Last week, CII adopted updated policies on portfolio company executive compensation that reflect these (among other) largely principles-based expectations and recommendations:
- Consideration of a simplified pay approach consisting of fixed pay/salary and a single incentive plan - such as time-vested restricted stock - that begins to vest after five years
- Judicious use and rigorous oversight of performance-based plans, which are characterized as a key source of pay complexity and confusion because they are allegedly less transparent, harder to understand, more difficult to value, and susceptible to manipulation
- Stock ownership policies/guidelines that apply until at least one year after the executive's departure, and prohibit sales/liquidation upon non-compliance
- Clawback policies actionable upon fraud, financial restatement and potentially other triggers like personal misconduct or ethical lapses that may cause material reputational harm to the company
- Independent comp consultants that are subject to a competitive bid process at least every five years
- Disclosure, justification, and full explanation of any intra-period or post hoc discretionary adjustments to performance-based pay
- Careful selection and use of peer group and peer group data
- Limited use of enumerated employment-related arrangements
See CII's release; this post from Cooley; this Pensions&Investments article; and additional information & resources on our Executive Pay, Pay for Performance, and Clawbacks pages. This post first appeared in the weekly Society Alert!