The Morning Risk Report: Walmart’s Poor Score

The Wall Street Journal

Shareholder advisory firm ISS strongly disapproves of Walmart Stores Inc.’s corporate governance, assigning it “8” on a 10-point scale where 10 indicates the highest level of risk….

Alan Johnson, managing director at compensation consulting firm Johnson Associates, told Risk & Compliance Journal that Walmart’s practice of adjusting compensation when performance targets are not achieved is neither unusual nor unjustifiable. “I have many clients that do that,” he said, noting that in a complex, global company facing pressures on several fronts, boards often want to retain flexibility. However, he also noted that “Walmart does not do a very good job of explaining.” But when half of the stock is in the control of the founding family, shareholder outreach may be an understandably low priority….

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Millions by millions, CEO pay goes up

Coming in a year in which corporate earnings gains continue to come mostly from job cuts and streamlining instead of organic growth, as well as nearly a decade of stagnant wage growth for rank-and-file workers, continued gains in CEO pay underscore the disconnect between boardrooms and Main Street. Among the nation’s 104.8 million full-time workers, average median annual wages were $40,872 last year, up just 1.4% over 2012.

“The extremes are getting bigger and run smack dab into the debate of income inequality,” says veteran compensation consultant Alan Johnson.

“Board’s are quite concerned over how executive compensation will be perceived. There’s very little of, ‘Let’s make Mr. Big happy because we’re all friends and he’s a nice man.’ But you try to balance what’s competitive. I tell boards that their primary goal is to do what’s best for shareholders. If a CEO has created shareholder value, whether they’re good or lucky, and things look like they’re going to go well, you’re probably going to have to pay a lot.”

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Fund Execs Could Reap Millions in Golden Parachutes


It is not unusual for a CEO to leave a firm with a golden parachute worth tens of millions of dollars…..

But C-suite parachutes are not as golden as they were before the financial crisis, says Alan Johnson, managing director of the compensation consulting firm Johnson Associates.

“The trend has been for a reduced severance over the last five or 10 years for CEOs,” he says. “That was one of [shareholder activists’] real hot-button issues.”

These days, firms are offering executives a year or two of pay, down from three, he says.

“The general view is you were paid well while you were there and the careers were shorter,” says Johnson……

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Growth in compensation for U.S. CEOs may have slowed

(Reuters) – Big U.S. companies appear to have handed out smaller increases in compensation to their chief executives in 2013 than in 2012, mainly as a result of reduced grants of stock options, according to an early review of annual regulatory filings.

Based on disclosures from 46 companies in the Standard & Poor’s 500 Index that had filed annual compensation reports by March 11, the median compensation increase for a CEO was 1 percent to $8.64 million.

That was a slower rate of increase than this group of 46 received for 2012 when its median CEO pay rose 15 percent to $8.53 million. The median compensation for CEOs in S&P 500 companies overall increased about 5.5 percent for 2012.

The review, conducted for Reuters by proxy adviser and corporate governance consulting firm Institutional Shareholder Services, provides an early peek at compensation trends but ISS cautioned that there could be significant changes once all companies have reported and that the 46 companies may not be representative of trends for companies in the entire index. Most companies will file their executive compensation data over the next few weeks…..

“They’re not going to get monster rewards,” said Alan Johnson, managing director of pay consulting firm Johnson Associates in New York. “The indications are that companies continue to do a better job of matching up pay with performance.”


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Managers, Advisors Enjoy Comp Boost in 2013

Year-end bonuses are tethered to the tides of the market and the tide was high in 2013. According to a FundFire reader poll and expert interviews, asset managers and financial advisors mostly saw their compensation go up or hold steady compared to last year’s take.

Pay bumps for both institutional asset management professionals and financial advisors are largely attributable to the bull market in equities, experts say.

The reason is particularly straightforward in the institutional space, according to compensation consultant Alan Johnson, where he said compensation was typically up 10 to 15%. In fact, the bonus season seems to have been relatively predictable—in a December FundFire poll, 89% of respondents predicted their compensation would grow or stay the same, compared to the 84% who reported that in last week’s poll…..

“This year it’s a simple story,” says Johnson, managing director of New York-basedJohnson Associates. “It’s attributable to two things really: better markets and firms doing a good job of getting their costs under control. They had the right-sized organizations, the markets were favorable and they were greeted with asset flows they hadn’t seen in a while.”


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A King of the “Rock”

Larry Fink is one lucky guy.

Fink will take home in excess of $20 million for his Wall Street work last year, when he successfully guided New York’s largest asset-management company, BlackRock.

“He’s right at the top. He’ll be north of $20 million — and, of course, BlackRock has done great,” compensation expert Alan Johnson told The Post.

Johnson says BlackRock, along with other huge asset managers, are part of the latest “seismic change” in 2013 salary and bonuses….

“The other surprise,” said Johnson, “is how long it has taken the industry to recover from the financial crisis. We are all seeing the light now at the end of the tunnel.”

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JPMorgan Seen Paying Dimon $34 Million Award This Year

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon, who got a 74 percent raise for his work in 2013, stands to reap a separate and bigger payday within months.

The bank’s board of directors, having delayed a decision for more than a year, has yet to say whether Dimon, 57, can collect 2 million stock options originally granted in 2008 and now worth about $34 million. Last week, the board increased his annual pay to $20 million from $11.5 million a year ago, when he was penalized for faulty oversight of botched derivatives bets….

After Dimon’s incentive package was created six years ago, JPMorgan grew to become the nation’s largest bank with shares outperforming the industry, and then snapped a three-year run of record profits as costs from government probes surged. The board’s decision to boost Dimon’s annual pay despite mounting legal settlements shows he probably will get the full options award, said Alan Johnson, founder of compensation-consulting firm Johnson Associates Inc.

“It’s obvious the board wanted to send a signal about what they think of him,” Johnson said. “It’d be very inconsistent to say, ‘You’re our guy, and we want to send an emphatic public message that we think very highly of you.’ And then, ‘Oh by the way, you didn’t earn this over the last five years.’”



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Big Bonuses, but a Shift in Who Gets the Biggest

Wall Street’s senior executives have been holed up in conference rooms across Manhattan the last couple of weeks, locked in tense all-day sessions. The special project: dividing up this year’s spoils as bonus season approaches.

Over the last month or two, headlines have speculated that 2013 will turn out to be an excellent one on Wall Street. By some estimates, bonuses should rise as much as 10 percent across the board, if not more. A survey of bankers in London released over the weekend suggested they expected to receive bonus increases of as much as 44 percent.

By the sound of it, you would think that being a banker on Wall Street once again meant you were a 1980s-style Master of the Universe…..

According to Johnson Associates, a compensation consulting firm, big banks set aside $91.44 billion for 2013 bonuses in the first nine months, down from $92.49 billion in the period a year earlier.

An investment banking managing director might make $850,000, down from at least $1 million a couple of years ago and $2 million to $3 million before that. A vice president is likely to receive about $400,000, compared with $750,000 a couple of years ago.



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Nearly Half of Fund Pros Expect Bigger Bonus: Poll

Nearly 50% of respondents to a recent Ignites reader survey said they expect a larger bonus for 2013 than they received for 2012, with 43% expecting a moderate increase and 6% predicting a significant increase.

The results are as of late afternoon Tuesday, with 437 readers voting. Click here to vote in the ongoing poll.

Just 17% said that they expect their bonuses to fall below their 2012 payout, with 12% envisioning a moderate decrease and 5% expecting a significant decrease….

Alan Johnson, managing director of compensation firm Johnson Associates, also sees the poll results as an on-target prediction of 2013 bonuses.

“They can look to the markets. There’s transparency about what drives business and thus compensation,” Johnson says. “If you tell me what the average for the S&P [500] will be in 2014, I can give you a pretty good estimate about bonuses.”



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Wall Street Bonuses Due To Rise 5% To 10%

When Wall Street firms announce their 2013 bonuses in December and January, employees will see an average bump of 5% to 10%, according to a closely watched compensation survey put out by New York compensation consultants Johnson Associates, which releases three Wall Street pay reports a year. To collect its data, the company queried eight of the nation’s largest investment and commercial banks and 10 of the biggest asset-management firms. It also looked at publicly available data.

Though the overall picture is a positive one for Wall Streeters, with bonuses rising for the second straight year, some employees will do worse than others. According to Alan Johnson, Johnson Associates’ managing director, firms will pay out differing amounts to different divisions. “A firm is really a combination of a bunch of businesses,” he explains….

“Banks are making a lot of money and they’re all fundamentally healthy,” says Johnson. “Their risks are under control but they still have not fully recovered from the financial crisis. The reality is the world economy has not recovered.” There is obviously still time before the end of the year and an uptick in trading or deals could change the bonus picture.


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