Center On Executive Compensation Subscriber Call Explores Implications of Changes to 162(m) on Incentive Design, Administration

February 02, 2018

This week, the Association’s Center On Executive Compensation hosted an in-depth discussion regarding the impact the repeal of the performance-pay exception will have on executive compensation plan design and administration as well as the implications for chief human resource officers and compensation committees.  The call featured Blair Jones, Managing Director at Semler Brossy Consulting Group, LLC and Regina Olshan, Partner at Skadden Arps, who joined the Center Team for a discussion on the practical implications of the 162(m) changes.  These included:

  • The impact on the timing of setting targets;
  • Whether the compensation committee process for approving incentive plans will change, including the compensation committee’s use of positive and negative discretion; and
  • The impact on company tax efficiency. 
On the call, Ms. Olshan answered several Subscriber questions on topics including the implications for shareholder approval of incentive and equity plans, the new method for determining who is covered by Section 162(m) and the transition relief that grandfathers certain plans in place prior to November 2, 2017.  Ms. Jones further noted that today’s governance environment may temper the use of flexibility and counseled participants on the mindset they should have as they consider making plan design changes next year and the implications the changes may have for shareholder and stakeholder engagements in 2018.  The Center has developed several documents for Subscribers on the impact of the section 162(m) changes on incentive philosophy, design and administration, including a side-by-side comparison of the requirements before and after the change and a forward-looking analysis. The call was a part of the Subscriber Discussion Call series, which provides monthly conference calls on trending and important executive compensation and corporate governance issues.  It features leading external and company speakers in executive compensation policy and practice and offers Subscribers an open forum to ask questions and get feedback.  For more information about the Center, please contact the Center’s CEO, Tim Bartl at tbartl@execcomp.org.