TheCorporateCounsel.net

October 7, 2008

Test Your Access for Our Upcoming Conferences

We thank the many of you who have registered to attend our upcoming conferences – to be held on October 21-22 – via video webcast: “Tackling Your 2009 Compensation Disclosures: The 3rd Annual Proxy Disclosure Conference” & “5th Annual Executive Compensation Conference.” And of course, we thank the many of you coming to New Orleans – for you, here are check-in/breakfast instructions.

For those watching by video webcast, to ensure you don’t have any technical snafus for the conferences, please test your access today.

How to Test: Use this link to test for access (this test is only available this week) by using your ID and password that you received for the Conferences (which may not be your normal ID/password for TheCorporateCounsel.net or CompensationStandards.com). If you are experiencing problems, follow these webcast troubleshooting tips.

How to Earn CLE Online: Please read these FAQs about Earning CLE carefully to see if that is possible for you to earn CLE for watching online – and if so, how to accomplish that. Both Conferences will be available for CLE credit in all states except Pennsylvania (but hours for each state vary; see the list for each Conference in the FAQs).

When you test your access, you can test our CLE Tracker as well as input your bar numbers, etc. You also will be able to input your bar numbers anytime during the days of the Conferences too (remember that you will need to click on the periodic “prompts” all throughout each Conference to earn credit).

How Directors Can Earn ISS Credit: For those directors attending by video webcast, you should sign-up for ISS director education credit using this form.

How to Attend by Video Webcast: If you are registered to attend online, just log in to TheCorporateCounsel.net or CompensationStandards.com on the days of the Conference to watch it live or by archive (it will take about a day to post the video archives after it’s shown live). A prominent link called “Enter the Conference” on the home pages of those sites will take you directly to the Conference.

More Companies Using Internal Pay Equity as Alternative Benchmarking

During our Conferences, some of the most respected compensation consultants will describe how companies can implement internal pay equity as an alternative to peer group benchmarking (see the Conferences’ agendas). With so much attention right now on excessive executive compensation, we predict that this methodology will really take off over the next year given how existing peer group surveys are comprised of inflated data.

Some companies have already taken the leap. In its 2008 proxy statement for Cerner Corporation, the company discloses that it uses internal pay equity guidelines that provide that its “CEO’s total cash compensation shall not be more than three times that of the next highest total cash compensation (the company’s board must approve any exception to these guidelines).”

My Ten Cents: Overcoming Objections to Internal Pay Equity

To the extent there is pushback from compensation consultants about clients using internal pay equity as an alternative benchmark to peer groups, I can understand it – because internal pay likely will reduce the level of the consultant’s role in the pay-setting process. With internal pay, consultants can advise clients about how to implement internal pay equity methodologies, but they wouldn’t make money for the use of their peer group database. This is because internal pay equity is an “internal look” at the company’s own pay scale.

But for the life of me, I can’t understand why lawyers would advise their clients not to consider internal pay equity. Over the past few years, peer group benchmarking has been criticized by many quarters. It’s not that peer group analysis is not useful per se, it’s just that the current batch of CEO pay data is tainted because most boards sought to pay their CEOs in the top quartile for 15 years – thus driving CEO pay inflation through the roof.

Given that most boards rely on peer group benchmarks as the paper trail to show that they were informed when exercising their fiduciary duties – and given that peer group benchmarking is now widely discredited – shouldn’t lawyers be advising boards to find another source of documentation for their files? Or urging them to obtain at least an additional layer of protection by balancing peer group benchmarking with internal pay equity?

The old adage that “everyone else is doing it” simply doesn’t work anymore with regulators and courts. Imagine a courtroom where several experts are brought in to show how peer group data is tainted and that everyone “should have known” it. It’s easy if you try…

Learn how to implement internal pay equity from the resources in our “Internal Pay Equity” Practice Area on CompensationStandards.com.

– Broc Romanek