1. Executive
Compensation And
Performance
BY DAN ISTVANEK

2. Overview
 Types of executive compensation and how there
awarded
 Problems with executive compensation
 The current status
 What's being done and solutions

3. Thesis Statement
 Compensation awarded to top executives does not
actually improve company performance, but intern
creates more long term problems.

4. Background
 Six main types of executive compensation
 On various disclosed financial documents
 Two ways of evaluating
Peer Comparison
Pay vs. Performance

5. Deciding On Compensation
 The Board of Directors
 Macroeconomic conditions
Outside factors
Ex: 2008 Recession
 Industry specific performance
Compared to similar companies in industry

6. Stock Return Rank vs CEO Pay Rank
 Equilar ranked the salaries of 200 highly paid CEO’s
 Compared to company revenue, profitability and stock
return
 Data shows no correlation
Scattered points
Exec income ranking is only 1% based on Co. stock
return

8. Compensation vs. Shareholder Returns
 CEO pay remained high in 2014
 Many companies had negative shareholder returns than in
2013
 Liberty Global CEO
 $112.2 million, 13.3% shareholder return
 Rite Aid CEO
 $8.3 million, 292.3% shareholder return
 Transocean CEO
 $14.2 million, -60% shareholder return

9. Liberty Global
Rite Aid
Transocean

10. 12/14/2015 CEO Pay vs Performance - WSJ.com
Year Shareholder Return Total Compensation
2014 +13.3%
2013 » +40.5%
2012 » +53.4%
2011 » +16.0%
2010 » +0.0%
Company Performance
2012-2014 Total Shareholder Return (Three-year) +34.5%
2014 Total Shareholder Return (One-year) +13.3%
2014 Change in Company Net Income (One-year) --
2014 Compensation Breakdown
Salary $1.9 Million
Bonus $5.0 Million
Annual Non-Equity Incentives $7.8 Million
Stock Awards $89.3 Million
Option Awards $6.6 Million
Long-Term Non-Equity Incentives $0
Change in Nonqualified Deferred Compensation
+ Pension Value
$262,417
All Other Income $1.3 Million
Michael T. Fries
Liberty Global (LBTYA)
2014 Market Cap. $43.6 Billion
Industry: Consumer Services
2014 Fiscal Year End: Dec. 31, 2014
Start Date: June 1, 2005
$112.2 Million
$46.9 Million
$14.0 Million
$13.8 Million
$12.3 Million
12/14/2015 CEO Pay vs Performance - WSJ.com
Year Shareholder Return Total Compensation
2014 +292.3%
2013 » +0.6%
2012 » +17.6%
2011 » -13.8%
Company Performance
2012-2014 Total Shareholder Return (Three-year) +72.7%
2014 Total Shareholder Return (One-year) +292.3%
2014 Change in Company Net Income (One-year) +111.2%
2014 Compensation Breakdown
Salary $1.0 Million
Bonus $0
Annual Non-Equity Incentives $4.2 Million
Stock Awards $810,060
Option Awards $1.8 Million
Long-Term Non-Equity Incentives $0
Change in Nonqualified Deferred Compensation
+ Pension Value
$240,511
All Other Income $273,325
John T. Standley
Rite Aid (RAD)
2014 Market Cap. $7.4 Billion
Industry: Consumer Services
2014 Fiscal Year End: March 1, 2014
Start Date: June 23, 2010
$8.3 Million
$7.8 Million
$11.0 Million
$2.8 Million

11. Pay Gap Ratio Disclosure
 SEC proposed a new regulation in July
 Pay gap ratio between median worker and CEO
 Pressure Boards of Directors to take action
 “We often see that what gets disclosed gets
considered and addressed by companies”
- Heather Slavkin Corzo

12. Pay Gap Ratio Disclosure Approved
 August 5, 2015 in a 3-2 vote.
 Opposition
 Costly for companies to be into effect
 Trying to shame board of directors into paying CEO’s less
 Issues
 Statistical sampling rather than all employees
 Exclude 5% of workers outside U.S.
 Shareholders may just ignore it

13. Learn From The U.K.
 Strategy – expand & compete globally
 Executive compensation plan
 Move executives around the world every 3 yrs.
 Take entrepreneurial risks in growing the company
 Paid below industry avg. for poor performance
 Company outperforms the market
 Grows at double digits
 Pays shareholders rich dividends

14. Conclusion
 Pay gap is constantly growing
 Compensation is not based on performance
 Solutions
More regulation and enforcement of regulations
Align compensation plan with business strategy
Change attitude of entitlement in the U.S.

15. Questions