This document provides information about an upcoming webinar on executive compensation. It includes brief bios of the four featured speakers, who are experts in executive compensation from large law and consulting firms. It also provides an agenda that outlines the topics to be covered, including understanding the current legal and regulatory landscape, issues around incentive-based compensation, and planning strategies. The webinar aims to help participants navigate the complex regulatory environment surrounding executive pay.
1. Speaker Firms and Organization: Presented By: Grant Thornton, LLPJ. Henry Oehmann III CCP, CBP, CEBS, SPHRDirector-National Executive Compensation Services Paul, Hastings, Janofsky & Walker LLPJ. Mark PoerioPartner, Employment Department Skadden, Arps, Slate, Meagher & Flom LLP Regina OlshanPartner, Executive Compensation and Benefits Mercer LLCCarol Silverman Principal Thank you for logging into today’s event. Please note we are in standby mode. All Microphones will be muted until the event starts. We will be back with speaker instructions @ 2:55pm. Any Questions? Please email: Info@knowledgecongress.org Group Registration Policy Please note ALL participants must be registered or they will not be able to access the event. If you have more than one person from your company attending, you must fill out the group registration form. We reserve the right to disconnect any unauthorized users from this event and to deny violators admission to future events. To obtain a group registration please send a note to info@knowledgecongress.org or call 646.202.9344. March 9, 2011 1
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6. Brief Speaker Bios: 4 J. Henry Oehmann III CCP, CBP, CEBS, SPHR Henry is Director National Executive Compensation Services practice and offices in Grant Thornton’s Raleigh office. Henry has more than thirty years of executive compensation consulting experience.Henry works extensively with compensation committees of public companies on executive compensation and corporate governance issues. Prior to joining Grant Thornton LLP, he was Vice-President of Executive Compensation Services at Clark Consulting, a Principal and compensation practice leader at Arthur Andersen and at Buck Consultants in Atlanta. In addition, he was Director of Compensation and Employee Benefits at Progress Energy. His in-depth experience in the banking and financial services industry is coupled with a wide-range of consulting engagements including both domestic and international clients across various industries. J. Mark Poerio Mark Poerio is a partner in the Employment department in the Washington D.C. office of Paul Hastings. For nearly 25 years, Mr. Poerio has been in private practice with a focus on executive compensation and employee benefit matters, especially from a business and corporate governance and securities perspective. He works regularly with every Paul Hastings office, on a national and international level, and has significant pro bono representations relating to not-for-profit business, executive compensation, and tax matters. Mr. Poerio is also an adjunct professor with the Georgetown Law School, where he designed and teaches both “Executive Pay and Loyalty” and “The Business and Securities Aspects of Executive Compensation.” March 9, 2011
7. Brief Speaker Bios: 5 Regina Olshan Regina Olshan’s practice focuses on advising companies, executives and boards on navigating the regulatory complexities of executive compensation and benefits. Ms. Olshan regularly advises public companies, boards, private equity clients and members of management on these issues, including those arising in the context of major corporate transactions. She is the author and editor of Section 409A Handbook published by BNA, lectures frequently on executive compensation issues, and has been quoted in various major publications on issues arising under Internal Revenue Code sections 409A and 457A, and other executive compensation matters. Carol Silverman Carol S. Silverman is a principal in the Washington Resource Group (WRG) of Mercer. The WRG is a national legal resource for Mercer consultants and clients on legislative and regulatory developments. Ms. Silverman advises employers on corporate governance and regulatory issues, and executive and director compensation strategy and design, with an emphasis on employment and change in control agreements and equity programs. She also specializes in employee benefit issues that arise in the context of corporate transactions and initial public offerings. ► For more information about the speakers, you can visit: http://knowledgecongress.org/event_2010_Executive.html March 9, 2011
8. Companies face considerable challenges when applying accounting principles related to executive compensation and bonuses in light of this new and complex regulatory environment. The Knowledge Group is assembling a panel of experts to help you understand the critical elements of executive compensation in 2010 & 2011. The speakers will share their expert opinions in a two-hour LIVE Webcast. They will address the following key issues: - Benefits, bonuses and incentives - Stock options - Compensation protection - Tax issues - Up-to-the-minute regulatory changes This live webcast will cover the fundamentals you need to understand about executive compensation. 6 March 9, 2011
9. Featured Speakers: 7 SEGMENT 1: SEGMENT 4: Carol Silverman PrincipalMercer LLC J. Henry Oehmann IIIDirector-National Executive Compensation ServicesGrant Thornton, LLP SEGMENT 2: SEGMENT 3: J. Mark Poerio Partner, Employment DepartmentPaul, Hastings, Janofsky & Walker LLP Regina Olshan Partner, Executive Compensation and Benefits Skadden, Arps, Slate, Meagher & Flom LLP March 9, 2011
10. Introduction 8 SEGMENT 1: J. Henry Oehmann IIIDirector-National Executive Compensation ServicesGrant Thornton, LLP Henry is Director National Executive Compensation Services practice and offices in Grant Thornton’s Raleigh office. Henry has more than thirty years of executive compensation consulting experience.Henry works extensively with compensation committees of public companies on executive compensation and corporate governance issues. Prior to joining Grant Thornton LLP, he was Vice-President of Executive Compensation Services at Clark Consulting, a Principal and compensation practice leader at Arthur Andersen and at Buck Consultants in Atlanta. In addition, he was Director of Compensation and Employee Benefits at Progress Energy. His in-depth experience in the banking and financial services industry is coupled with a wide-range of consulting engagements including both domestic and international clients across various industries. March 9, 2011
13. A collapse of the financial markets, bank failures, and the government bailout of banks and other financial institutions;
14. The recession and related economic downturn that has resulted in a substantial decline in the stock market, significant and chronic unemployment, business failures, and a general aura of uncertainty in the business community;
15. The intrusion by the federal government into most aspects of the business and financial community to provide plans and programs to restore the capital markets and to alleviate the unemployment crisis; and
16. The infusion of taxpayer dollars through programs such as TARP and “cash for clunkers” to restart the economy and add capital to offset the economic losses caused by foreclosures, defaults, and a declining auto industry.March 9, 2011
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18. SEC amendments to proxy disclosure rules relating to compensation and corporate governance adopted in December 2009;
20. Federal regulators of financial institutions “Guidance on Sound Incentive Compensation Policies”.
21. Our discussion will incorporate the chronology of executive compensation changes beginning with the Sarbanes-Oxley Act of 2002 and continuing with the Emergency Economic Stability Act, the American Recovery and Reinvestment Act and leading to the most recent enactment of Dodd-Frank.
22. The seeds of most of the current and likely the future executive compensation and corporate governance changes will be revealed through the lens of this historical perspective. March 9, 2011
35. Many of these changes grew from the EESA and ARRA legislation and regulations that imposed restrictions on banks and financial institutions that received government assistance through programs such as TARP.
53. Clawbacks present a unique challenge to most companies, whether public or private; your company’s ability to modify agreements, identify the events triggering a clawback, and tracking down and recovering pay from former employees will be difficult, if not impossible;
54. What is expected in the reporting of a compensation structure remains unclear. What is clear is that this provision is intended to address excessive compensation and/or preventing excessive risk. We think that the regulations on this will be difficult to address, but are likely to end up focusing on enterprise risk management.
55. “Say on Pay” will lead companies to rethink the adoption of new compensation plans that are difficult or awkward to communicate. March 9, 2011
61. Within its guidance and principles, the agencies identified the following incentive compensation strategies to ensure a balance of risk and reward:
62. Adjusted awards to reflect the following risks: credit, market, liquidity, operational, legal, compliance, and operational;
76. Risk and size adjust awards based on the control that individuals may have to impact a broad segment of the company’s earnings or exposure to potential future losses;
77. Provide delayed payment schemes linked to the time horizon of the risk, especially if the executive has the ability to affect the near-term outcome;
78. Use of stock-based compensation, stock holding period requirements, and share ownership guidelines may improve the link between executive behavior and long term shareholder value;
79. Monitor performance to ensure that paid compensation is not later subject to revisions or restatements of financial information that would reduce the initial value of these payments;
80. Engage internal audit, the compensation committee, and management in the development, approval and tracking of incentive compensation plans. March 9, 2011
92. Look for signals and trends like those from Dodd-Frank and TARP/ARRA as a guidepost for more global compensation restrictions and requirements;
93. Risk management and compensation will need to work more closely in the future to ensure compliance and a sound approach to incentive compensation. March 9, 2011
94. 23 Introduction Mark Poerio is a partner in the Employment department in the Washington D.C. office of Paul Hastings. For nearly 25 years, Mr. Poerio has been in private practice with a focus on executive compensation and employee benefit matters, especially from a business and corporate governance and securities perspective. He works regularly with every Paul Hastings office, on a national and international level, and has significant pro bono representations relating to not-for-profit business, executive compensation, and tax matters. Mr. Poerio is also an adjunct professor with the Georgetown Law School, where he designed and teaches both “Executive Pay and Loyalty” and “The Business and Securities Aspects of Executive Compensation.” SEGMENT 2: J. Mark Poerio Partner, Employment DepartmentPaul, Hastings, Janofsky & Walker LLP March 9, 2011
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96. “Malus”Disloyalty SEGMENT 2: J. Mark Poerio Partner, Employment DepartmentPaul, Hastings, Janofsky & Walker LLP March 9, 2011
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99. SOX 304(a) 26 Additional Compensation Prior to Noncompliance With Commission Financial Reporting Requirements. If an issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer, as a result of misconduct, with any financial reporting requirement under the securities laws, the chief executive officer and chief financial officer of the issuer shall reimburse the issuer for-- 1. any bonus or other incentive-based or equity-based compensation received by that person from the issuer during the 12-month period following the first public issuance or filing with the Commission (whichever first occurs) of the financial document embodying such financial reporting requirement; and 2. any profits realized from the sale of securities of the issuer during that 12-month period. SEGMENT 2: J. Mark Poerio Partner, Employment DepartmentPaul, Hastings, Janofsky & Walker LLP March 9, 2011
100. Dodd-Frank 2010 27 Clawback in Section 954 of Dodd-Frank Conf. Report (7/12/2010): [New to ‘34 Act:] §10D. RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION. POLICY (1) LISTING STANDARDS.—The Commission shall, by rule, direct the national securities exchanges and national securities associations to prohibit the listing of any security of an issuer that does not comply with the requirements of this section. (2) RECOVERY OF FUNDS.—The rules of the Commission under paragraph (1) shall require each issuer to develop and implement a policy providing— (A) for disclosure of the policy of the issuer on incentive-based compensation that is based on financial information required to be reported under the securities laws; and (B) that, in the event that the issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer with any financial reporting requirement under the securities laws, the issuer will recover from any current or former executive officer of the issuer who received incentive-based compensation (including stock options awarded as compensation) during the 3-year period preceding the date on which the issuer is required to prepare an accounting restatement, based on the erroneous data, in excess of what would have been paid to the executive officer under the accounting restatement. March 9, 2011
121. Hold HarmlessSEGMENT 2: J. Mark Poerio Partner, Employment DepartmentPaul, Hastings, Janofsky & Walker LLP March 9, 2011
122. Conclusion 36 Questions? Mark Poerio 202.551.1780 markpoerio@paulhastings.com SEGMENT 2: J. Mark Poerio Partner, Employment DepartmentPaul, Hastings, Janofsky & Walker LLP March 9, 2011
123. 37 18 offices across Asia, Europe, and the U.S. One legal team to integrate withthe strategic goals of your business March 9, 2011
124. 38 Deductibility of Bonuses by Accrual Basis Taxpayers Regina Olshan Skadden, Arps, Slate, Meagher & Flom LLP New York, NY 10036 Regina.olshan@skadden.com For the education of administrators only. Not for use with the public. Any graphics and charts are copyright to their owners and are used for educational purposes only. SEGMENT 3: Regina Olshan Partner, Executive Compensation and Benefits Skadden, Arps, Slate, Meagher & Flom LLP April 28,2010
125. Introduction Regina Olshan’s practice focuses on advising companies, executives and boards on navigating the regulatory complexities of executive compensation and benefits. Ms. Olshan regularly advises public companies, boards, private equity clients and members of management on these issues, including those arising in the context of major corporate transactions. She is the author and editor of Section 409A Handbook published by BNA, lectures frequently on executive compensation issues, and has been quoted in various major publications on issues arising under Internal Revenue Code sections 409A and 457A, and other executive compensation matters. SEGMENT 3: Regina Olshan Partner, Executive Compensation and Benefits Skadden, Arps, Slate, Meagher & Flom LLP 39 April 28,2010
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127. Until recently, few if any companies considered the federal income tax treatment of the payments in this regard.April 28,2010
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133. The IRS concluded in the Chief Counsel Memorandum that “even though bonuses may be based on the company’s performance in Year 1, economic performance does not occur and the liability is not fixed until the date that bonuses are paid because service must continue until that time.” SEGMENT 3: Regina Olshan Partner, Executive Compensation and Benefits Skadden, Arps, Slate, Meagher & Flom LLP April 28,2010
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136. Conclusion 45 Employers should review their incentive compensation plans to determine if their current or historical deduction practices are subject to challenge based on this position. Employers who claim a Year 1 deduction notwithstanding a Year 2 service requirement risk challenge on audit, particularly in light of recently increased employment tax compliance audits and pressures on the IRS to raise revenue. SEGMENT 3: Regina Olshan Partner, Executive Compensation and Benefits Skadden, Arps, Slate, Meagher & Flom LLP April 28,2010
137. A Global Law Firm 46 CANADA EUROPE SEGMENT 3: ASIA USA • Toronto • Brussels • Frankfurt • London • Moscow • Munich • Paris • Vienna Regina Olshan Partner, Executive Compensation and Benefits Skadden, Arps, Slate, Meagher & Flom LLP • Beijing • Hong Kong • Shanghai • Singapore • Tokyo • Boston • Chicago • Houston • Los Angeles • New York • Palo Alto • San Francisco • Washington, D.C. • Wilmington • Sydney April 28,2010
138. 47 Introduction SEGMENT 4: Carol Silverman PrincipalMercer LLC Carol S. Silverman is a principal in the Washington Resource Group (WRG) of Mercer. The WRG is a national legal resource for Mercer consultants and clients on legislative and regulatory developments. Ms. Silverman advises employers on corporate governance and regulatory issues, and executive and director compensation strategy and design, with an emphasis on employment and change in control agreements and equity programs. She also specializes in employee benefit issues that arise in the context of corporate transactions and initial public offerings. March 9, 2011
146. Shareholder vote required on named executive officer (NEO) pay programs -- as disclosed in proxy statement Compensation Discussion & Analysis (CD&A) and related tables -- at least once every 3 years
156. For votes on say on pay, director elections, executive pay or other significant matters, can count only votes from shareholders and brokers specifically authorized to vote on shareholder’s behalf
163. Nominating shareholders must notify company no later than 120 days but no earlier than 150 days before anniversary of prior year’s proxy mailing
164. Originally scheduled to take effect Nov. 15, 2010, the SEC has granted a stay pending resolution of a lawsuit filed by the Business Roundtable and the US Chamber of Commerce March 9, 2011
174. If the company fails to address those problems by the next year, ISS is likely to advise voting against compensation committee members or, in some cases, all directors (red card)
175. If a company with problematic pay practices does not have a SOP resolution on the ballot or has “egregious” pay practices, ISS may go directly to a red card, recommending a vote against compensation committee members or all directors
176. Companies can no longer avoid a negative vote recommendation by committing to eliminate a pay practice in the futureMarch 9, 2011
199. 58 Q&A: SEGMENT 1: SEGMENT 4: Carol Silverman PrincipalMercer LLC J. Henry Oehmann IIIDirector-National Executive Compensation ServicesGrant Thornton, LLP SEGMENT 2: SEGMENT 3: J. Mark Poerio Partner, Employment DepartmentPaul, Hastings, Janofsky & Walker LLP Regina Olshan Partner, Executive Compensation and Benefits Skadden, Arps, Slate, Meagher & Flom LLP ►You may ask a question at anytime throughout the presentation today. Simply click on the question mark icon located on the floating tool bar on the bottom right side of your screen. Type your question in the box that appears and click send. ►Questions will be answered in the order they are received. March 9, 2011
201. 60 ABOUT THE KNOWLEDGE CONGRESS: The Knowledge Group, LLCis an organization that produces live webcasts which examine regulatory changes and their impacts across a variety of industries. “We bring together the world's leading authorities and industry participants through informative two-hour webcasts to study the impact of changing regulations.” If you would like to be informed of other upcoming events, please click here. Disclaimer: The Knowledge Group, LLC is producing this event for information purposes only. We do not intend to provide or offer business advice. The contents of this event are based upon the opinions of our speakers. The Knowledge Congress does not warrant their accuracy and completeness. The statements made by them are based on their independent opinions and does not necessarily reflect that of The Knowledge Congress' views. In no event shall The Knowledge Congress be liable to any person or business entity for any special, direct, indirect, punitive, incidental or consequential damages as a result of any information gathered from this webcast. March 9, 2011
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