Executive Pay Scrutiny Calls for ‘Belts and Suspenders’ Says Compensation Expert

HOUSTON (April 26, 2010)—When executive compensation consultants Longnecker & Associates (www.longnecker.com) share “8 Disturbing Questions” with public and private companies “…it mitigates fear!” says Brent Longnecker, CEO of the 25-year Houston-based consulting firm. The firm is sharing its expertise at the meeting of the Environmental Safety & Health Committee of the Aerospace Industry Association (www.aia-aerospace.org) on May 6 in Irving, TX.
Questions ranging from “Did you know the IRS is randomly auditing executive compensation practices of private companies to ensure appropriate pay?” to “Is your compensation committee ‘independent’—as now required by the SEC” can put dread and trembling into a company’s compensation committee, Longnecker maintains.
Following the takeover of General Motors and Chrysler, and the review of big bank compensation, government now is insisting that companies wear “belts and suspenders to keep their compensation up to date,” said Longnecker. Executive compensation now must be comparable to company performance in its industry. No longer can companies compete in the middle of their industry and have compensation that leads the industry.
“As 70 million baby boomers retire, pay of their replacements will come under additional scrutiny. The powers that be will be looking at salary, variable pay, equity, retirement benefits, employee agreements, the work experience—even the type of cell phone support they receive,” said Longnecker.
He added that private companies, publicly-traded companies and not-for-profits all will be drawing from the same talent pool. Compensation will be a two-edged sword that must win the talent and conform to industry standards at the same time.
“Performance, executive compensation and employee compensation must fit,” said Longnecker. All the buckets of pay: base, bonus, long-term, SERP (Supplemental Executive Retirement Plan ) and perquisites should be competitive with similar sized companies in the same industry.
Other compensation committee concerns Longnecker addresses:
~The strong division of company wealth between executives and shareholders
~The disconnect between compensation and performance
~Excessive “farewell” payments
~Government pushing for clawbacks/deferrals
“To please government and community oversight, pay must not only be appropriate, it must look good to those not working there,” Longnecker added. ##

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