Week of January 5th
January 9th, 2009
What’s News is a regularly updated summary of news stories, typically related to compensation, that we are following, find interesting, or find baffling.
Week of January 5th…
- In response to ten questions posed by a Congressional Oversight Panel, the Treasury Department admitted that they still have no way of determining if companies receiving TARP funds are complying with the executive compensation restrictions (Download the PDF). This is really no surprise given that TARP is fundamentally a poorly structured concept with little independent oversight and minimal company accountability. What is more, based on preliminary terms of the Treasury Department’s purchases, the deal terms of the stock and warrant purchases are very unfriendly to U.S. taxpayers. Check back in the coming months as Presidio Pay will be providing an in-depth analysis of the banks participating in TARP, the terms of their deals, and the implications on executive compensation. While this letter is a few weeks old, we don’t feel it got the coverage it deserved.
- There were quite a few companies across all industry sectors announcing layoffs (Alcao, Boeing, AK Steel, ON Semiconductor, and WWE), executives forgoing bonuses and taking pay reductions (ArvinMeritor, MTI, and OHSU), or both (Lenovo, EMC, and CitiGroup). While these cost-cutting measures are unavoidable for some companies, Professor Peter Cappelli at the Wharton School of Business outlines a number of alternatives for companies considering layoffs.
- Joann Lublin wrote an interesting article for the Wall Street Journal (subscription required) about attracting key talent to a company that has filed for bankruptcy. The article points out a number of issues, including that some may require offering more cash than a comparable position in an organization that hasn’t filed for bankruptcy protection. We’d also add that companies should recognize that not only the value but the structure of pay packages will (and should) be structured quite differently while the organization is in bankruptcy than after the company emerges from bankruptcy.
- The U.S. House of Representatives approved the Paycheck Fairness Act (H.R. 12), a bill that is intended to, among other things, protect wage discrimination based on gender. There is some concern among compensation professionals that the bill will limit a companies ability to differentiate pay based on an employees location. Some suggest that an employee living in an area with a lower cost of labor would have to be paid the same as an individual living in a higher cost of labor. These concerns, as reported by some organizations, appear to be a gross exaggeration of the facts. Feel free to read the clause in question but be warned it is not an easy read and filled with sub-clauses and sub-sub-clauses. We will continue to monitor this bill’s legislative progress and provide updates as they come available.
