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Fair Game: A Better Way to Compare C.E.O. Pay

September 21, 2013 by

Now the Securities and Exchange Commission has dipped its toe into the executive pay pool with a rule issued last week that would require companies to publish a comparison of their chief executives’ pay to the median compensation of most other company employees.

Unless you were born yesterday, you already know there’s a vast gulf between C.E.O. pay and that of the public company rank and file. So the rule, if it goes into effect (it is now undergoing a 60-day comment period), won’t be that revelatory. Sure, there will be noteworthy numbers. But the new rule will do little to help shareholders understand whether the executive pay awarded by their companies is appropriate and if not, how off the charts it is. A far more meaningful comparison for regulators is the peer groups public companies choose to use as benchmarks when setting their pay packages.

These peer groups, which are supposed to include similar companies, often don’t. In many cases, companies choose peers that are far larger or more complex and whose executives are paid more to manage that size and complexity. Therefore, the inclusion of these companies in a peer group can skew an executive’s pay higher. Investors have a name for such companies: aspirational peers.

Peer groups certainly are ubiquitous — in 2012, some 86 percent of companies in the Standard Poor’s 1,500-stock index said they used them, according to Equilar, the executive compensation analytics company in Redwood City, Calif. But they can be pretty blunt instruments for comparing executive pay.

Aware of the potential for questionable choices of companies within these peer groups, institutional investors are examining them more closely. Equilar has been assisting these investors with a system that generates a separate peer group for a company. Shareholders can use Equilar’s peer groups — and the pay they provide to their executives — to vet the groups chosen by their companies.

Aeisha Mastagni, investment officer at the California State Teachers’ Retirement System, says her organization uses Equilar’s peer groups as a gut check before voting on executive pay at companies. When wide disparities emerge between a company’s peer group and the Equilar alternative, Calstrs officials have brought up the matter with company officials.

“The peer group aspect is one piece of the puzzle that we look at when we cast votes on company pay practices,” Ms. Mastagni said in an interview last week. “Far too many companies use the peer groups as a starting point when they really need to be that reasonableness check.”

Peer groups chosen by companies don’t always differ significantly from those Equilar’s system produces. But many do.

ONE is Hain Celestial Group, a food company based on Long Island whose founder and chief executive, Irwin David Simon, received $6.5 million in pay last year.

In its proxy statement, Hain discloses two different peer groups that it uses to benchmark pay. One consists of many food and beverage companies, including Chipotle Mexican Grill, Mead Johnson and United Natural Foods. Most have higher revenue than Hain’s and half have larger market capitalizations. And yet Hain’s chief executive received far more than the $3.9 million median pay for the C.E.O.’s at those larger peers.

The other peer group used by Hain consists of companies whose founders, like Mr. Simon, still run the show. This peer group is made up of 14 companies, including Costco and Starbucks. The revenues of most of those companies were significantly higher than Hain’s — Costco, for example, has $99 billion in revenue compared to $1.4 billion for Hain. Nevertheless, these peers paid their executives less — a median of $4.8 million versus Hain’s $6.5 million.

Equilar’s suggested peer group for Hain, adds two companies to Hain’s list, with median revenues that were much more in line: Post Holdings and SunOpta. This group paid their C.E.O.’s a median $2.6 million last year, far less than what Mr. Simon at Hain received.

Mary Anthes, a spokeswoman for Hain, said that its peer group was selected by its board’s compensation committee and that for the last two years Hain’s sales, earnings and stock price had been markedly higher, justifying the pay.

Article source: http://www.nytimes.com/2013/09/22/business/a-better-way-to-compare-ceo-pay.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Devoted to Weight Watchers, but Workers Rebel Against Low Wages

February 26, 2013 by Leave a Comment

The problem, Ms. Williams said, is that she works so many hours and is paid so little. “They know my love for the program, but I can’t say we’re treated right,” she said. “We are professionals, we have to dress nice, but we are paid less than kids who work at McDonald’s.”

As the highly competitive weight-loss industry continues to suffer from the sluggish economy — Weight Watchers reported a 15.6 percent decline in earnings last year — hundreds of its rank-and-file workers are waging an open rebellion that management is scrambling to address.

This frustration reflects a growing discontent among low-wage workers, as seen in the recent protests at dozens of Walmarts, at high-end retailers in Chicago and at fast-food restaurants in New York. Low-wage workers have become more assertive out of dismay that while corporate profits have rebounded to record levels since the recession, wages have floundered.

Many also feel trapped as the gap between haves and have-nots has widened. Some employees at Weight Watchers expressed irritation at being paid the minimum wage while the company lavishes millions of dollars on celebrities like Jessica Simpson and Jennifer Hudson to advertise its weight-loss program.

Executives at Weight Watchers say they are paying attention to their employees’ concerns, and have hinted they will increase compensation.

The company’s chief executive, David Kirchhoff, wrote to employees earlier this month, saying, “One of our top priorities is to improve your working life at Weight Watchers, and in particular, the way we reward you for the incredible work you do.”

Employees — many of them leaders like Ms. Williams who run meetings — have inundated an internal company Web site with complaints about poor wages and being pressured to work many hours unpaid.

Some leaders say that the $18 base rate for running meetings has not increased in more than a decade, and many complain that they receive no mileage reimbursement for the first 40 miles driven each day. Some also assert that a major reason Weight Watchers keeps its pay so paltry is that the overwhelming majority of its employees are women.

“We are not working for a charity or a nonprofit corp,” one Weight Watchers leader posted on the Web site. “This is a multimillion-dollar company with enough cash to advertise relentlessly on TV, and pay celebrities tons of money to lose weight.”

The restlessness over low pay extends across the weight-loss industry to Weight Watchers’ rivals, including Jenny Craig and Nutrisystem. A pending lawsuit asserts that Jenny Craig’s employees in New York State typically work through their lunch hour, but are not paid for that time — a claim the company denies. That comes after Weight Watchers reached a $6.2 million settlement two years ago to end a class-action lawsuit in California in which employees complained about minimum wage violations, off-the-clock work and receiving paychecks that did not explain how wages were calculated.

”People feel they did everything right. They’re working hard, they have higher levels of education than ever before, and they find the job market is offering them a wage that they can’t live on,” said Janice R. Fine, a professor of employment relations at Rutgers University.

For Weight Watchers, one of the world’s oldest and largest dieting companies, keeping its leaders happy is crucial to the company’s future, because it relies on them to recruit and retain members through the nearly 50,000 face-to-face meetings the company runs each week worldwide.

Article source: http://www.nytimes.com/2013/02/26/business/devoted-to-weight-watchers-but-workers-rebel-against-low-wages.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Democrats See Advantage in Payroll Tax Debate

December 2, 2011 by Leave a Comment

With Mr. Obama leading the charge in Washington and political swing states, Senate Democrats have put proudly antitax Republicans in the position of opposing a tax cut for more than 160 million mostly middle-class Americans because they object that it includes a tax on about 350,000 people, those with more than $1 million in annual taxable income.

Votes late on Thursday left the issue at an impasse. The Senate voted 51 to 49 for Democrats’ measure to further reduce Social Security payroll taxes next year for both workers and employers and to impose the surtax, but the tally was short of the 60 votes needed. One moderate Republican, Senator Susan Collins of Maine, supported it. A Republican alternative, which would have extended the current more modest tax cut and slashed the federal payroll to pay for it, was rejected 78 to 20, with more than half of Republicans opposed.

The maneuvering suggests that the parties will agree to some continued relief before the current payroll tax cut expires on Dec. 31. But how much of a cut and how — or if — it will be paid for remain to be settled, with some in both parties saying that the tax break would further weaken the Social Security system’s financing.

But politically, Democrats believe that they have already won this latest skirmish in the message wars. And some exasperated Republicans acknowledge that they are losing the exchange; party leaders have worked this week to bring the rank and file in line behind the tax cut.

Democrats have concluded from the payroll tax debate that Republicans are vulnerable over their opposition to any new taxes on the wealthy in a way they were not when Democrats proposed such taxes for deficit reduction. So they have reprised an old message — that Democrats fight for the middle class, Republicans for the rich — and are likely to sound it through 2012, in hopes of blunting the headwinds they face as unemployment remains high.

“Tonight, Senate Republicans chose to raise taxes on nearly 160 million hard-working Americans because they refused to ask a few hundred thousand millionaires and billionaires to pay their fair share,” Mr. Obama said in a statement after the first Senate vote.

It was the same message he delivered on Wednesday, in anticipation of the Senate action, both in speeches to a crowd in blue-collar Scranton, Pa., and later to affluent donors in New York. In Scranton, speaking as if to Republicans, he asked, “Are you willing to fight as hard for middle-class families as you do for those who are most fortunate?  What’s it going to be?”

Mr. Obama, in setting this debate in motion in September, when he introduced his job-creation plan, has tapped into the widespread sense of income inequality — fighting for “the 99 percent” — that gave rise to the Occupy Wall Street movement. But Democrats would not be in their current strong position but for the fact that Republicans, for the first time in memory, contested a tax cut and then insisted that the reductions be paid for.

“This would have been unheard of even six months ago,” said Senator Charles E. Schumer, Democrat of New York. “But we are changing the debate, and the public is with us.”

Mr. Schumer read to reporters from RedState.com, a Web site popular among conservatives, where a blogger, Erick Erickson, wrote, “I never thought I would see the day, but Democrats are outmaneuvering Republicans on a tax cut.”

“Like clockwork, the G.O.P. is throwing the ball into the Democrats’ basket for them,” Mr. Erickson said.

Republican leaders’ struggle this week to find a strategy that could unite their party reflected the political bind it is in. Nearly 7 in 10 Americans said the policies of Republicans in Congress favored the rich, a New York Times/CBS News poll found in October.

In a memo to Senate Democrats last week, the party pollster Geoff Garin cited other recent surveys to argue that concern about income inequality and the perceived decline of the middle class is trumping the antigovernment fervor that defined last year’s Congressional midterm election and allowed Republicans to take control of the House. He said that sets up a 2012 election that is fundamentally different.

Robert Pear and Jennifer Steinhauer contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=b5d23beec96f69c57ad03966536d2bb1

Filed Under: Economy News Tagged With: , ,