Page 657 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

642 The Complete Guide to Executive Compensation

2006 Berkkshire Hathaway first stock to close at $100,000 a share
2006 ATT Chairman and CEO earns $31.6 million
2006 United Health Group CEO reportedly to leave with $1 billion in cash and stock
2006 New York judges tells former New York Stock Exchange CEO that he must
pay back almost $100 million of the pay received
2006 Proxy advisor Glass Lewis & Co. assign grades ranging from “A” to “F” for
CEO pay-for-performance packages
2006 GE CEO states CEO pay should be a small multiple of 25 most senior
managers; Immelt’s own was within 2–3 times range.
2006 Outside Coca-Cola directors to be paid solely on equity-share units based on
compound annual EPS growth meeting or exceeding 8% per share
2006 IBM announces the end to stock options for outside directors
2006 Everyone on Forbes 400 list has net worth of at least $1 billion
2006 Google CEO and two founders receive $1 salary and $1,723 cash bonus, but
CEO ouns 10% of Google stock and cofounders each own 25%
2007 Wall Street CEO executive pay was led by Merrill Lynch ($35.4 million),
Morgan Stanley ($41 million), and Goldman Sachs ($53 million)
2007 President Bush states boards must step up to their responsibility and pay exec-
utives based on performance
2007 Pay packages for terminated CEOs were led by Pfizer ($200 million) and
Home Depot ($210 million)
2007 Newly appointed Home Depot CEO rejects offered pay package as too rich;
board gives equity grants peformance measure based equity grants instead of
restricted stock
2007 Google implements ongoing auction with third party financial institutions
permiting employees (other than the Executive Management Group) to sell
their vested stock options
2007 American Express Co. reduces executive supplemental pension formula
2007 After four-year hiatus, GM returns to use of stock grants to top executives
2007 Aflac gives shareholders non-binding vote on executive pay
2007 SEC approves Zions Bancorp auction method for determining stock option
expense charge
2007 Treasury Department and IRS issue final regulations on section 409A
(Deferred Compensation) of the Internal Revenue Act

THE PRESENT

The Ideal Pay Plan
The plan for an individual company can only be structured by reviewing the specific objectives
of that company, assessing their priority and degree of importance, and creating a delivery
system that facilitates their attainment in a cost-effective manner. Too often, the right decision
is made at the wrong time (e.g., give more stock options because the stock is performing well,
or adopt a nonmarket plan because the stock price is low). In other instances, priorities are
confused (e.g., placing tax effectiveness ahead of individual needs and corporate objectives).
Table 11-1 recaps the characteristics of the ideal pay plan reviewed earlier.