Human Resource Executive Online, May 15, 2008, Thursday

Human Resource Executive Online

May 15, 2008, Thursday

Human Resource Executive Online

Positioning HR on Executive Comp

A new HR group, created by members of the HR Policy Association, will lobby on executive-comp-reform issues. It has positioned itself as a centrist organization, with officials saying it is seeking a "reasoned perspective."

By Stephen Barlas


A new business lobbying group composed of top HR executives is positioning itself as a voice of reason on executive pay in advance of Congress's expected attempts in 2009 to seriously consider "say on pay" bills and the likelihood of a new White House occupant sympathetic to those and other similar efforts.

The Center on Executive Compensation, formed by members of the HR Policy Association, which represents Fortune 500 human resource directors, appears to be trying to take a more nuanced approach to executive compensation issues than the Business Roundtable which has successfully prevented the Senate from considering a bill sponsored by Rep. Barney Frank., D-Mass., that passed the House in 2007.

But President George W. Bush's threat to veto that bill probably has a lot to do with Connecticut Democrat and Senate Banking Committee Chairman Chris Dodd's decision to ignore the Frank bill, sponsored in the Senate by Sen. Barack Obama, D-Ill.

However, in 2009, either Obama or Sen. John McCain, R-Ariz., will be president, barring some unforeseen circumstance. McCain also supports a "say on pay" bill and would be likely, as Obama would, to push for other anti-executive comp measures, such as more detailed, and perhaps draconian, Securities and Exchange Commission rules on reporting of executive compensation.

The newly created Center, like the Roundtable, opposes the Frank/Obama Shareholder Vote on Executive Compensation Act.

Timothy Bartl, vice president and general counsel of the HR Policy Association, who helps manage the Center, says, "If there is a president who is more amenable to some of these changes, there is a greater likelihood we will see attempts legislatively on these issues, and I think there is widespread anticipation of that."

Tom Lehner, director of public policy for the Business Roundtable, says the Center is "a welcome addition" and adds that its executive compensation "reform" agenda doesn't differ markedly from the Roundtable's.

The Center has developed a number of position papers, which it displays on its Web site: www.execcomp.org . But one Washington observer who is very active on executive-comp issues and perused the Center's Web site says, "What they have is extremely limited and [is] missing nearly all of the real issues."

While the new Center echoes the Roundtable's opposition to the Shareholder Vote bill, it appears to depart from some of the BRT's other positions -- maybe in style, maybe even in substance.

"On some things," Bartl says, "we will be more nuanced than the Roundtable. We want to offer a reasoned perspective on executive compensation that is a counter perspective to some of the approaches to compensation advocated by critics, and also to lend our voices to where reform is necessary."

Nell Minow, a leading shareholder's voice and editor and co-founder of The Corporate Library, says, "It sounds like the Center is trying to be more centrist. The BRT talks a good game but its members are among the worst offenders. "

Since its creation, the Center seems to be taking a more critical position on severance pay.

Charles Tharp, executive vice president for policy at the Center, explains, "While new executives should receive a supplemental severance, as they do now, once they have participated in performance-based awards for a period, the supplemental severance should phase out."

The Center will also support SEC efforts to improve the commission's summary compensation table, revised in December 2006, and which came into play for the first time for 2007 proxies.

But John White, the director of corporation finance for the SEC, has made it clear in speeches that, although companies have made good-faith efforts to comply with the SEC rules, they need to do better on the manner of presentation and analysis.

Tharp says the summary compensation table "results in an apples-to-oranges comparison, in which potential pay is compared with past company performance. We seek to develop an approach in which actual and realizable pay is compared to company results that would provide an apples-to-apples comparison and would be more meaningful for shareholders."

As the Center attempts to present a friendlier face on executive comp issues, it remains to be seen whether the group will be able to assert itself.

Tharp, the "public face" of the Center, according to Bartl, is a part-time employee and an academic who is an instructor at Cornell University's School of Industrial and Labor Relations. He is the Center's only employee at the moment. Bartl says no outside lobbyists will be hired.


May 15, 2008

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