18 Dec Deck and Notes from NACD webinar on Comp Committee trends for 2020

Michael Keane sat in on NACD webinar today featuring Pearl Meyer consultants discussing prevailing trends on Comp Committee issues for next year.   Here are his notes and the presentation deck…

NACD Webinar – Comp Committee Trends
December 12, 2019

1.    While ISS will start incorporating EVA into its evaluation of corporate performance within its “black box”, it is NOT recommended that companies include this within its performance metrics, unless already doing so
1.1.    There will be four different EVA-related metrics in ISS’ calculation, but they are not yet clear

2.    More companies are considering whether to include ESG within their STI or LTI plans
2.1.    Key concerns
2.1.1.    Ability to create clear related metrics?
2.1.2.    Impact to other metrics – will it “crowd out” other metrics?
2.2.    More boards are making it a key consideration within the discretionary aspect of determining actual payouts
2.3.    This correlates to management’s willingness to be transparent about all aspects of ESG activities
2.4.    Propose a robust process for establishing ESG goals and metrics that can be overtly aligned (or not) with STI or LTI plans

3.    These are the broadly accepted “Rules of the Road” for reasonable Adjustments:
3.1.    Materiality – meaningful thresholds above which you make adjustments
3.2.    Consistency – you make these adjustments consistently over time
3.3.    Accountability – these adjustments account for issues outside of management’s control
3.4.    Disclosure – does the adjustment create any issues with information NOT available to investors?

4.    Comp Committee Role is expanding into Succession Planning and Talent Development
4.1.    Charter is to ensure alignment between Leadership and Strategy
4.2.    Increasingly taking this from Nominating & Governance Committee, esp. below CEO level
4.3.    Asking CHRO to do semi-annual talent pool reports
4.3.1.    Key metrics – Engagement scores, Key Talent Turnover, Key Layer Bench Strength, Key Level Diversity metrics
4.4.    Gender Pay is integrally related to D&I oversight, but careful to not be too intrusive
4.4.1.    Pearl Meyer Pay Equity studies are showing relative parity
4.4.2.    Pearl Meyer Pay Gap studies are showing 80% – the difference is in the relative lack of women in roles contributing to the calculation

Download the Presentation here