Effective executive compensation promotes company growth and long-term performance, creates value for shareholders, and rewards executives appropriately. Tapestry’s Compensation Committee Leadership Network (CCLN) fosters practical insights and solutions to some of the most vexing challenges boards face related to pay and performance.
The CCLN brings together compensation committee chairs from more than 40 of the largest and most admired companies in North America. This thoughtful group meets privately on a continuing basis, fostering personal relationships, mutual trust, and candor.
CCLN members are leading the way in developing pragmatic policies and leading-edge thinking on topics ranging from management development and executive compensation to succession planning.
Recent network topics:
In light of the crisis arising from Wells Fargo’s recent settlements to resolve a multi-year fraud investigation, compensation committee chairs discussed how compensation and incentive programs can affect a company’s culture and reputation.
Boards
seek to position their companies for success by linking CEO selection,
executive compensation, and other important decisions with their companies’
long-term goals.In a series of recent
conversations, compensation committee chairs discussed how they stay focused on
the priorities that drive value not for the quarter or the year, but for many
years into the future.
CCLN members discussed the lifecycle of a major transaction and the different milestones at which companies and their boards must make decisions about key personnel. These include choices about who will manage the combined entity and how those leaders will be compensated in both the short and longer term. Members also considered executive severance and dismissals. CCLN members emphasized the importance of putting thoughtful severance programs in place that give managers license to make decisions that are in the best interest of the company.
CCLN members discussed a wide range of pressures boards face as they seek to add value to their companies. Members said that directors must think harder about the backgrounds and skills needed to compose the right board for a company’s future. Members also discussed the best ways to respond to criticism about director pay or independence.
Compensation committees face many choices when deciding how to pay, and thereby motivate, management. Members of the CCLN discussed how they select the right metrics, targets, and payout curves to align pay with performance. In another session, members were joined by a panel of institutional investors to discuss executive compensation, shareholder-director communication, and proxy voting. Members were also joined by Professor Michael Dorff for a lively dinner conversation about incentive pay plans.
The rise in shareholder activism and the increased attention institutional investors are paying to corporate governance requires boards to prioritize investor relations. CCLN members discussed the value of a strong relationship between the board and the investor relations officer (IRO), with a focus on ways to empower IROs to share early warning signs with directors. Members also discussed current trends in shareholder activism and the need for directors to think like the activist within a company.
Interest in the compensation committee’s work is unprecedented and this ViewPoints illuminates some of the key governance and regulatory issues facing compensation committees today. First, the discussion highlights CD&As as an emerging tool to communicate complicated compensation decisions to a large number of stakeholders. Then, it examines six practices that boards and management should consider as part of a vigorous succession plan. Lastly, it assesses the steps companies are taking to prepare for forthcoming SEC rules on executive compensation.
As they exercise oversight, directors listen carefully to their shareholders and to the proxy advisers. Compensation committee chairs and lead directors discussed trends from the 2014 proxy season. In a separate session, guests from ISS and Glass Lewis joined the directors to explore proxy advisory firm policies. Both guests shed light on their firms’ decision making practices and recommendations on specific proxy issues. Additionally, they described how their firms evaluate each proxy proposal individually and dispelled the myth that they just apply their policies universally.
Marianne Harris
Compensation Committee Leadership Network
Compensation Committee Chair, Sun Life Financial
