Communication
Compensation
Health and Productivity
Retirement
Talent and HR Solutions
Communication
Well-designed Career Sites Improve Recruiting Effectiveness Even in a Down Economy
For the past few months, recruiting may have been the last thing on many employers' minds given the current state of the economy. But the recently passed stimulus plan could create a need for rapid hiring in selected industries. However, the resourcefulness, innovative thinking, and productivity that proven talent brings to an organization are needed now more than ever in any industry. The question is: How can your organization find such talent?
Managing Workforce and Benefit Program Risks during an Economic Downturn
The United States, along with most countries around the world, is in the throes of a severe economic downturn. The world economy is being buffeted by rising unemployment, capital markets that are volatile and much reduced in value, restructuring in the housing and financial sectors and, in some cases, inflation or deflation. Though no one can be certain when the economy will reach bottom, many expect that the current downturn will continue through 2009 and into 2010...
Compensation
Re-thinking Target Date Funds No magic formula
Is the conceptual design behind Target Date Funds sufficiently robust to warrant the claim of being "the" ideal solution for defined contribution retirement plans? This article aims to make the case for a complete and consistent framework to vet the risk-and-return proposition of TDFs. In particular, financial operators and regulators should re-examine the existing TDF solutions and encourage more accurate disclosure of the expected risks and returns of each product in a manner consistent with (a) rigorous analysis based on commonly accepted financial theory and (b) realistic empirical market evidence.
The Accounting and Economics of Executive Stock Options | Part III: Assessing the Role of ESOs in Executive Compensation
CEO and other executive compensation has received unprecedented attention during the past year. It continues to draw intense scrutiny from the government, investor rights organizations, and the public. One of the key debates, triggered by the recent turmoil in the financial industry as well as less recent debacles like Enron and MCI, is the extent to which the structure of executive compensation can ensure that a company's management operates in the best interest of shareholders.
The Accounting and Economics of Executive Stock Options | Part II: Fair Value vs. Compensation Value
This is the second of three articles dedicated to the economics of Executive Stock Options (ESOs) and their role in executive compensation packages. In the first article we challenged the perception that ESOs offer the potential for very large rewards with no downside risk. This misperception appears, in some cases, to be an emotional reaction to corporate abuses rather than a rational response to accurate analysis. We applied formal risk assessment methodologies to demonstrate that ESOs' upside potential comes at the cost of significant variability of the final payout. And unlike alternatives such as cash or Restricted Stock Units (RSUs), ESOs may not pay out at all if the stock underperforms.
The Accounting and Economics of Executive Stock Options | Part I: How Risky are Executive Stock Options?
This is the first of three articles that look at the financial and economic features of Executive Stock Options (ESOs) and their role in executive compensation packages. In this article we challenge the lack of discipline around discussions about equity awards such as ESOs and executive risk-taking behavior. In these discussions, seemingly logical arguments fuel concerns that ESOs encourage executives to expose their companies to excessive risks because the executives can reap potentially substantial rewards with little or no personal downside risk. We use two common approaches to analyze the risk and rewards of ESOs to show that ESOs can be perceived as riskier for executives than restricted stock units (RSUs). In follow-up articles we'll discuss ways to use the results of this analysis to determine the incentivizing and potentially risk-inducing role of ESOs in executive compensation arrangements.
The Value of Equity Compensation: Delivering on the Best of Intentions
Many publicly traded companies deliver equity-based compensation to their executives on an annual (or bi-annual) basis after a fairly intense "packaging" process. Among other steps, this process may include a competitive assessment against a select group of peers, decisions regarding what levels of compensation are appropriate at certain performance levels (if granting performance shares), and calculations regarding dilution and expense. This painstakingly packaged award is then delivered to the executive with the intention of providing the "right" level of compensation for the "right" level of performance.
Facilitating Dysfunction: The Dominance of Line-of-Sight and Near-Term Incentives
Incentives with an unrelenting focus on line of sight and near-term results are more controllable by the employee, but often run counter to value creation. Yet again, history has repeated itself. A narrow focus on nearterm revenue and profits has ended in unexpectedly damaging results, now on a global scale. Among the many reasons for the bloodbath experienced in our financial institutions and other sectors is the structure of incentive programs in these organizations. The incentive design principles that have helped push our financial institutions to the edge of the cliff are alive and well throughout much of industry.
Compensation Innovations for the Economic Downturn
Economists continue to debate whether the United States is entering a recession or already in it, but many companies and entire industry sectors are well into a recessionary business environment. Significant reductions in business volume, write-offs of previously recorded revenue, staggering losses of shareholder value, and layoffs are occurring regardless of academic opinion. While recessions are typically announced many months after they have begun — and sometimes after they have ended — many employers are already facing recession-driven decisions...
Heightened Risk of Discrimination Claims Makes Now a Good Time to Audit Pay Practices
Two concurrent developments are prompting employers to review their employment policies and practices to determine if they are potentially discriminatory. The two developments are: (1) enacted and proposed legislation that appears to favor employee, rather than employer, rights and (2) an increase of employee claims of discrimination.
Corporate Governance: A Risk-Sensitized Executive Pay Governance Process —
Part One
The deterioration of the global economy has occurred with breathtaking speed and unprecedented breadth. As events unfold, one common view has emerged: the crisis is predominantly a failure in human decision-making, influenced by two fundamental pay and performance-related factors...
Corporate Governance: A Risk-Sensitized Executive Pay Governance Process —
Part Two
As a result of TARP provisions and proactive shareholder advisory groups, executive compensation is coming under intense scrutiny. The focus is two-fold: (1) are pay-for-performance programs really paying for shareholder value created, and (2) are the incentive systems encouraging inappropriate or excessive risk-taking that may threaten rather than create shareholder value?...
Convergence Towards International Financial Reporting Standards Will Require Comprehensive Review of Executive and Equity Compensation Programs
Over the past few years, there has been much attention paid to the accounting treatment for equity-based compensation, culminating in SFAS 123R and subsequent interpretations and clarifications. This change led many companies to reconsider and, in many cases, revise their equity compensation strategies, but the impact of SFAS 123R may pale in comparison to another wave of change that is coming. The convergence of U.S. accounting rules with international standards will result in pervasive changes in the measurement and reporting of corporate financial performance.
Stop before You Swap: Revisiting Solutions to Underwater Equity
For most companies, the last several months have been a period of tremendous share price volatility and unprecedented decline in market value. The drop in the stock market has made underwater stock options a major topic of concern and conversation. It is a troubling problem for management and the board of directors when equity compensation vehicles initially granted to provide incentive and address retention and engagement issues among employees have lost their value. The problem is more acute as many companies over the past few years, often to mitigate the prospect of underwater options, have supplemented or replaced stock options with other forms of equity-based compensation which have lost most or all of their value and taken on the "underwater" label as well...
Can Your Long-Term Incentive Plan Become More Performance Based Again?
A top responsibility for Compensation Committees is to ensure a strong linkage between executive compensation and company performance. Long-Term Incentive Plans (LTIPs) typically provide the largest component of senior executives' compensation, most often through one or more of three equity-based types: Stock Options, Restricted Stock, and Performance Shares.
New Accounting Standard Provides Greater Flexibility for Informally Funded Nonqualified Plans
A new accounting standard, FAS 159 The Fair Value Option for Financial Assets and Financial Liabilities, provides an intriguing opportunity to sponsors wishing to informally fund1 their nonqualified retirement programs. For fiscal years beginning after November 15, 2007, companies have the option to account for certain financial instruments at fair value and report in earnings the unrealized gains and losses on securities for which the company has elected the fair value option.
Best Practice Guidance to Managing Compensation Prior to an IPO
A global trend is re-emerging: privately held companies are using initial public offerings (IPOs) as a vehicle for raising capital or for an enterprise to shift from government to private ownership through the floating of shares on a stock exchange.
The SEC's Proxy Disclosure Rules Tell Investors a Whole New Story about
Executive Defined Benefit Retirement Plans
The key intent of the newly finalized Securities and Exchange Commission's (SEC's) proxy disclosure rules is to give investors a handle on the total compensation that public companies pay to their senior executives. Until now, fully understanding this concept has been a complex undertaking because senior executives' total compensation is typically derived from numerous programs, and amounts were not disclosed for some of these programs.
Adapting to an Option Expensing Environment - Three Steps to Prepare Your Organization
The call to treat employee stock options as an income statement expense is among the loudest and most contentious cry coming out of the public debate on cormorate reform.
The Brave New World of Not-for-Profit Governance and Compensation
It's the way you do the things you do. In the turbulent health care environment, hospital boards are increasingly expected to be independent, transparent and ethically grounded enough to avoid conflicts of interest.
The Brave New World of College Governance and Compensation
It's the way you do the things you do. In the emerging environment of college governance, boards will be expected to be independent, transparent and ethically grounded enough to avoid conflicts of interest.
The Brave New World of Foundation Governance and Compensation
It's the way you do the things you do. In the emerging environment of foundation governance, boards will be expected to be independent, transparent and ethically grounded enough to avoid conflicts of interest.
The Brave New World of Museum Governance and Compensation
It's the way you do the things you do. In the emerging environment of museum governance, boards will be expected to be independent, transparent and ethically grounded enough to avoid conflicts of interest.
Buck's FASB Statement 123 Update: FASB Issues Final Statement on Accounting for Share-Based Payment
This paper summarizes the new accounting rules with regard to FAS 123(R) and discusses the implications for companies that are currently utilizing stock compensation or considering the implementation of stock-based programs.
Executive Retirement Programs at River-Branch General: A Guide Into a Safe Harbor for Not-for-Profit Hospitals
Since 1990 our fictitious River-Branch General Health Care System has grown from the initial merger of two century-old hospitals in downtown Pleasant Valley to 15 hospitals serving as many communities on both sides of the Mississippi River. Today, the health care professionals have many reasons to hail River Branch as a well-run, well-regarded health care system, a merger and acquisition success story.
FASB Releases Share-Based Payment - Exposure Draft
On March 31, 2004, the Financial Accounting Standards Board (FASB) released its much anticipated exposure draft (ED) highlighting the proposed accounting rules for all "Share-Based Payment" compensation awards. The FASB intends to release its final standard in the fourth quarter of 2004, and require adoption for fiscal years beginning after December 15, 2004, for most companies. This paper summarizes the proposed accounting rules and discusses implications for companies using stock compensation.
FASB's Preliminary Equity Compensation Decisions Provide for Unique Strategies
in 2004
Buck's compensation consulting practice summarizes some of the FASB's preliminary decisions and outlines certain tactical and strategic actions that companies can take to minimize impending accounting costs.
Process and Outcome: New Clarity in Achieving Reasonable Executive Compensation
One common legacy of the dot.com boom and various corporate scandals of the last few years is regulators' new focus on responsible corporate governance, specifically on reasonable executive compensation. In fact, the New York State Attorney General's complaint against the former chairman of a major non-profit NY institution was a sharp reminder, if one was needed, that the debate over what constitutes reasonable compensation will be neither private nor leisurely. Whatever the outcome of that action, legislators and regulators have made one thing clear: there will be no quiet return to "business as usual."
Proxy Statement — Compensation Committees' Toolkit for Building Shareholder Support
This paper will demonstrate how a board of directors can reshape a proxy statement from the perfunctory and somewhat defensive document it often is into a compelling message to investors and their advisors. Specifically, we will focus on how a board of directors' Compensation Committee should use the proxy statement to convey a convincing rationale for its executive compensation policies and practices. We will also suggest how board members can improve communications with shareholders.
Responding to Mandatory Option Expensing: A Buck Flash Survey
For the past 18 months, the market has been anticipating the Financial Accounting Standards Board's (FASB) changes in the rules for stock-based compensation accounting. While we have not heard the last word, FASB released an Exposure Draft (ED) of new rules on March 31, 2004. They have been gathering comments since that time, and are expected to release a final version of the rules for equity expensing late in 2004.
Walking the Walk: An Executive Compensation Cautionary Tale for Not-for-Profit Hospitals
In springtime, many reporters turn to thoughts of...executive compensation. It's no secret that executive compensation is a big news issue these days, even for not-for-profit hospitals. And spring is when reporters generally inquire about executive compensation. Not-for-profit hospitals should be prepared for media questioning. In this white paper, Mellon's compensation consulting practice outlines some of the strategies and tactics hospitals can use when preparing for "compensation season."
Health and Productivity
Welcome to the 2011-2012 Flu Season: Is your business ready?
In an influenza outbreak, you play a key role in protecting your employees' health and safety. The workplace is one place where everyone can help stop the spread of the flu. The actions you take "locally" can help limit the impact of the illness on the economy and society as a whole. Pandemics, like the viruses that cause them, are unpredictable and can occur at any time. As with any potential catastrophe, it's essential to have a contingency plan. We can't afford to let our guard down and let this flu season turn into another pandemic.
Health Care Reform's Impact on Rewards Strategies — Is it time to change the mix of compensation and benefits?
Some critics of health care reform predict that the low $2,000 employer mandate penalty will cause many employers to exit the employer-sponsored benefit (ESB) system and dump their entire workforces on the new Exchanges. The truth is that most employers will find it in their best interest to continue to offer coverage.
Diagnosis HSA — A Treatment Plan for Employers
As the economy continues to contract globally U.S. employers are seeking and finding benefit plan design and funding solutions to control and manage both short- and long-term costs. So what is the diagnosis for Health Savings Account (HSA) qualified plans and HSAs specifically? At the heart of the most innovative approaches is a combination of High-Deductible Health Plan (HDHP) design features joined with a tax-advantaged HSA. According to the Kaiser Family Foundation, HSA-qualified plans reduce the premiums to offer health insurance and the savings nearly offset all of the deductible. Even on a risk-adjusted basis, recent studies from the Blue Cross Blue Shield Association (BCBSA), United Health Care, CIGNA, and Aetna all support the notion that HDHP participants have the same demographic, health, and economic characteristics as non-participants and costs are lower, both initially and over a long-term basis. The question is: How are HSAs contributing to these findings?...
What Ails Behavioral Health Care? — Diagnosis and Treatment Ensure a Healthier Bottom Line for Employer-Sponsored Programs
The responses from more than 400 organizations to Buck Consultants' 2005 National Health Care Strategy Survey confirmed that employers are more concerned about health care costs than about any other business cost, and are even more worried about future rather than current health care costs.
Obama's Plan For Health Care Reform: What Does It Mean For Employers?
Although the election is over, the issues discussed throughout the campaign remain. In fact, many of these issues are even more critical now with job loss at a 26-year high, businesses on the brink of bankruptcy, and two ongoing wars abroad.
Update on H1N1 Pandemic and Preparing for the 2010 Influenza Season: What Employers Need to Know
On August 10, 2010, the World Health Organization (WHO) International Health Regulations (IHR) Emergency Committee and the WHO Director-General, Dr. Margaret Chan, declared an end to the 2009 H1N1 influenza pandemic. This declaration was based on strong indications that influenza, worldwide, is transitioning toward seasonal patterns of transmission.
Health Care Reform's Impact on Rewards Strategies — Is it time to change the mix of compensation and benefits?
Some critics of health care reform predict that the low $2,000 employer mandate penalty will cause many employers to exit the employer-sponsored benefit (ESB) system and dump their entire workforces on the new Exchanges. The truth is that most employers will find it in their best interest to continue to offer coverage.
As Influenza Season Nears, Employers Need to Be Prepared
In June 2009, the World Health Organization (WHO) officially categorized the H1N1 influenza virus as a Level 6 global pandemic. In response, the United States has embarked on a massive vaccination campaign intended to protect millions of Americans from the H1N1 flu. Employers, too, are in varying stages of preparation for the effects of a pandemic on their workforce and operations.
Productivity for the Ages: Maximizing the Contribution of Older Workers
Earlier this decade, demographers, labor economists, and more than a few human resource consultants predicted that the United States would experience a significant labor shortage due to Baby Boomer retirements. The U.S. Bureau of Labor Statistics, as late as 2006, estimated that the shortfall would reach 10 million by 2025.
The Obama and McCain Health Care Platforms: A Guide for Employers
When Americans head to the polls on November 4, many will undoubtedly have the presidential candidates' positions on health care reform in mind. A February 2008 Gallup poll identified health care among the top five "extremely important" issues influencing candidate preference. Tellingly, it fell just a few points behind terrorism and government corruption, which shared third place, and the Iraq war and economy, which were one and two, respectively. It seems that the United States has finally reached the health reform tipping point.
The Role of Severance in Today's Employment Environment
Employers' search for low-cost labor and the focus on core competencies have ushered in an era of off-shoring and outsourcing. Technological advances enable companies to do more with fewer people — and they are. These developments, coupled with continued consolidation in some industries, have led to many reductions in force...
Vive VEBAs?
Buyouts for Retiree Medical Liability: Who? What? How? And, Most Important, Why?
Many employers have shouldered annual increases in costs for their retiree health care programs for years. That weight has become crippling for some employers. They include employers in distressed industries with a significant percentage of unionized and older employees who are covered by very generous postretirement health benefits. These characteristics typify employers in the auto, steel, mining, airline, and communications industries.
Specialty Drug Programs
Rx: Special Solutions for Employers
Specialty drugs, which treat diseases at the cellular level, promise new cures for many previously untreatable and intractable conditions. But these drugs also challenge employers. They must strike the right balance between providing these drugs to plan participants who need them and managing the extremely high cost for employers and plan participants alike. This InsightOut, Specialty Drug Programs - Rx: Special Solutions for Employers, addresses this challenge.
Beyond Words ...
Engaging Consumers in Changing Health Behaviors
In order to positively impact workforce health and reduce costs, employers must move their health programs beyond words to a state of consumer engagement and action. This article summarizes relevant concepts and findings from the fields of psychology, decision research, and social marketing and identifies best practices in developing consumer engagement. Employers can utilize this information when creating health care programs and tools to control costs and improve workforce health and productivity.
Health Care Consumerism: An Employer's Perspective
Historical approaches to cyclical health care cost crises have centered on "tweaking" the system. Typical "tweaks" include shopping for better provider pricing between broad networks, attempting to lower administrative costs through competitive bidding, making minor plan design changes, and increasing premium sharing requirements. But these changes have neither prevented the relentless rise in health care costs nor addressed the dysfunctional purchasing and value chain. Health care consumerism is changing that.
Generic Drug Mail Service May Not Save as Much as We've Been Led to Believe: Protecting Plan Assets
Recent Wall Street Journal article reported on the practice of Pharmacy Benefit Managers'(PBMs) mail services charging drug plan sponsors considerably higher prices for generic drugs, such as diazepam (brand name Valium) or atentolol (brand name Tinormin) a blood-pressure medicine, compared to what individuals may pay for the same drugs purchased at some retail pharmacies for cash.
Good Health Pays Off! The Fundamentals of Health Promotion Incentives
Employer interest in consumer driven healthcare is accelerating. Shifting more responsibility to employees entails changing a number of well-entrenched assumptions, values and practices related to the way sick care is viewed and utilized. One such shift is getting employees to focus more on maintaining and improving their health rather than on seeking treatment once they are sick.
Bona Fide Wellness Programs Under HIPAA
Proposed HIPAA regulations provide guidance that enables employer-sponsored wellness programs to aggressively promote and reward healthy behaviors using significant financial incentives. This article outlines the features of a "bona fide wellness program"as defined by HIPAA guidelines.
HSA Prognosis — Employers Have Choices
Nationwide, employers' and employees' health care premiums have risen almost 75 percent from 2000 to 2005, according to the Kaiser Family Foundation. Companies with average premiums around $2,300 per covered life in 2000 were spending, on average, over $3,400 per life in 2005. Faced with this near vertical climb, human resources and financial executives in large companies — "encouraged" by their shareholders — made themselves dizzy trying to offer competitive benefits while still controlling their cost. So what is the prognosis?
Avian Flu — A Preparedness Primer
Increasingly, the news media are reporting on growing concern about avian flu and its potential to cause a global pandemic. We've read about the precautionary slaughter of hundreds of millions of chickens in areas where birds have already died from infection. Wild birds carry this disease along migratory flyways, infecting poultry they come into contact with along the way.
HSAs: The Next Wave
When Congress authorized the creation of Health Savings Accounts (HSAs) at the end of 2003 as part of Medicare overhaul legislation, employers of all sizes took notice. With double-digit health insurance premium increases from 2001 to 2003, even financially healthy employers started investigating the addition of a consumer-directed health plan (CDHP) component to their employee offerings.
Lifetime Health®: A Model for Change
Buck is a long-time advocate of accountable health care plan design, significantly contributing to the development of consumer-directed health care as a means of encouraging responsible health care consumption. Lifetime Health represents the next step in achieving health care value and parity for both employers and employees.
Medicare Part D: Communication Planning Considerations
Medicare Part D coverage for prescription drugs begins in 2006, brought to you by the Medicare Modernization Act of 2003. While a potential boon to retiree medical plan sponsors in helping with health care costs, Medicare Part D also presents the possibility of storm clouds of retiree confusion, a rainstorm of phone calls to HR and call center staff (if not also senior leadership), and even a media relations lightning strike.
Retirement
An introduction to International Retirement Plans
Helping build retirement security for your "global nomads"