Executive Compensation Telecom USA
Contents
Executive Summary
Pay for performance remains an important driver for any organization which is ambitious and competitive. For this report the proxy statements of Comcast(2012), Verizon(2012) and At&T(2013) were studied and salient similarities and differences were observed. I observed that the proxy statements of the telecom/technology companies have stressed on creating shareholder value. In achieving this all the three have emphasized on high proportion of performance based pay. Clearly defined goals, grids and qualifying criteria have been illustrated with detail. This is how the company sends positive signals to the shareholders and the employees simultaneously. In all the three cases the compensation objective was around “long-term goals and the interests of the company’s shareholders”, “emphasis on managing the sustainability of the business” and “Align executives’ and shareholders’ interests”. These objectives are supposed to be met by a compensation structure which has a “balance between short and long term goal achievement” (AT&T), “without incenting inappropriate risk taking” (Comcast).
The compensation committee plays an important role in deciding compensation in terms of total compensation opportunity and the break-up of components of compensation. It also helps the board to recommends qualifying criteria and measures on which executives will be evaluated. Also some conclusion regarding the instrumentality of specific measures were reached. For example Comcast compensation committee concluded that operating cash flow had the highest overall meaningful correlation to shareholder value over the long term. Also there are many metrics which help the company in aligning executives’ goals to its compensation policies. Metrics such as earnings per share, free cash flow, revenue, and return on invested capital connect compensation to company performance while total stockholder returns align executive pay with performance relative to
Executive Summary
Pay for performance remains an important driver for any organization which is ambitious and competitive. For this report the proxy statements of Comcast(2012), Verizon(2012) and At&T(2013) were studied and salient similarities and differences were observed. I observed that the proxy statements of the telecom/technology companies have stressed on creating shareholder value. In achieving this all the three have emphasized on high proportion of performance based pay. Clearly defined goals, grids and qualifying criteria have been illustrated with detail. This is how the company sends positive signals to the shareholders and the employees simultaneously. In all the three cases the compensation objective was around “long-term goals and the interests of the company’s shareholders”, “emphasis on managing the sustainability of the business” and “Align executives’ and shareholders’ interests”. These objectives are supposed to be met by a compensation structure which has a “balance between short and long term goal achievement” (AT&T), “without incenting inappropriate risk taking” (Comcast).
The compensation committee plays an important role in deciding compensation in terms of total compensation opportunity and the break-up of components of compensation. It also helps the board to recommends qualifying criteria and measures on which executives will be evaluated. Also some conclusion regarding the instrumentality of specific measures were reached. For example Comcast compensation committee concluded that operating cash flow had the highest overall meaningful correlation to shareholder value over the long term. Also there are many metrics which help the company in aligning executives’ goals to its compensation policies. Metrics such as earnings per share, free cash flow, revenue, and return on invested capital connect compensation to company performance while total stockholder returns align executive pay with performance relative to