Center Annual Meeting Focuses on the Latest From Investors and Proxy Advisors, SEC Pay Ratio Rules and Peer-Led Discussion of Incentive Plan Design Trends

November 21, 2014

The Center On Executive Compensation held its seventh annual meeting last week featuring panel discussions on the impact of activist investors, investor priorities for 2015, the latest on the SEC's pay ratio rules, and a peer-led discussion of the challenges around making changes to incentive plan design.  Kicking off the meeting, Center Chair Richard R. Floersch, Executive Vice President and Chief Human Resources Officer, McDonald's Corporation, warned that despite improving say on pay results and a strong stock market, CHROs and their teams should "not be lulled into a false sense of security."  He said it was the Center's role to educate the HR community about the challenges ahead.  Highlights from the meeting follow.

  • SEC Spotlight on Compensation and Governance.  The opening panel featured two former officials in the SEC's Division of Corporation Finance, Brian Breheny of Skadden Arps LLP, and Jennifer Zepralka of WilmerHale.  Mr. Breheny explained that it is difficult to discern when the SEC will act on the Dodd-Frank executive compensation rules, but they remain a priority for Chair White.  Ms. Zepralka added that with Republicans taking control of both houses of Congress, it would not be surprising to see more legislation like the JOBS Act get passed that could further impact the rulemaking schedule.

  • Impact of Activist Investors on Strategy and Compensation.  Moderated by Center Advisory Board member Marcia Avedon, Senior Vice President, Human Resources, Communications and Corporate Affairs for Ingersoll Rand, this panel featured the experiences of Dennis Berger, Senior Vice President and Chief Coworker Services Officer for CDW Corporation, in dealing with private equity owner Madison Dearborn Partners, which still owns a substantial stake in the company, Mindy Mackenzie, former Senior Vice President and Chief Performance Officer for Beam Suntory, who dealt with William Ackman's Pershing Square during her tenure with the company, and Sandy Ogg, an operating partner with Blackstone Group who oversees HR for their portfolio companies and who was formerly Chief Human Resources Officer for Unilever.  During the panel, Ms. Avedon also shared Ingersoll-Rand's experience in dealing with Nelson Peltz's Trian Partners and discussed the importance of being prepared in the face of an activist threat.  At the meeting, the Center released its guide, Shareholder Activism and Executive Pay: An Overview, which profiles 10 leading investors representing the spectrum of shareholder activism today.

  • Say on Pay, Investor Engagement and the Pay for Performance Equation.  Moderated by Center CEO Charlie Tharp and featuring Glenn Booraem, Fund Controller for Vanguard, Yumi Narita, Vice President of Americas Corporate Governance for BlackRock, Pat McGurn of ISS and Bob McCormick of Glass Lewis, this panel discussed the trend toward homogeneity in pay given the continued strong influence wielded by proxy advisors over say on pay votes, the effects of stock price on the rigor of investor evaluation of pay and the panelists' perspectives on the selection and rigor of performance metrics.

  • Pay Ratio Administrative and Communications Challenges.  The discussion on the Dodd-Frank pay ratio rule moderated by Center Executive Vice President Shelly Carlin featuring Peter Carson of Powell Tate, Thomas Kim, former Chief Counsel in the SEC's Division of Corporation Finance, now of Sidley Austin LLP, and Jane Romweber of Meridian, focused on the unique communication and messaging challenges presented by the pay ratio, as well as each company's disclosure of median employee pay.

  • The Changing Landscape of Incentive Plan Metrics.  Moderated by Lisa Bisaccia, Senior Vice President and Chief Human Resources Officer for CVS Health Corporation, this panel featured John Murabito, Executive Vice President, Human Resources and Services for Cigna, Garrett Walker, Chief Human Resources Officer for Quintiles, and Steve Harris of Frederic W. Cook & Co. in a discussion about the challenges involved in changing metrics to better fit company strategy, punctuated by specific company examples on changes made to support a growth strategy, and a debate on the appropriateness of TSR as a metric or modifier within an incentive plan.