September 4, 2002
Greg Keshishian was a featured speaker on a program sponsored by the Columbia Business School Alumni Association on September 4, 2002 at Lehman Brothers in New York City -- the subject of the panel discussion was "Why Investors Should Care About Executive Compensation (Lessons from Recent Corporate Failures)
-- other panelists included a public company Director, a prominent shareholders' rights attorney, an institutional investor representative and an executive recruiter.
From the August 2001 Issue of CFO Magazine
The following letter to the editor of CFO Magazine was published in the August 2001 issue of that financial executive publication:
"Of Carrots and Pigs...I am writing in response to Hilary Rosenberg's article on incentive pay ("Building a Better Carrot," June). For the past 50 years, American companies have been contending with the issue of how to compensate employees in a way that is competitive, fair and likely to increase productivity at the individual level and profitability at the corporate level. These efforts have included various job-evaluation and performance-appraisal schemes, merit pay programs, sales commissions, cash bonus plans, and most recently, stock options and other equity incentives.
With all the time and effort that has gone into these programs, the empirical results are difficult to ascertain. CFO has done a good job of restating the basic opportunities and problems associated with incentive compensation. What no one has ever been able to do is to convincingly argue and document whether employee behavior or corporate results are affected in any significant way.
Make no mistake -- given the scores of variables that affect employee job effort and an organization's business results, implementing a pay program that truly responds to individual, group and company performance (and fairly rewards such performance) is one of the most difficult human resources tasks faced by any company. Than many (if not most) companies continue to struggle with the issue is both to their credit and a competitive fact of life. But time and experience have proven again and again that incentive pay is a moving target, and, like advertising, somewhat mysterious in how it actually works. We take on faith that employees will do what they are paid to do, but proving it is another thing. Anyone who thinks he or she has the answer to the incentive pay puzzle should be reminded of the proverbial "greased pig": You can wrestly one down and hold on for a while, but eventually that sucker is going to get away"
Greg Keshishian, Managing Partner, GK Partners
From the January 2001 GK Partners Newsletter
"With the volatility of the equity markets during the past year, and in light of the dramatic effect of reported earnings (and short-term earnings expectations) on the discounted market value of many companies' stock prices, the subject of "underwater" stock options has resurfaced with a vengeance. In 2000 and this year, both new and old economy companies have seen their stock prices decline significantly, causing both vested and unvested option grants to be in an underwater situation. This has been in the case in both traditional industries, and in technology-based companies that have relied heavily upon stock options as an alternate means of compensation and where many employees may have accepted lower cash compensation in favor of stock options. Because we have been experiencing a stock market correction, and not a full-blown economic recession, the demand for talented employees and competitive pay opportunities remains high. Companies are therefore increasingly facing the actual and perceived loss of incentive and retention value in their employee stock option programs. In one survey of 100 technology companies by iQuantic (a West Coast-based research firm), more than 80% of survey respondents reported that at least some of their outstanding stock options were underwater. In response to these circumstances and as an alternative to repricing, a number of marketplace compensation strategies have emerged with respect to the handling of underwater stock options..."
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From the September 2000 Issue of CFO Magazine
The following letter to the editor of CFO Magazine was published in the September 2000 issue of that financial executive publication:
"Old Wine, New Bottle...I am an avid reader of CFO, and keep an eye on compensation-related matters that are reported there. In the July issue, George Donnelly reports on the "fresh start" repricing of stock options by means of a "more-for-less" exchange of underwater options for new options ("Underwater Life," Newswatch)."
"As you may know, employee stock option repricings of any kind are dimly viewed by shareholders in the current environment, and have a very negative accounting/earnings impact. While the concept of trading in a larger number of deeply underwater options for a much fewer number of new options is an interesting idea, I'm afraid that it is old wine in a new bottle. Yes, shareholder dilution may potentially be reduced due to lesser option overhang, but reported earnings will still be negatively affected. I don't think many compensation committees will approve such an action and, frankly, none of our mid- to large-cap clients are entertaining such thoughts."
Greg Keshishian, Managing Partner, GK Partners
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