the past." News Contact: Kevin L. Sullivan, ksullivan@laborlawyers.com Phone: +1-404-240-4248 Web site: http://www.laborlawyers.com/Bio/RobertChristenson.asp (2/5/07)

**12. BRUCE POUNDER, CMA, CFM, host of "This Week in Accounting" and president of LEVERAGED LOGIC, a leading provider of continuing education to financial professionals: "Boards of directors and their compensation committees have often failed to fulfill their fiduciary duty to shareholders when developing and implementing executive compensation plans. The current system of corporate governance clearly does not provide enough checks and balances to combat executive greed and board complicity, the two most significant causes of abusive compensation. Giving shareholders the right to approve executive compensation plans would be a significant improvement in this area. In contrast, neither legal limits on compensation nor tax disincentives would address the underlying governance issues that have led to our present problems." Pounder is an experienced, highly quotable media source available for expert commentary and/or formal interviews on corporate governance problems and their solutions. Pounder: BPounder@LeveragedLogic.com Phone: +1-828-254-4812 (2/5/07)

**13. HARLAN PLATT, finance professor at the College of Business Administration at NORTHEASTERN UNIVERSITY: "My views on executive compensation are fairly straightforward. Companies should make their compensation decisions through a corporate governance model that includes a compensation committee and public disclosure. Shareholders can approve or disapprove these decisions by their decision of whether to retain their stock holdings. A rational shareholder would approve an outlandish pay package to an executive who also provides them with outsized investment returns. Government policies frequently have unexpected consequences. I fear that the new legislative proposal will result in more damage than good." News Contact: Dennis O'Connor, dennis.oconnor@paradigmshiftpr.com Phone: +1-508-650-0100 Web site: http://web.cba.neu.edu/~hplatt (2/5/07)

**14. S. GARY SNODGRASS, executive vice president and chief human resources officer of EXELON CORP. in Chicago: "The best companies understand and have adopted 'pay-for-performance' policies that serve the interests of shareholders. They use measurable, objective, quantifiable performance criteria such as net earnings, total shareholder return and other metrics linked directly to achievement of business strategies. In those companies, there is no pay if there is no performance. Pay should be aligned with business goals and must be delivered in the old-fashioned manner: It must be earned." News Contact: Winter Bishop, wbishop@boothmedia.com Phone: +1-760- 929-1111 (2/5/07)

**15. IRA KAY is global director of executive compensation consulting at Watson Wyatt Worldwide, a global consulting firm, and co-author of the forthcoming book "Myths and Realities of Executive Pay": "The executive pay- for-performance model is working, and legislating for a few excesses will not be as effective as letting market and shareholder forces come to bear. Legislation and further regulation also may have the unintended effect of driving away top talent from an already finite talent pool and creating another barrier to corporate success." News Contact: Ed Emerman, eemerman@eaglepr.com Phone: +1-609-452-5967 (2/5/07)

**16. JIM STROUP, D.B.A., is author of the book "Managing Leadership" and management consultant who has worked internationally with firms ranging from one-person shops to global organizations employing tens of thousands of people. Stroup's area of specialty is organizational leadership: "The obtusely self-aggrandizing behavior of managers unrestrained by directors, most of whom are managers themselves from the same or other firms, has wrought the political storm over executive compensation we are presently enduring. The solution is not political intervention -- that is just as injurious to the integrity of the system and fiduciary logic and ethics of its operation as the behavior that engendered it. The solution is in effective corporate governance. Only when business cleans up its own house can it defray such unwelcome and unhelpful attention." Stroup: jhs@managingleadership.com Phone: +1-760-742-5161 Web site: http://www.managingleadership.com/blog (2/5/07)

**17. JARED HARRIS is an assistant professor of business administration at the UNIVERSITY OF VIRGINIA's Darden Graduate School of Business Administration and a fellow of the Business Roundtable Institute for Corporate Ethics: "Self- regulation of executive pay has not worked. Not only is there no empirical evidence that stock options or other incentives 'align' incentives and boost company performance, there is striking evidence that such incentives have increased financial misrepresentation. Requiring shareholder approval of pay packages is an interesting idea, since one of the primary problems is that the 'market' for CEO pay is unduly driven by parties with an interest in perpetually increasing executive compensation (interlocking directorates, 'benchmarking' by compensation consultants and fixation on star CEOs). Will the new federal disclosure rules help? If by 'help,' you mean rein in executive pay, they will not." Harris: harrisj@darden.virginia.edu Phone: +1- 434-982-2323 News Contact: Brian Moriarty, moriartyb@darden.virginia.edu Phone: +1-434-982-2323 Web site: http://www.corporate-ethics.org (2/5/07)

**18. SHARON M. FOUNTAIN, partner at THOMPSON & KNIGHT LLP in Dallas: "I don't think additional tax rules will help to any great extent to hold down executive pay. Such rules would likely only result in a shift to different methods of compensating executives. While businesses shouldn't be left to self-regulate on all matters, matters of executive compensation should be decided by boards of directors who are held accountable by shareholders, and through additional disclosures and increased transparency, such as mandated by the SEC's new proxy disclosure rules." Fountain: sharon.fountain@tklaw.com Phone: +1-214-969-1518 News Contact: Barry Pound, barry@legalpr.com Phone: +1- 214-559-4630 (2/5/07)

**19. DEAN KREHMEYER, executive director of the BUSINESS ROUNDTABLE INSTITUTE FOR CORPORATE ETHICS: "Executive compensation is the role of boards of directors. We need to expect more from directors or legislation becomes very likely. Most of our attention, with regard to pay-for-performance, so far, has focused on the 'pay' aspect -- we need to give more thought to emphasizing the 'performance' part of the phrase." Krehmeyer: KrehmeyerD@darden.virginia.edu Phone: +1-434-982-2323 News Contact: Brian Moriarty, moriartyb@darden.virginia.edu Phone: +1-434-982-2323 Web: http://www.corporate-ethics.org (2/5/07)

**20. BILL COLEMAN, chief compensation officer for SALARY.COM, is a nationally recognized expert on executive compensation at both large and small companies. Coleman would have many insights into the proposed legislation to force shareholder approval of executive compensation plans. He is also well versed in how the supposed tax credits to small businesses regarding minimum wage will dramatically impact small business. Coleman has been interviewed on dozens of television programs, such as "Today," "Good Morning America," "Fox News Live," CNN's "American Morning," and MSNBC, and has been quoted in more than 2,000 articles in the past few years. News Contact: Bill Keeler, BKeeler@schwartz-pr.com Phone: +1-781-684-6542 Cell: +1-508-414-7755 (2/5/07)

**21. JOHN J. MCFADDEN, Esq., Robert K. Clark Chair in Executive Compensation and Benefit Planning, is a professor of taxation and pensions at THE AMERICAN COLLEGE's Huebner School, and teaches a course on executive compensation, as well as graduate courses in advanced pension and retirement planning. McFadden has written articles in tax and professional journals on subjects such as retirement planning with qualified plan accumulations, and non-qualified deferred compensation. He is author of "Retirement Plans for Employees" and co-author of "Employee Benefits" (sixth edition, Dearborn Financial Publishing, Inc.) and "Tools and Techniques of Employee Benefit and Retirement Planning" (sixth edition, National Underwriter Company). News Contact: Eric B. Gordon, Eric.Gordon@TheAmericanCollege.edu Phone: +1-610-526-1450 Web site: http://www.theamericancollege.edu/advance/faculty/mcfadden.asp (2/5/07)

**22. DR. RALPH A. WALKLING, Stratakis Chair in Corporate Governance, is executive director of the Center for Corporate Governance in the Lebow College of Business at DREXEL UNIVERSITY. His major area of research is corporate governance and corporate acquisitions, although he has also published research on transaction costs, trading volume, dividends, futures markets, industry classifications and agency theory. He is a leading contributor to the top refereed journals in his field, including The Journal of Financial Economics, The Journal of Finance, The Journal of Financial and Quantitative Analysis and The Rand Journal of Economics. Walkling is listed in the top 1 percent of finance authors, in terms of academic citations of their work. He also serves as associate editor of The Journal of Financial and Quantitative Analysis, The Journal of Corporate Finance, Financial Review, and as a member of the editorial board for The International Journal of Finance and Accounting. News Contact: Richard Barnes, richardb@drexel.edu Phone: +1-215-895-2075 (2/5/07)

**23. JERRY L. MILLS is the founder of B2B CFO, the nation's largest CFO firm that services small and mid-size companies. Mills and his partners advise entrepreneurs around the country on cash flow-related topics -- a huge portion of which is compensation. He has 30 years of business experience. Prior to founding B2B CFO, he was a manager with Arthur Andersen & Co., within the firm's small-business division. Mills is also a CPA, so he brings the experience from that perspective into his responses. He is author of "The Danger Zone: Lost in the Growth Transition," a business non-fiction book that helps entrepreneurs spot and avoid growth-oriented challenges. News Contact: Ania M. Kubicki, ania@anglespr.com Phone: +1-480-755-0009 Web site: http://www.b2bcfo.com and http://www.dangerzonebook.com (2/5/07)

**24. BRENT LONGNECKER is president of Houston-based LONGNECKER & ASSOCIATES, an executive compensation and corporate governance firm. Longnecker, who was named one of the "Top 25 Consultants of 2005" by Consulting Magazine, has more than 22 years of experience in executive compensation and corporate governance, and can discuss his thoughts on the executive compensation legislation being pushed by Rep. Barney Frank. Longnecker's consulting engagements with numerous CEOs, boards of directors, investment bankers, attorneys, and certified public accountants for all major industries have embraced a wide range of operational, organizational, strategic and ethical business issues. He has authored several books, including "HR How-to Strategy" and "Equity at Work," and has been featured in The New York Times, The Wall Street Journal, CFO, BusinessWeek and Entrepreneur, and has appeared on CNBC and "Lou Dobbs Tonight" on CNN. News Contact: Emily Bruce, ebruce@michaelpartners.com Phone: +1-972-716-0500, ext. 21 (2/5/07)

**25. LAURA THATCHER, head of the executive compensation practice at ALSTON & BIRD, has more than 20 years of experience. She is a co-author of the "Compensation Committee Handbook" (second edition), which serves as a single- source guidebook to executive compensation strategies and practices. Thatcher: +1-404-881-7546 News Contact: Katie Patterson, katie.patterson@edelman.com Phone: +1-404-832-7710 (2/5/07)

**26. BRUCE NEWSOME is an expert in executive compensation with Dallas' HAYNES AND BOONE LLP, an international corporate law firm representing some of the nation's largest and most well known enterprises. Selected as a Texas Rising Star by Law and Politics and designated a Texas Super Lawyer by Texas Monthly, Newsome is available to guide reporters through all aspects of executive compensation law. News Contact: Douglas R. Bedell, doug.bedell@haynesboone.com Phone: +1-214-651-5815 (2/5/07)

**27. CHARLES ELSON is Edgar S. Woolard Jr. Chair and director of the John L. Weinberg Center for Corporate Governance in the UNIVERSITY OF DELAWARE's Lerner College of Business and Economics. Elson: elson@lerner.udel.edu Phone: +1-302-831-6157 News Contact: Neil Thomas, nfttwo@udel.edu Phone: +1-302-831- 6408 Web site: http://www.lerner.udel.edu/ccg/staff.htm (2/5/07)

_____ LEADS

**1. BUSINESS: CHINA OFFERS MORE OPPORTUNITY THAN THREAT. TED REVIS, expert on China, is president of THE NORELLI GROUP, a strategy development and management firm specializing in service to private equity groups: "American businesses that only see China as a low-cost producer who is threatening their very existence may be missing one of the greatest opportunities of this century. The Chinese love high-quality, American-branded products, and discretionary incomes are increasing. While the U.S. market is growing by 3 percent a year, China's is booming at nearly 10 percent, representing tremendous growth opportunities for savvy businesses." News Contact: Michael Henry, mhenry@wwlcreative.com Phone: +1-704-926-1364 (2/5/07)

**2. MARKETING: EMOTIONAL AND SENSORY CONTENT INCORPORATED INTO MARKETING. TIM GIRVIN, founder of GIRVIN, INC., is an internationally recognized designer, writer, illustrator and calligrapher: "How strong is the link between the hand and the mind? There is an emerging trend that favors the return of the fountain pen. Experts have found that by using the fountain pen to write, the writer then forms greater mental discipline and achieves clarity of thought and purpose. There is something about the age-old correlation of 'think clearly, write clearly and act clearly.' In our age of digital keying, dissonance and distraction, the notion of a simple well-crafted pen in hand is the holistic link between thought and action." Girvin speaks all over the world on issues affecting branding, corporate identity, business communications and the incorporation of emotional and complete sensory content into all aspects of marketing. News Contact: Patricia Vaccarino, patricia@xanthuscom.com Phone: +1-206-284-4122 (2/5/07)