1. Connell & Partners Top 13 Concerns
for Compensation Committees in
2013 – “Top 13 for 2013”
September 17, 2012
300 TradeCenter, Suite 3460 | Woburn MA 018031 | T: 781.392.3600 | www.dolmatconnell.com

2. Introduction
Connell & Partners is pleased to present its Top 13 Compensation Committee concerns for 2013, the “Top 13
for 2013.” Our hope is that with this list, Compensation Committees can be better prepared to address the
challenges now as they get ready for compensation decision making this Fall and into Q1of 2013.
If your firm would like any assistance with these issues, or other executive compensation matters, please
contact us on the web at www.dolmatconnell.com or call or email Jack Connell, founder and Managing
Director at 781-647-2739/ jack_connell@ajg.com or Justin Fossbender, Principal Consultant at
justin_fossbender@ajg.com/ 781-496-3406.
Connell & Partners, Inc., (www.dolmatconnell.com) a division of Gallagher Benefits Services (GBS), which
itself is a division of Arthur J. Gallagher (NYSE:AJG), is an executive compensation boutique consulting
firm with all of the advantages of a $2.5B public company behind it that meets all Dodd-Frank consultant
independence tests. Additional information on our firm can be found at the end of this presentation.
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3. Top 13 Compensation Committee Concerns for 2013
Dodd-Frank, Say-on-Pay and the lingering economic uncertainty are all having an impact on how
Compensation Committees and Management teams make decisions about pay. Thus, it’s no surprise that the
oversight responsibilities of Compensation Committees continue to evolve. As we begin the planning cycle
for compensation decisions for 2013, the following reflect our perspective on the Top 13 concerns for
Compensation Committees in 2013 and in this continually changing environment.
1. CEO Pay and Firm Performance
 ISS reliance on Total Shareholder Return as the standard for firm performance
 How to create incentive plans that are aligned with the business and also build toward TSR growth
as an outcome, and yet are not solely based on TSR?
2. Shareholder Optics/Say on Pay
 Shareholder outreach/engagement becoming more of a routine practice
 If we “failed,” did we do enough this time around to secure a passing vote? Even though we passed,
are we sure we’ll pass again?
 What is the “box of normal” that public companies have to operate within given today’s governance
challenges and is this box getting smaller?
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4. Top 13 Compensation Committee Concerns for 2013
3. Continuing Impact of Dodd-Frank
 CEO Pay Ratio and Clawbacks – Final SEC Rules pushed out
 But most companies not waiting until final rules are issued to implement clawbacks
 Most taking wait and see approach on ratios
 Assessing Compensation Consultant Independence
 Dodd-Frank/Listing Exchange Criteria and Consultant Certification of those criteria
4. Balancing Varying Perspectives (Shareholders, Shareholder Advocates, Executives, the Board, and the
broader employee population)
 How should market data be valued, referenced and utilized? One reference point among many
(internal parity, performance, etc.)?
 Pay disparity/Pay (in)equality (Top 1% vs. broader employees, is the gap growing or narrowing and
why, and what are the implications?)
5. The Selection of Performance Metrics for Bonus and LTI Plans
 What are the appropriate metrics for our plans? How do we know?
 How are risk and performance leverage balanced to ensure we can still drive the business?
 How confident are we in our forecast in light of the continuing economic uncertainty?
 Should we consider relative performance to mitigate the uncertainty?
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5. Top 13 Compensation Committee Concerns for 2013
6. Proper Long-term Incentive (LTI) Vehicle selection and Usage
 Are we using the right vehicles based on our business strategy?
 Managing annual share pools and securing approval of new share requests from shareholders
7. Peer Group Selection
 Consistent, reasonable, appropriate, and defensible methodology – but no “one size fits all”
approach
 Knowledge of ISS methodology and relative alignment with your current practice
 Should we have multiple peer groups for multiple purposes?
8. Beyond ISS
 Awareness of ISS and other shareholders and advocacy groups preferences for compensation
practices (Glass Lewis, Fidelity, Vanguard, CalPERS, TIAA-CREF, AFL-CIO, etc.)
 Their evaluation criteria for Say-on-Pay, share pool requests, and other voting criteria
9. Executive and Board Stock Ownership and Holding Requirements
 A market best practice in all public companies these days
 Agreement that we should have them, but what’s the best approach (e.g., multiple of pay, retention
ratio, hold until retirement, etc.)?
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6. Top 13 Compensation Committee Concerns for 2013
10. Board of Director Compensation
 Pay levels continue to increase based on supply and demand, increased time commitment and
liability exposure
 Alignment with time spent AND company performance?
 Pay mix/LTI mix and vesting becoming simpler
 Total cost of governance in absolute dollars (Board pay x # of Directors = Total Cost) and as percent
of market cap (Total Cost / Market Capitalization) help to compare total cost across comparators
11. CD&A Disclosure
 Continuing to build on and illustrate the “story”
 Pay for Performance – opportunity vs. realized and realizable pay
 CEO Pay/Ratio
 Response to Say-on-Pay results
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7. Top 13 Compensation Committee Concerns for 2013
12. Managing the Compensation Committee’s Time and Agendas
 With so much to focus on evolving practices, how does the Committee make the most effective use of
its time and agendas?
 Does our Committee calendar sufficiently outline the year’s agendas, including enough time for ad hoc
or other unplanned business needs?
 Revisiting the Committee Charter as responsibilities expand – Have we reviewed it annually and
assessed it against the Committee’s actual undertakings?
13. Employee Engagement, Succession Planning and Retaining your “Critical Talent”
 The Compensation Committee continues to evolve into an “HR Committee”
 Given the continuing challenges and regulatory landscape pushing more to “plain vanilla” plans, how
do companies continue to strive for competitive advantage from their compensation plans without
disenfranchising shareholders?
 Do companies understand the strengths and weaknesses of their employment value proposition and
can they be agile enough to respond if and when the market rebounds?
 Review of total compensation philosophy in light of Compensation Committee Charter, HR Strategy,
Compensation Strategy, and evolving regulatory and environmental framework to ensure it is aligned
with the needs of the business.
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8. Concluding Thoughts
While these “13 for 2013” are likely on the top of most Compensation Committee minds, they are not
meant to be exhaustive, as each company will have its own issues to address.
These concepts are intended to illustrate the process and approach Committees can take to assess their
strategies in light of the business environment and evolving external stakeholder views, determine
their approach to pay and performance, articulate that approach through various channels, illustrate
the results and implications to the various stakeholders, and ensure enough flexibility in plan designs
to deliver competitive advantage and be able to adjust quickly as business needs warrant.
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9. About Connell & Partners
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10. About Connell & Partners
 Connell & Partners is a independently run division of Gallagher Benefits Services which itself is a
division of Arthur. J Gallagher (NYSE:AJG) dedicated to providing independent, insightful, and
innovative advice in all areas of executive compensation and Board of Directors remuneration. We meet
all of the independence requirements required by the SEC under the Dodd-Frank Act.
 At a time of unprecedented scrutiny of executive compensation programs, Connell & Partners delivers
the independent advice required in today’s demanding governance environment. We have no benefits
brokerage, HR outsourcing, insurance, actuarial, or management consulting conflicts and no cross-selling
pressures.
 Our consultants draw on their significant consulting and corporate experience to provide insightful
advice to a wide range of clients, including venture-backed start-ups and Fortune 500 companies. Connell
& Partners offers expertise that rivals our largest competitors with the innovative, tailored advice and
exceptional client service associated with a dynamic consulting boutique.
 We welcome the opportunity to introduce you to our firm and to discuss how our services may benefit
your organization.
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11. Our Services
 We advise clients from an independent perspective on all matters of compensation, including:
 Executive Compensation
 Compensation Strategy and Philosophy Development
 Board of Directors Compensation
 Long-Term Incentive Plans
 Short-Term Incentives / Bonus Plans, including Performance Metric Selection and Calibration
 Executive Employment / Change-in-Control Agreements, including IRC §280G calculations
 Corporate Governance, including Compensation Committee Charters
 Pre- and Post-IPO Compensation
 Merger & Acquisition Compensation Strategies, including Retention Plan Design
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12. What Sets Connell & Partners Apart from Other Firms
 Alignment of Compensation Strategy and Business Strategy
 We provide more than data. In order to deliver exceptional value, we take the time to understand your
business and your competitive environment thoroughly. We then tailor our advice to your specific
situation and unique needs. Based on our knowledge of your organization, we can employ a strategic
approach to designing the compensation program that will best assist your organization in achieving key
strategic and financial objectives and that will help create a competitive advantage for your firm.
 Partner Attention and Exceptional Client Service
 At Connell & Partners, our consultants work with you over the entire project, from the initial stages to
editing the final report. We constantly strive to exceed your expectations in order to develop a long-term
relationship with you.
 A Results-Driven Approach
 Our approach to executive compensation considers the forms of pay, the levels of pay, and the processes
used to develop pay programs to appropriately link executive compensation with key results. Whether
your focus is on recruiting, retaining, or incentivizing your key people, we develop total compensation
programs tailored to your needs. Our customized compensation programs move pay-for performance
from rhetoric to reality, while appropriately balancing the interests of shareholders and executives.
 Our Reports are Both Comprehensive and Comprehensible
 Our reports are written with senior executives and Board members in mind. We provide cutting-edge
quantitative analyses and highly detailed assessments without data overload. Our presentations are
accessible and informative, designed to help you make key compensation decisions.
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13. Why Connell & Partners?
 Since our inception in March 2005, Connell & Partners has worked with over 125 firms ranging from venture-
backed start-ups to Fortune 500 firms. Our partners and senior staff all have significant national, cross-industry
consulting experience. We have particular experience in the high technology, life science, and clean
technology/alternative energy industries, having collectively consulted to over 200 companies in these
industries. We work with many pre-IPO companies. We also have significant experience working in the
business/professional services, consumer products, manufacturing, and financial services industries. Some of
the firms that we have worked with include:
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14. High Technology Clients
 Some of the firms in the High Technology, Hardware, and Software industries who we have worked
with include:
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15. Pre-IPO Clients
 Extensive experience in the pre-IPO / recent IPO arena.
 We have collectively worked with over 100 pre-IPO firms in the last 10 years. Some of the firms
that we have recently worked with in this space include:
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16. Consultant Bios
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17. Jack Connell
Jack is founder and Managing Director of Connell & Partners, Inc. Jack is a nationally recognized expert in
executive compensation, sales compensation, incentive plan design (short-term and long-term), linking pay
and company performance, and total reward strategy development. He works with organizations ranging
from start-ups to Fortune 50 companies. He has worked on over 100 IPOs over the course of his consulting
career. He focuses on industries with intensive human capital needs, including high technology and life
sciences. He also has special expertise in mergers and acquisitions, and turnarounds.
Jack has significant experience at both consulting firms and corporations, and brings both perspectives to his
work when advising clients. His consulting experience includes serving as Managing Director and National
High Technology and Life Science Practice Head for Pearl Meyer and Partners, Managing Director and East
Coast Practice Leader for iQuantic, Managing Director and National Consulting Practice Leader of The
Wilson Group, and President and Founder of Solutions at Work. His corporate experience includes serving as
Senior Vice President of Global HR for Geac Computer; Senior Director of Compensation, Benefits, and HRIS
at Avid Technology and Stratus Computer; and various HR, and compensation and benefits roles at Digital
Equipment Corporation and Data General Corporation.
He earned a Bachelor's Degree in Economics from the University of Michigan and an MBA in Organizational
Behavior and Corporate Strategy from the University of Michigan Ross Graduate School of Business. Jack has
also been an adjunct professor at Bentley College and Babson College, and an instructor for WorldatWork.
Jack has published more than 40 articles and book chapters, including articles in Forbes, WorldatWork
Journal, Chief Legal Executive, Mass High Tech, and Boston Business Journal. He has been quoted
extensively in such publications as The Wall Street Journal, Business Week, CFO Magazine/CFO.com, Red
Herring, USA Today, The San Jose Mercury News, Corporate Governance News, Employee Benefits News,
and Compliance Week. Jack speaks regularly at many national and regional conferences.
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18. Justin Fossbender
Justin is a Principal for Connell & Partners. He is responsible for client delivery and business development for
the firm.
Justin brings a balanced perspective to clients, having both significant consulting and in-house, corporate
senior leadership experience. He has been responsible for client service, delivery and business development
on the executive compensation consulting side at Hewitt, now AonHewitt, Fred Cook & Company, and
Watson Wyatt (now Towers Watson). He has also led significant change management initiatives through his
leadership of the compensation, benefit, talent management and HR technology functions as Vice President of
Total Rewards at Millipore Corporation, a $1.7B leading-edge Life Science Company, until Millipore’s
acquisition by Merck, KGaA and then Senior Director of Total Rewards, HRIS and Talent Management at
VCE, The Virtual Computing Environment Company, a joint venture between EMC, Cisco Systems and
VMware focused on cloud computing.
Through Justin’s consulting and in-house leadership experience, he has provided strategic advice and counsel
to Senior Management and Boards of Directors across all aspects of the executive compensation area,
including compensation strategy and philosophy development, short- and long-term incentive plan design,
M&A, employment arrangements, retention plan design, communications, and corporate governance.
Justin graduated from Columbia University with a Bachelor of Arts degree. He then obtained a Juris Doctor
degree from New York Law School. He is licensed to practice law in the state of New York.
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19. David Dreyfus
David is a Managing Consultant for Connell & Partners. He is responsible for day-to-day project management
and quality assurance of our client deliverables and handles the day-to-day client interface as well.
David began his career in the Business Analyst program at Capital One Financial Corp. He worked on the
Sales Strategy and Analysis team in the Point of Sale Finance Division in Framingham, MA. There he
designed and implemented the sales compensation plans. He also worked on the Workforce Planning team at
Vistaprint, N.V. in Lexington, MA, a publically traded e-commerce company.
David graduated from the Olin Business School at Washington University in St. Louis with a Bachelor of
Science in Business Administration. There he double-majored in Finance and Economics.
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20. To Contact Us:
Connell & Partners is a wholly-owned subsidiary of Gallagher Benefits Services (GBS), which is itself a
division of Arthur J. Gallagher (AJG:NYSE), dedicated to providing independent, insightful, and
innovative advice in all areas of executive compensation and Board of Directors remuneration. We
meet all independence requirements of the Dodd-Frank bill’s rules for compensation consultants.
Jack Connell Justin Fossbender David Dreyfus
Managing Director Principal Consultant Managing Consultant
781.647.2739 781-496-3406 781.647.2722
jack_connell@ajg.com justin_fossbender@ajg.com david_dreyfus@ajg.com
Visit our website at www.dolmatconnell.com.
Connell & Partners, Inc. does not provide legal or financial advice nor provides tax or accounting services. Recommendations should be reviewed with appropriate tax, accounting, or
legal counsel. Connell & Partners, Inc. warrants that its services are performed by personnel possessing competency consistent with applicable industry standards. No other
representation, express or implied, and no warranty or guarantee is included or intended in any report, opinion, deliverable, work product, document or otherwise. Furthermore, no
guarantee is made as to the efficacy or value of any services performed or work product developed. THIS SETS FORTH THE ONLY WARRANTIES PROVIDED BY Connell &
PARTNERS, INC. CONCERNING THE SERVICES AND RELATED WORK PRODUCT. THIS WARRANTY IS MADE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, ACCURACY, COMPLETENESS, ADEQUACY, OR
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