Lawyer Jeremy Goldstein Discusses Executive Compensation

Executive compensation now depends on the mandatory advisory vote, so it is more important than ever that shareholders are involved in the corporate landscape. With this in mind, companies are having a hard time determining when, how and whether or not corporate directors need to discuss executive compensation with the shareholders. In this article, Jeremy Goldstein lists the factors that companies may want to consider that will help them decide these issues.

In general, the main spokesperson needs to be the chief executive officer. If the primary architect of the company’s strategy is always the chief executive officer, the company will always have a persistent theme. The exception may be when the topic being discussed is executive pay.

The board approves compensation for the chief executive officer and other executives. Therefore, the best people to discuss payment for these individuals may be board members. Also, investors believe that chief executives are highly interested in their own compensation. If board members engage with shareholders on questions of compensation, they will demonstrate to investors that they are fulfilling their duty of overseeing company business as well as showing support for the company’s programs.

In all, for the reasons stated above, board members may be the most appropriate people to discuss matters of executive compensation. This, of course, will depend on the facts and circumstances of each individual corporation.

The following components will help people decide whether or not a board member is the appropriate person to discuss executive pay:

  1. A Board Member Knowledgeable about Pay Programs

The most critical concern is whether or not the board member knows the subject at hand intimately. Shareholders are expected to engage in operations so that the company is trustworthy. It also helps to maintain credibility. A company will ensure that these goals are attained by choosing a spokesperson who deeply understands the executive pay program and can explain the reasoning behind it.

  1. The Topic that Is to Be Addressed

The topic that needs to be addressed will help you determine who the best person is to broach it. The best choice to speak with investors about the pay of a chief executive officer or other matters may be a director. If the topic will be a general compensation policy, someone other than the director may be a better choice.

  1. The Shareholders’ Preferences

One shareholder may wish to speak with one representative, but another may wish to converse with someone entirely different. There may be someone who would like to talk to compensation committee members, but sometimes, people do not want to talk to board members at all. The best way to encourage shareholder engagement is for a representative to be aware of each investor’s preference and go out of his or her way to serve those needs.

  1. The Individual/Shareholder

In most cases, a member of the compensation committee or the lead director/independent chairman will speak for the board when executive pay is being discussed. The compensation committee approves executive pay, so it may seem as if it is correct for the compensation committee chair to discuss executive pay. The fact is that the company wants to ensure that a singular message is always being given by the same person. Therefore, a lead director needs to be the one who is engaging with the shareholders. The best choice in this regard would be someone who is a member of the compensation committee and a lead director/independent chairman.

In the event that a director will be the one to discuss executive pay, these discussions must be one part of a larger communications strategy. If a shareholder needs to communicate with the directors, some companies have a corporate secretary who will deliver shareholder inquiries to the directors. Companies that have a director of corporate governance use this person for the purpose of sending messages to the directors.

Management and the board must come to an agreement on what types of topics the board will agree to discuss. These topics should only include items that are on the agenda. Directors must lead the conversation and not allow shareholders to steer the group into a discussion about financial performance and corporate strategy unless both sides have agreed to discuss these things before the meeting gets started.

Management has to be certain of two things, and they are the following:

  • Board engagement activities must be fully known.
  • Directors have all of the information that is needed to answer all investor questions. The messages must always be consistent with other corporate literature.

The company must decide beforehand whether or not management members will be allowed to be present at the meeting with investors. When this occurs, management will be informed about everything that was discussed. The head of investor relations, human resources executives, director of corporate governance and the general counsel are the most necessary attendees at these meetings. The directors will have the responsibility of informing the management team of the investors’ feedback whether the afore-mentioned individuals attend the meeting or not. This will ensure that full disclosure has been attained.

In order to keep from breaking securities laws, directors need to be familiar with Regulation F-D so that they do not inadvertently disclose information to investors that has not been disclosed to other market participants if their duty is to communicate with shareholders.

Headshot of Lawyer, Jeremy Goldstein
Jeremy Goldstein, Attorney at Law

About Jeremy Goldstein

Jeremy Goldstein was accepted at New York University School of Law where he received his Juris Doctor. He stayed close to this school after his graduation and is currently a member of the Professional Advisory Board for the NYU Journal of Law and Business.

Jeremy Goldstein was a partner in a major law firm with a focus on mergers and acquisitions early in his career. Some of the prominent cases he has been involved in include the acquisition of AT & T Corp. by SBC Communications, Inc. and the merger between Bank One Corporation and J.P. Morgan Chase & Company. He was also involved in Miller Brewing Company’s purchase of South African Breweries, PLC.

In 2014, Jeremy Goldstein founded Jeremy L. Goldstein and Associates, LLC. His practice focuses on executive pay as well as corporate governance issues. He counsels management groups, compensation committees and CEOs when they are in the process of undergoing corporate transitions and other difficult circumstances.

Jeremy Goldstein is a member of the American Bar Association Business Section. He is also the chair of the Mergers and Acquisitions Subcommittee. He supports mental health programs for people in his community as a member of the board of directors for The Fountain House.

Check him out on LinkedIn and about.me

Read our previous Jeremy Goldstein post here.

Jeremy Goldstein Explains The Mystery Of Severance Pay

In today’s unpredictable and competitive employment market, one common concern among employees everywhere is severance pay. Although many people believe that professional jobs automatically come with severance pay, this is not always the case. For those who are job hunting or are concerned about being fired from a professional job, it is important to understand how severance pay works and when it is applicable.

 

 

Severance Pay And The Law

Not all companies are not required by law to provide severance pay. If an employee leaves a job voluntarily, the Fair Labor Standards Act mandates that the worker must be paid his or her wages through the date of completion. Also, the worker is entitled to be paid for any vacation accrual. A severance sum is not mandated by the FLSA. Employers may offer severance pay if they choose to do so. It may be offered to employees on a certain level or all employees of a company. If severance is paid, it is often paid through an agreement between the employee and the employer or a union.

 

In the event of a mass layoff, employers are required by the Worker Adjustment and Retraining Notification Act to notify workers 60 days in advance. If the employer does not or cannot provide notice within that period, the employer is required to pay the workers their regular salary and benefits for 60 days. For example, a company that is closing in 30 days and must lay off workers would still have to pay the workers for 30 days beyond the closing date. If a company promises severance pay in its employee handbook or through an employment contract, the company is required to honor its commitment. Employees who receive a severance benefit are usually required to sign a contract from the employer that liberates the employer from any future legal claims or liabilities.

 

Another common requirement that accompanies severance release forms is an age discrimination release form. Anyone who is over the age of 40 is usually required to sign this form since some people file lawsuits under the Age Discrimination in Employment Act. Employees who are over the age of 40 and are presented with a severance option have 21 days to decide whether or not to accept the offer under federal law. However, employees have 45 days to consider the offer if more than one person is being laid off at the same time and at least two of the workers are over the age of 40. This is because more than one person being laid off at a time is considered a group layoff.

 

 

How Severance Is Paid

Most large companies offer severance in the form of one lump payment. In some instances, severance is calculated based on continuing salary for a certain period. When this is the case, severance may be distributed in several payments. A lump sum is the best option to accept if an employer offers multiple choices for payment. When payments are received in multiple increments, some employers provide a larger payment upfront followed by diminishing payments until there is nothing left to pay.

 

One benefit of receiving multiple payments is continuing health insurance. In some instances, an employer will pay the severed employee’s health coverage until severance pay runs out. Employees can ask about this before accepting a payment structure. Although workers are often allowed under the Consolidated Omnibus Budget Reconciliation Act to continue receiving health benefits from a former employer for up to 18 months, they are usually required to pay the premiums themselves. Many group plans have expensive individual premiums. Some workers who know that they will be laid off may be able to negotiate with an employer to have the company continue paying for health benefits for a certain period.

 

When calculating severance pay, employers usually base it on the worker’s salary and invested years. For example, many large companies that employ top-level executives offer about three weeks of severance pay for every year of work. This means that an executive who worked for a firm for 10 years may receive a severance package that includes between 25 and 30 weeks of pay. For lower-level employees, severance pay is usually equal to less than two weeks of pay for every year spent at the company. In many instances, severance pay comes with a year number cap. This varies from one company to another and may also vary based on an employee’s position.

 

Severance pay is taxed. Receiving a lump sum could put a person in a higher tax bracket. Many workers benefit from contacting a tax professional before accepting a payment option when they are presented with more than one choice. When being laid off, workers can also try to recoup reimbursement for travel expenses, sick time or unused vacation time. Additional benefits such as 401(k) contributions and others may be kept by the employee.

 

 

About Jeremy Goldstein

Jeremy Goldstein is a partner at Jeremy Goldstein, LLC. His firm serves the greater New York City area. Mr. Goldstein earned a bachelor’s degree in history from Cornell University in 1995. He earned a master’s degree in history from the University of Chicago in 1996. In 1999, he earned his law degree from the New York University School of Law. Jeremy Goldstein volunteers his time as a director at Fountain House in New York. The non-profit organization helps men and women receive treatment for mental health issues.

 

In the past, Mr. Goldstein served as a partner for 14 years with another firm. He gained valuable experience in executive compensation with a focus on issues related to mergers and acquisitions. Additionally, he has extensive experience in executive compensation in relation to corporate governance. Jeremy Goldstein is also a member of several prestigious associations related to corporate governance and executive compensation.

Jeremy has contributed before on our blog. Read his opinions on stock options for employees: https://thereisnoconsensus.com/jeremy-goldstein-explains-knockout-options-help-employers/

Learn more:

https://www.visualcv.com/jeremygoldstein

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