Compensation | Cowden Associates
Devising A Compensation Strategy That Keeps You Competitive
Cowden’s compensation practice applies a holistic and continuous approach to working with clients to develop and implement tailored compensation strategies and plans. In order to construct a plan that’s right for each client, we work closely with them to understand company business goals and objectives while conducting thorough research to gather all of the significant data. Our consulting process includes evaluation of the company’s existing programs and their effectiveness through external benchmarking of peer groups; analysis of overall competitiveness of total compensation, including annual and long-term incentives; and analysis and recommendation of appropriate base salary and incentive opportunities, equity ownership and retirement plans.
Each company should have a total compensation strategy that sets forth the company’s philosophy on issues such as:
- Pay Positioning – level of compensation relative to competition
- Pay Mix – balancing the appropriate mix of fixed pay (i.e. salary and benefits) and variable pay (i.e. short-term and long-term incentives)
- Performance Measures – combination of financial, market and strategic performance measures
- Performance Benchmarks – use of historical, projected or peer performance as standards of success
- Key Cultural Objectives – rule of subjective measures
Cowden recognizes that disputes may arise regarding the interpretation of plan provisions. As such, we have demonstrated excellence in litigation support activities representing corporations in legal disputes concerning compensation, equity, retirement, collective bargaining issues, and health and benefit matters for hourly and salaried employees, including preparation of expert reports and testimony.
Benchmarking
Cowden works with companies to identify appropriate peers for financial performance and pay benchmarking. We analyze competitive compensation data from several sources:
- Public documents (i.e., proxy statements and 10-Ks) filed by publicly traded U.S. companies allow us to use data from peer groups or other relevant comparisons. The peer company information enables us to analyze compensation levels in a performance context where financial information is also available. Companies are required to disclose compensation and benefits information only for their top five (5) executive officers.
- Published surveys conducted by consulting firms and trade associations provide the most readily available source of competitive information for the greatest number of positions. Published survey data, however, cannot be “tailored” to meet a client’s specific needs in terms of comparable companies or types of information.
- Best practice research maintained in our database contains the compensation practices of well-known, best practice companies.
Our primary focus is on comparing total compensation programs in the peer group and from other published databases with a company’s existing programs. In addition, we identify general trends in the market place and provide our perspective based on current developments regarding creative pay concepts, such as:
- Pay levels and pay mix
- Performance to pay relationships
- General trends regarding executive incentives and commentary on the approach used by each company
- Technical commentary related to special issues, such as stock option expensing, change-in-control, deferred compensation, etc.
Our process includes local and industry market analyses of pay information and an extensive review of all aspects of regional and competitor compensation programs. We use comparative data from national and regional external databases and regional proprietary internal sources. Our analysis includes:
- Base pay
- Annual and long-term incentives
- Unique incentive opportunities
- Benefits
- Perquisites
- Severance
- Grant types and mix
- Stock ownership guidelines
- Creation of compensation structures
- Employee communication plans and support
- Creation of new or updated plan documents
Communications Assistance
The best-designed comprehensive compensation plans may fail if not properly communicated. Cowden assists companies in preparing communications to employees and providing education for managers regarding the new program and other related assistance.
We help you to implement any newly developed compensation programs by preparing internal documentation necessary for approval at committee levels and/or Board of Director levels. Our assistance would include preparation of materials and, if needed, attendance at meetings to present program overviews.
A total Compensation Statement is a communication tool that clearly shows employees the financial worth of their total compensation. Show your employees the major investment your organization makes in their lives and that of their families. Cowden helps transform your employees’ understanding of the value of your overall benefits package by preparing Total Compensation Statements.
Compensation Committee Services
We offer a variety of independent and objective services for compensation committees: Our analysis includes:
- Review of management proposals
- Compensation risk review
- Education and on-board training of new members
- Review of various compliance disclosures
- Company specific impact analysis of new releases and regulations
- Peer Group design, selection and modeling
- Compensation philosophy development
- Grant type and mix analysis
- Employment contracts, severance agreements, change-in-control agreements, and other special plans, including retention bonus plans
- Technical assistance with compliance and process matters
- Guidance to accommodate plans from mergers or assimilate plans from acquisitions
- Board of Directors’ compensation
- Change-in-control analysis and planning
- Assistance with the design and ultimate negotiations for recruits, including preparation of term sheets and assistance with review of employment contracts
Executive & Board Compensation
With over 20 years of experience, Cowden is a recognized leader in providing independent advice to compensation committees and their senior management. We specialize in the development of performance-driven, comprehensive compensation programs that are directly linked to the economic value of the business enterprise while remaining fully compliant with SEC, IRS and state requirements. We also advise shareholders on designing committee member compensation programs that attract and retain high performing members. Our services include:
- Compensation philosophy development
- Peer group design, selection and modeling
- Competitive pay and proxy analysis
- Incentive design: aligning salary and bonus models to short and long-term business objectives
- Performance measurement and benchmark selection
- Documentation, drafting of plan documents, grant letters and disclosure requirements
- Executive benefits and supplementary retirement income
- Non-qualified deferred compensation and capital accumulation programs design and analysis
- Development of stock option plans
- Executive stock purchase arrangements
- Restricted stock, performance shares and other forms of full value stock grants
- Development, negotiation and drafting of senior executive employment contracts, severance agreements, change-in-control arrangements, and other special plans, including retention bonus plans
- Board of Director compensation services
- Participant communication
We design and implement innovative approaches that ensure executive and Board plans are compliant, cost effective and competitive.
Incentive Compensation Planning
We design specialized annual and long-term incentive plans, including performance and event related incentives. The initial phase of our assignment is to gain a complete understanding of your business structure and performance drivers. Working with you, we then establish performance measures along with associated benchmarks. It is essential that the plan design achieve the following mutual objectives:
- Require meaningful returns to shareholders before any incentives are paid and
- Require meaningful incentives to participants to continue to attract and retain talent.
The process typically includes:
- Benchmarking
- Performance Measure and Benchmark selection
- Pro-forma modeling of scenarios
- Impact on the company (cash flow, expense, taxes, and balance sheet)
- Impact on the participants (cash flow, taxes, and total reward review)
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