Exequity Discusses Board Committee Oversight of ESG

Over the past two years, Environmental, Social, and Governance (ESG) matters have become an increasingly important issue in the boardroom. This trend is accelerating today as a growing number of investors and stakeholders expect companies to both produce strong stock price returns and demonstrate ESG improvements. Many companies are responding to investor pressures by providing enhanced disclosures on existing ESG practices. In turn, boards are broadening their mandates to add ESG.

To understand how boards are disclosing the scope of their oversight responsibilities, Exequity reviewed the board committee charters[1] of the S&P 100 constituents. Our research reveals the overall … Read more

Exequity Discusses S&P 500 Companies’ Use of “Relative Total Shareholder Return”

The economic consequences of the COVID-19 pandemic have upended countless budgets for 2020 and rendered long-term forecasts speculative at best. By now, most companies providing financial guidance have withdrawn it. Uncertainty abounds.

All the while, investors, proxy advisors, and other constituencies continue to demand pay-for-performance. Media and critics of executive compensation are culling through filings in search of companies taking actions that could be perceived as friendly to executives at the expense of stakeholders that may run counter to a strict pay-for-performance philosophy. Common modifications that may be taken in the current market to set more reasonable financial goals for … Read more

Exequity Discusses How COVID-19 Is Affecting Pay

While it is safe to say every economic crisis is different, it does not seem fair to compare this crisis to any other. The global impact of the COVID-19 pandemic is unprecedented in modern times. In response, governments around the world have restricted travel, and closed public spaces, restaurants, theaters, and “non-essential” businesses. About 75% of the U.S. population is currently subject to stay-at-home orders. Millions are suddenly furloughed or unemployed.

This is different.

As consultants to boards and management teams, Exequity has been closely monitoring public disclosures for what companies are doing, and how they are responding. To that … Read more

Exequity Discusses Valuing Amazon

It is widely accepted among investors that compensation committees should align executive pay with performance in part by using incentive metrics that contribute directly to shareholder value. For this reason, it is common for incentive metrics to overlap with performance highlights relayed in press releases communicating quarterly earnings. Planting its latest performance measurement flag in the ground, Institutional Shareholder Services (ISS) introduced economic value added (EVA), contending that EVA is better than commonly used metrics such as EBITDA, EPS, and others. Compensation committees may wonder, is EVA really a better gauge of value than their earnings release metrics? Does ISS … Read more

Exequity Discusses 2019 Trends in Companies’ Use of Total Shareholder Return

Faced with pressures from varied constituencies, compensation committees striving to demonstrate links between pay and performance regularly consider market-based performance measures such as relative total shareholder return[1] (RTSR). Companies reviewing the mix and designs of their long-term incentives (or being pressured into adopting performance-vested awards) may not be comfortable setting reasonable three-year goals—ones that are not a sure bet, but also not unattainable. As compensation committees and management teams review their alternatives, the use of RTSR as a performance metric is typically part of the conversation. Some compensation committees feel a discussion of long-term incentive metrics is remiss without … Read more

Exequity Discusses Economic Voodoo and ISS’ Use of Economic Value Added

Institutional Shareholder Services (ISS) recently introduced Economic Value Added (EVA) as its latest approach to measuring company performance. Recent white papers from ISS, authored by Bennett Stewart (ISS Senior Advisor), who, along with former business partner Joel Stern, developed the general EVA framework roughly 40 years ago, implicitly suggest that EVA is the solution to identifying companies creating value and therefore, the superior method for assessing pay for performance. As ISS states:[1]

“EVA is an established standard in measuring, analyzing, projecting, valuing, and discounting a firm’s underlying economic profit rather than its accounting profit. With coverage of 16,500+ public Read more