华信惠悦-公司治理与高管薪酬.pptx

华信惠悦-公司治理与高管薪酬.pptx

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CorporateGovernanceandExecutiveCompensation,CurrentCompensationCommitteeandExecutiveCompensationIssues,March20,2003PeterSaulnier,ExecutiveCompensationisinaStateofFlux,InstitutionalInvestorActivism,NYSE&NASDAQListingRequirements,StockOptionAccounting,NewU.S.GovernanceLegislation,LossofInvestorConfidence,UncertainEconomy,ExecutiveCompensation,2,SomeoftheGovernanceConcernsthathavebeenExpressed:

ExecutivePay:

NotlinkedtoperformanceEscalatingratioofexecutivecompensationtothepayofothermanagers,workersWhatisaCEOworth?

ExecutiveloansStockOptions:

AbsenceofaccountingchargehasfacilitatedexcessuseofoptionsEquivalentcashvalueofastockoptiontoanexecutiveislessthanitseconomiccosttothecompanyArisingtidefloatsallboats,3,GovernanceConcerns（Contd）,IntheBoardroom:

ThecultureofmostBoardroomsmakesiteasiertogoalongwithManagementsrequeststhantorejectorreducethemCompensationconsultantsareusuallynotindependentofmanagementImproperuse/overuseofcompensationsurveyscausea“ratcheting”effectinexecutivecompensationManycompensationcommitteeslacktheexperiencenecessarytoanalyzecomplexproposalsandtodevelopinformedopinions,proorcon,4,Meanwhile,CompanyCEOsalsoHaveConcerns,Impactofnewlegislationandstandardsongovernanceandday-to-dayoperationsArticulatingcorporatestrategyinshareholderterms,withmoreBoardinvolvementAchievementoffinancialresultsinanuncertainenvironmentShortenedcareersproduceorelseAttraction,motivationandretentionofkeyexecutivetalentCashcompensationvs.equityincentivesOtherissues:

succession,etc.,5,ShareholderObjectivesforExecutiveCompensation,Buildreallong-termgrowthinshareholdervalueCompetitive,performance-alignedcompensationAvoidcorporatefuturefinancialhardshipasaresultofspecialcompensationarrangementsPricingrelativetothemarketproperuseofcompensationinstrumentsTrulyindependentCompensationCommitteesFull,truthfulandstraightforwarddisclosureofTheprinciplesandstructuresofexecutivecompensationsystems（i.e.,no“boilerplate”）Decision-makingprocessforcurrentyearawards,6,ExamplesofShareholderResistance,CoolBrands:

21%dropinstockpricefollowingrequestformoreoptionsCHCHelicopters:

“No”to11%optiondilutionproposalATITechnologies:

Only54%shareholderapprovalfornewoptionsFairvest/InstitutionalShareholderServices:

useoftheISSoptionvaluationmodelleadstomore“No”recommendationsTeachersPensionPlan:

optiongrantsshouldbeproportionaltoexecutiveownershipAngiotechPharmaceutical:

“evergreen”stockoptionreplenishmentrescindedduetoinstitutionalshareholderconcernsandnegativepress,7,TheCanadianCoalitionforGoodGovernanceisGainingClout,LaunchedlastyearBrainchildofSteveJarislowskyandClaudeLamoureuxConsistsofCanadaslargestpensionfunds,mutualfundsandmoneymanagersPurposeistoshareinformationandtaketheinitiativetoholdmanagementaccountableforgrowinglong-termshareholdervalueTheCoalitionwillsupportcompensationschemesthatrewardemployeesforsustainedperformancesSuccessfullyattackedAngiotechproposal,8,NewLegislationandStandardsareAffectingExecutiveCompensation,U.S.Sarbanes-OxleyActProposedChangestoNYSEandNASDAQListingRulesCanadianSecuritiesAdministratorsDisclosureConcernsInternationalStockOptionExpensingProposalsRepapCourtCase,9,ShareholderDisclosureConcerns,CanadianSecuritiesAdministratorsNov.5,2002pressrelease:

Sampleof76publicly-tradedcompanies95%had“inadequate”disclosureWatsonWyattProxyCircularReview272TSXcompaniesin200248%hadnodisclosureannualincentivedetermination,10,StockOptionAccountingStandards,Stockoptionexpensingisjustaroundthecorner!

InternationalBoardisgoingtomandateinternationalstockoptionexpensingstandardsthisyearCanadianBoardhasannouncedintentiontorequirestockoptionexpensingbeforetheU.S.actsU.S.AccountingBoardisconsideringmandatoryadoptionManylargeNorthAmericancorporations（over150）havealreadydecidedtoexpenseoptions:

Boeing（first）Coca-ColaCanadianBanks,AFordGEInco,GMWal-MartSunLifeBCE,11,MeetingShareholderConcernswithOptions:

ProsandCons,IndexedoptionsPremium-priceoptionsPerformance-vestedoptionsGreaterstockownershipRestrictedstockunitsCashlongtermincentiveplans,12,MeanwhileintheCourts:

TheRepapCase,NewChairmanwasaretiredU.S.lawyer;noexperienceinRepapsindustrySummaryofhiscontract:

Amulti-milliondollar“marketcapitalizationbonus”notlinkedtofinancialperformanceSharesandoptionsamountingto13.4%ofthecompanysstockImmediatepensioncreditsof8yearsA“singletrigger”change-of-controlseverancepackageworthabout$27millionOntarioTrialCourtJudgesetasideChairmanscompensationagreementbecausethedirectorshadnotspentsufficienttimeanalyzinganddiscussingthecontractIndoingso,shesetasidethe“businessjudgmentrule”thatnormallyprotectsdirectorsfrombeingsecondguessed,13,YES,Executivepayisunderthemicroscope,BUT.,CanadianandU.S.WatsonWyattstudies*showthat:

HigherCEOcompensationopportunityiscorrelatedwithhigherTotalShareholderReturns（TSR）HigherCEOandExecutivestockownershipiscorrelatedwithhigherTSR,EPS,ROE,ROAHigherstockoptionopportunityisalsopositivelycorrelatedwithhigherTSR,EPS,butThereisanoptimallevelofstockoption“overhang”aboveorbelowwhichshareholdervalueiseroded,*“CorporateGovernanceInCrisis;ExecutivePay/StockOptionOverhang2003”and“MonitoringCanadianCEOPayandPerformance,2002”.,14,EntertheCompensationCommittee.,15,15,PurposeoftheCompensationCommittee,TheprimarypurposeoftheCompensationCommitteeoftheBoardistodetermineandoverseethecompensationpoliciesoftheorganizationDutiesinclude:

DevelopingandsettingcompensationphilosophyandpoliciesDecidinguponcompensationlevelsandincentiveopportunitylevelsforofficersReviewingperformancelevelsofcompanyandcompensationmechanismsandlevelsCEOperformanceevaluationManagementdevelopmentandsuccessionplanningCommunicationtothefullBoardCompensationoftheBoard,16,StrategicExecutiveCompensationFramework,CriticalFactors,SpecificExecutiveCompensationPhilosophy,StrategicImplicationsonPrograms,Policies,Practices,Strategies/Plans,ManagementPhilosophy,OrganizationalDesign,OwnershipStructure,MarketplaceDynamics,CompanywideLinkage,ObjectivesforPay,CompensationElements,CompetitivePositioning,CommitmenttoCommunication,BaseSalary,Short-TermIncentives,Benefits/Perquisites,Long-TermIncentives,17,StrategicExecutiveCompensationFramework,SpecificExecutiveCompensationPhilosophy,SupportiveofCompanysmissionandvaluesConsistentwithTotalCompensationPhilosophyFlexibletoadapttouniqueorganizationalandindividualcircumstances,CompanywideLinkage,ObjectivesforPay,DifferentiatefromcompetitorsFocusoncompanygoalsAlignwithorganizationalsuccessAttractnewtalentMotivateandrewardimprovedperformanceRetainhighperformersandkeycontributorsProvidesecurityandwealth-buildingopportunitiesEnsureexecutivesunderstandandappreciatecompensationandbenefitprograms,CompetitivePositioning,Establishrelevantpeergroup（s）andreferencepointsAppropriatepositioningrelativetoreferencepointsMethodologiesandsourcesofmarketdata,CompensationElements,Desiredpaymix（fixedvs.variable,shortvs.long-term）RoleofbasesalaryObjectivesforshort-andlong-termincentivesSelectionofincentiveplanperformancemeasuresandgoalsCompetitivebenefitsandperquisites,CommitmenttoCommunication,CompanysphilosophyonexecutivecompensationLinkagebetweencorporatestrategiesandrewardsObjectivesforprogramelementsProcessesformanagingpayPerformancemeasuresthataffectcompensationTotalcompensationpersonalizedcommunications,18,StrategicImplicationsonPrograms,Policies,Practices,StrategicExecutiveCompensationFramework,BestunderstoodelementofpayRepresentsasignificantportionofcompensationopportunityServesasanindexforincentiveandbenefitvaluesAffectedby:

PhilosophyExternalcompetitivenessInternalconsiderationsIncumbentexperienceandperformance,BaseSalary,Short-TermIncentives,ObjectivesEligibilityAwardpotentialsPerformancemeasuresandgoalsAwarddeterminationForm/timingofpaymentAffectedby:

CompanystrategiesCompensationphilosophyMarketvaluesMeasurementtools,Long-TermIncentives,ObjectivesEligibilityAwardpotentialsProgramvehicle（s）Performanceperiods,measures,andgoalsRetentionelementsAffectedby:

CompanystrategiesCompensationphilosophyMarketcompetitivenessAvailabilityofstockorequitysubstitute,Benefits/Perquisites,ObjectivesforHealthcareRetirementincomeSurvivorincomeDisabilityincomeDeferredcompensationAffectedby:

CompanystrategiesCompensationphilosophyStatutoryconsiderationsPerceivedvalue,19,WatsonWyattsView,Inthefinalanalysis,executivecompensationarrangementsmustreflectgoodgovernanceprinciplesStrengthandindependenceoftheBoardiskeyCredibleandconsistentcompensationdataandadviceiscrucialAccountabilitytoownersandtransparencyismoreimportantthansophisticationofdesignandtaxadvantagesOptionswillcontinuetobeused,butmoreprudently,20,PracticalThingstoReview,Whereisyourstockoptiondilutionlevelrelativetothemarketandinstitutionalshareholdercomfortlevels?

Whatisyourexecutivepaymix?

Haveyoudisclosedyourexecutivecompensationpoliciestoyourshareholdersinthemannerrequiredbytheregulators?

WhatimpactcouldstockoptionaccountingexpensehaveonyourP&L?

WhoisonyourCompensationCommitteeandwhatishisorherrelationshiptothecompany?

DoesyourCompensationCommitteehaveauptodatecharter?

21,PracticalThingstoReview,ArecompensationproposalscarefullyreviewedbytheCompensationCommitteeandth