华信惠悦 - Setting a Total Rewards Strategy Amid a Shifting Executive Compensation Climate.ppt

Setting a Total Rewards Strategy Amid a Shifting Executive Compensation Climate Biotech Employee Development Coalition (BEDC) September 30, 2003 Terri Shuman 818-623-4509 Jason White 818-623-4582 Agenda The Shifting Executive Compensation Climate Why Total Rewards? Setting a Total Rewards Strategy Next Steps/Q A Appendix: About Watson Wyatt The Shifting Executive Compensation Climate Today’s Headlines in Executive Pay Current Environment – Executive Pay Sarbanes Oxley Act (SOX) Penalties for falsifying financials No new loans Limitations on stock trading Compensation Committees more active / challenging Current Environment – Executive Pay (cont’d) Expensing FASB now to release final proposal in 3rd Q 2004 IASB and FASB divergent – key differences: FASB allows expense reversal, IASB will not IASB requires prorated expensing upon termination 15 different valuation models being reviewed Most companies waiting for FASB before expensing Plans must bridge today’s vs. tomorrow’s accounting Dilution under attack (ISS targeting high overhang) New word: any discount on ESPPs would incur earnings charge (5% no longer exempt under FAS 123) Current Environment – Executive Pay (cont’d) Stock Exchange Regulations Shareholders must approve all equity plans (except new hires, mergers / acquisitions) Remaining stock exchange proposal awaiting SEC approval Companies already revising Boards to ensure majority is independent Boards controlling outside advisors and meeting independently Guidance to better educate Board members taken seriously Lead directors being appointed in about 25% of larger companies Current Environment – Executive Pay (cont’d) Tax Laws Jobs and Growth Tax Act lowered dividend and capital gains rates to 15% Creating potential collision course in 2009 Sunset provisions apply and tax rates potentially return to pre-2002 levels Dividend equivalent and restricted stock plans more desirable due to lower tax rates Current Environment – Executive Pay (cont’d) D