Alan Johnson, an executive pay consultant who is no fan of excessive compensation plans, says $1 pay schemes for CEOs sound nice, but they rarely work for shareholders. They tend to have a chilling affect on what a company will pay for other top talent. “Was Whole Foods able to get the best talent possible the past 10 years?” Johnson asked.
The new rule is intended to create a level playing for “bad negotiators” who’ve been paid less (women in particular) and who will in future be liberated from the shackles of their historic low pay. However, by encouraging banks to come in with incredibly low offers in an attempt to flush out pay levels, Johnson says legislators will simply make existing discrepancies worse.
For their part, banks will need to carefully document the process leading to candidates disclosing their pay levels voluntarily. – There are fines of $250k for organizations which actively ask candidates to provide the information. “Banks are going to need a paper trail,” says Johnson. “- You’ll have lawsuits over this. Three years later, banks will need to be able to point to a signed declaration saying the employee gave his or her information willingly.”
Ford’s board may have decided to leave out the cash base pay (which, prorated, would’ve been a little over $1 million) because unlike stock, a direct cash payment could make for poorer optics, said Alan Johnson of the executive compensation consulting firm Johnson Associates.
After the first quarter, Wall Street compensation consulting firm Johnson Associates is projecting mixed incentive pay across financial services, with a generally more upbeat business environment and compensation outlook compared to recent years. There’s a long way to go until the end of the year, though, with political and regulatory uncertainty, rising interest rates and ongoing challenges in global markets keeping full-year pay projections cloudy. That said, in general stronger performance has led to optimism that pay will be higher this year compared to 2016.
Pressure on asset management profit margins is driving these pay cuts, the firm notes. “The reality is that compensation is not likely to recover to recent market highs and might even fall further in coming years,” says Johnson Associates managing director Francine McKenzie.
Society For Human Resource Management (SHRM)
The reason why scandal-plagued companies are willing to pay millions in severance to allegedly bad actors is because they believe it’s the best way to put a crisis behind them and move on, explained Alan Johnson, managing director at Johnson Associates, an executive pay consultancy in New York City.
Pensions & Investments
CEO pay cuts at money management firms are following an overall trend for banks that began after the financial crisis as the highly paid top executives of the nation’s largest banks saw compensation drops, Mr. Johnson said.
“It’s someone saying: ‘I can add billions of dollars in value, and for that I want to be paid extremely well,’” said Alan Johnson, managing director of executive compensation consulting firm Johnson Associates Inc. “You don’t see this very often at all. Just like a sports figure, if CEOs believe they’re worth something there’s no reason they shouldn’t ask to get paid.”
Levin’s large pay package comes as compensation has dropped in the hedge fund industry and firms narrow in on paying for performance, says Alan Johnson, managing director of compensation consultancy Johnson Associates.
“Pay has come down meaningfully. People are differentiating better,” he says. “People who perform continue to stay where they are.”
According to Alan Johnson, managing director and founder of compensation consulting boutique Johnson Associates, some boards have moved to reduce discretion in bonus plans in order to appease investors and proxy advisors. “There’s this tension in the marketplace. A lot of it’s driven by ISS and Glass Lewis,” he says. “They hate discretion.”