It’s the start of a new year, and with it comes the excitement of gearing up for the 2019 executive compensation planning cycle (or dread, depending on how prepared you are). The executive compensation planning process gets increasingly more complex each year thanks to a steady stream of new regulations, proxy advisory firm updates or activist investor demands. Add to that the ever-elusive challenge of designing pay plans that will incentivize your executives to deliver results for the business.
If you’re not careful, you might wind up spending so much time pulling data from multiple sources and crunching numbers that you don’t have the time to step back and think strategically about your executive compensation plans. You have better things to do than become bogged down with compiling all the data you need to meet the stringent demands of corporate governance. To alleviate this concern, we built our Compensation and Governance Professional (CG Pro) software suite of tools to ensure you have data and tools at your fingertips so you can focus more on what’s really important: designing pay plans for your executive team.
Here are eight ways CG Pro can simplify your executive compensation planning activities, saving valuable time and money.
1. Finalize Peer Group Selection and Approval
Kicking off the planning season, the first time-consuming activity for executive compensation professionals is building, or updating, their peer groups. Most companies focus on a single peer group, but may use multiple peer groups for their pay analysis or in their analysis and modeling work.
Building peer groups the old-fashioned way involves manually reviewing financials and proxy filings of possible peer companies. Whether you’re looking this data up directly from SEC filings or using a data aggregation service like Bloomberg, S&P’s CapitalIQ or Hoovers, it can be a time-consuming and error-prone process.
With CG Pro, you can tap into our PeerBuilder tool and select criteria based on industries and/or a variety of 12 different financials metrics over a 1-, 3-, or 5-year horizon. PeerBuilder is a downloadable Excel spreadsheet tool so you can comfortably change your criteria as much as you’d like. Here’s a snapshot of our presentation-ready PeerBuilder report.
2. Conduct Executive Benchmarking Analysis
Once you have your peer groups established, you’re faced with compiling the pay data as reported in the proxy statements. With CG Pro, you can access the total compensation data in a variety of standardized reports — either online or as downloadable Excel spreadsheets.
We compile the proxy pay data on thousands of companies each year so you can spend your time more strategically designing pay packages that drive results.
3. Review Pay for Performance
Your compensation committee will be pressing you hard to make sure there is alignment between proposed payouts to your Named Executive Officers (NEOs) and the performance of the company. You’ll need to gather data to show how the pay for your NEOs stacks up relative to not only your company’s performance, but also relative to the performance of your peer companies.
CG Pro will provide you with a powerful spreadsheet tool that allows you to pick from up to 24 common performance metrics over a 1-, 3- or 5-year time horizon. You can then plot how each of your NEO’s pay ranks compared to your peer companies as well as to one of the major indices (i.e., S&P 1500, Fortune 500, etc.).
You'll be able to model countless scenarios and respond quickly to questions your comp committee will undoubtedly ask. The difference you’ll notice when CG Pro is you won't have to be the one to compile all the permutations of pay and performance data.
4. Prepare First Draft of Proxy
By the start of mid-season, you will most likely need to have a first draft of your proxy Compensation Discussion & Analysis (CD&A) done. Whether there are new topics that you need to include or you are looking to improve the quality of your existing disclosures, coming up with the language for that first draft can be time-consuming.
CG Pro’s ProxySearcher tool can save you time by giving you easy access to the actual language your peers have used in their most recent proxy filing. This is not just a summary, but rather we have ‘scrapped’ the actual proxy, including tables, charts or images so you can see exactly what your peers have said on a wide range of topics.
When you see examples of how other companies have addressed the same topics you’re now trying to write about, you can save countless hours as you come up with your own narrative.
5. Establish Goals for the Upcoming Pay Program
The start of the New Year means establishing the metrics and performance goals for your incentive plans. You’ll need to ensure you have appropriate levels of ‘stretch’ performance established for each plan metric at target. Also, you’ll need to analyze and report on the overall payout curve so you have competitive thresholds and maximums.
Using the CG Pro Payout Curves reporting tools, you can view how each of your peer companies paid out relative to their performance. In our interactive downloadable spreadsheet, you can select from seven different metric categories, such as stock market, revenue, profit, etc. The tool then generates a tabular scorecard of payouts for each peer executive as well as a graphical chart that displays the payout curve.
No longer do you have to spend time building complicated spreadsheets or gathering the data about your peers’ performance and payout.
6. Run Rate and Dilution
You’ll need to keep an eye on your authorized share pools that you use for your equity awards, and to be aware of how your peer companies stack up in terms of overhang, burn rate and equity dilution.
With CG Pro, we not only gather the data, but also provide you with customizable calculation methods. You can view quick results, or choose a powerful reporting option in the form of a downloadable Excel spreadsheet that provides both the tabular data as well as a collection of pre-formatted summary reports.
7. Prepare for Shareholder Meeting
Heading into the shareholders’ meeting, one of the biggest fears for executive compensation professionals is to fall short on the “Say on Pay” vote and end up with an unfavorable rating. You can stay a step ahead by looking at the same types of tests that the proxy advisory firms (ISS and Glass Lewis) will use.
With CG Pro, you can easily assess pay for performance and realizable pay ahead of time and prepare for mitigating risks you might face.
8. Calculate Realizable Pay
To close out the annual executive compensation planning cycle, you will want to compare your awarded pay to the earned pay of the NEOs at your peer companies. This alternative pay calculation takes into account the actual value executives are earning based on the stock price has performed since equity grants were made.
CG Pro’s Realizable Pay reporting does the heavy lifting of compiling all the award and stock performance data. We provide you with comparisons of realizable pay calculations from the leading governance organizations (Glass Lewis, ISS and Conference Board) all in one glance.
Contact us to learn more about how CG Pro can streamline your executive compensation planning season and request a demo.