Executive Decision - March/April 2008 - (Page 35)

return-on-equity (ROE) of 36% on average; and (4) outperform the S&P 500 by 2.5% per year on average, according to Justin Kuepper, chief editor for Accelerize New Media’s (OTC-BB: ACLZ) content network, including SECInvestor.com, SECfilings.com, ExecutiveInvestigator.com and numerous other blogs. “The end result is a shareholders will become discontent and public embarrassment may result. Compensation committees must thus provide a program that will attract, motivate, and retain the level of executives needed within the context of a sensible business strategy and a responsible budget. Of paramount concern is how to provide competitive compensation opportunities for executives and ensure that the level of compensation actually earned is commensurate with the level of business performance achieved.” Clearly, the movement in Corporate America is moving toward greater disclosure and accountability and pay for performance on the lines of the American Express model. The pieces are in place for a new era of corporate honesty and accountability. XD “We’ve covered everything we can think of for the time being until people devise new ways to cheat.” plan in which Chenault won’t earn a dime even if he matches market returns. He must beat them in order to secure his bonuses,” Kuepper says. Chenault’s best-case scenario is $222 million in profits if he outperforms. His worst-case scenario is $0 if he underperforms, TA K E AWAY VA L U E TV A TM adds Kuepper who has been active in the market for over 10 years as an expert in technical and fundamental analysis while also freelancing for numerous publications including Forbes’ Investopedia.com for several years. According to Tauber, cost compensation committees today understand that compensation opportunities should not be benchmarked to what other companies pay without considering: The Search for Honesty I The aftermath of the Enron/WorldCom scandals is a new era of corporate transparency and disclosure. I The two major building blocks to this new area are the Sarbanes-Oxley Act of 2002 and SEC disclosure requirements adopted in 2006. I Safeguards are now in place to prevent a reoccurrence of abuses but there is always the possibility that new ways to commit fraud will be devised. I Transparency and disclosure reforms have resulted in new emphasis on pay for performance but the concept has been present for some time. I While conventional wisdom believes executive compensation might be too high, in reality, it may not be. • • • The degree of difficulty in achieving the performance targets; The value to the company resulting from that achievement; and The portion of that value investors should be willing to share given the relative degrees of risk assumed by them (in investing financial capital) and management (in investing human capital). “Having said all this, one can not overlook the fact that the labor market for critical talent, including capable senior executives who can lead and manage today's global business enterprises, is becoming ever more competitive,” Tauber adds. “Consequently, if pay is too low, key executives will leave and those who stay will be demotivated. If pay is too high, EXECUTIVE DECISION I March-April 2008 35 http://www.SECInvestor.com http://www.SECfilings.com http://ExecutiveInvestigator.com http://Investopedia.com

Table of Contents Feed for the Digital Edition of Executive Decision - March/April 2008

Executive Decision - March/April 2008 Contents Index of Advertisers Contributing Editors From the Editor's Desk Publisher's Note You Be the Judge - Unionization Thought Leader - Pitney Bowes Management - Flying High for Long-Term Results Strategies - Sovereign Wealth Funds Cover Story - In Whom Do We Trust? The Movement for Greater Accountability & Disclosure Finance/Legal - The New Boycott Model Green At Work - Transforming for Sustainability Technology - Embracing Risk Leadership - Executive Reputation Management The Global Village - China Moves to Curb Prices Economic Profile - California Gold Rush Transformations - I Can See Clearly Now, The Brain Is Gone Marketing - Effectively Using Market Research The Bottom Line - Brands: A Shrinking Advantage or Shifting Advantage? Pulse - Pandemic: Not If But When SPECIAL SECTION - Living On the Green: Luxury Golf Destinations

Executive Decision - March/April 2008

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