Matteo Tonello is Managing Director of ESG Research at The Conference Board, Inc. This post is based on co-publication by The Conference Board, Semler Brossy, and ESGAUGE, authored by Mr. Tonello, Mark Emanuel, Todd Sirras, Elijah Ostro, and Paul Hodgson. Related research from the Program on Corporate Governance includes the book Pay without Performance: The Unfulfilled Promise of Executive Compensation, and Executive Compensation as an Agency Problem, both by Lucian Bebchuk and Jesse Fried.
Director Compensation Practices in the Russell 3000 and S&P 500: 2021 Edition documents trends and developments in non-employee director compensation at 2,855 companies issuing equity securities registered with the US Securities and Exchange Commission (SEC) that filed their proxy statement in the period between January 1 and December 31, 2020, and, as of January 2021, were included in the Russell 3000 Index. The project is a collaboration among The Conference Board, compensation consulting firm Semler Brossy, and ESG data analytics firm ESGAUGE.
Data from Director Compensation Practices in the Russell 3000 and S&P 500: 2021 Edition can be accessed and visualized through an interactive online dashboard at https://conferenceboard.esgauge.org/directorcompensation. The dashboard is organized into six parts.
Part I: Compensation Elements, with benchmarking information on the prevalence, value, and year-on-year increases of cash retainers, meeting fees, stock awards, stock options, and any benefits and perquisites.
Part II: Supplemental Compensation, including the cash retainer and meeting fees granted for serving on board committees and the premiums offered for board and committee leadership roles.
Part III: Equity-Based Compensation, which reviews cash and equity compensation mix, the prevalence and value of various equity award types, and the vesting schedules of awarded equity.
Part IV: Stock Ownership Guidelines and Retention Policies, for a detailed analysis of the features of ownership guidelines for board members (including their disclosure, their compliance window, the definition of ownership adopted, and whether the guidelines revolve around a multiple of the cash retainer or a specific number of shares) and the types of retention requirements applicable to equity-based compensation (including the retention ratios and the duration of the retention period).
Part V: Compensation Limits, including the prevalence of limits by type (whether total compensation limits, dollar-denominated limits or share-denominated limits) and the median and average value of these ceilings.
Part VI: Deferred Compensation and Deferred Stock Units (DSUs), including elective and mandatory deferrals, to what compensation element the deferral applies, the form of the deferred compensation payout, the use of deferred cash investment vehicles (such as money-market or savings accounts, retirement accounts, or others) and the prevalence, value, holding requirements, vesting periods, and payout forms of DSUs.
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Repairing the US Financial Reporting System
More from: Lynn Turner
Lynn E. Turner is Former SEC Chief Accountant and Senior Advisor to Hemming Morse LLP. This post is based on an open letter to SEC Chairman Gary Gensler, authored by Mr. Turner and 33 other individuals.
The under-signed individuals and organizations share a deep concern about the present state of the financial reporting infrastructure in the United States. Two decades after a wave of major accounting scandals swept U.S. markets and Congress responded with passage of the Sarbanes-Oxley Act (SOX), many of the root causes of that crisis—deeply flawed and outdated accounting standards, weak and ineffective auditor oversight, and auditors who lack both independence and professional skepticism—have reemerged as pressing issues. For too many years, the Commission itself has been either complicit or passive in the face of these developments. We are writing to urge you to take bold action to restore the financial reporting infrastructure on which investor protection, the fair and orderly functioning of our markets, and the efficiency of the capital formation process all depend.
The original federal securities laws are based on a principle that is elegant in its simplicity—that “all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it.” [1] As the Alliance of Concerned Investors (AOCI) stated in their April letter, “investors are empowered to make useful investment decisions only when they are provided with robust and timely financial information.” [2] Increasingly, there is a growing demand for that information to include applicable disclosures regarding environmental, social and governance (ESG) issues. It’s not just investors, however, but effective market oversight and capital formation, that benefit from the transparency needed to ensure that capital flows efficiently to its best uses. For that system to work, the information that companies report must be complete and accurate. When financial reporting fails to provide the information that investors are demanding, or when investors lose faith in financial reports’ reliability, our markets suffer, as we saw to devastating effect two decades ago.
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