Proxy Statements That Mention ERI Data
The Compensation Committee frequently engages independent compensation consultants to assist it in the compensation process for the Named Executive Officers. The consultants are retained by and report to the Compensation Committee. The consultants provide expertise and information about competitive trends in the employment marketplace, including established and emerging compensation practices at other similarly situated companies. The consultants also provide survey data and assist in assembling relevant comparison groups for various purposes and establishing benchmarks for base salary, benefits, perquisites and incentives based on a number of factors. During fiscal year 2016, the Compensation Committee of the Board of Directors engaged Arthur Warren Associates, a compensation consultant, to advise the Compensation Committee on executive officer and director compensation. During fiscal 2016, Arthur Warren Associates also assisted the Compensation Committee in the review of base salary, short-term incentives, long term phantom and equity incentive plan design trends, particularly among the Bank’s peer group, as determined through industry surveys and published proxy statements. The Compensation Committee also used the consultant’s assistance in setting parameters for incentive awards consistent with peer group awards in the Bank’s competitive market place. The Compensation Committee also relied on other survey sources including FinPro Custom Peer Group Survey Data, Pearl Meyer & Partners 2015 New York Bankers Association Banking Compensation Survey, Pearl Meyer & Partners 2015 Northeast Bankers Survey, and <b>Economic Research Institute (ERI)</b> Survey.
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To help establish competitive compensation levels, the Compensation Committee examined executive compensation survey data, including “base salaries”, “incentive compensation” and total cash compensation, from <b>Economic Research Institute (“ERI”)</b>. The survey data was tailored to include only those U.S. public companies in the “Instrument Manufacturing” segment with revenues between $50 -- $100 million per year. This included companies that produced both medical devices and general electronic instruments, along with consumable supplies. The data was further adjusted for the geographic location of each NEO. The data from this analysis was used by the Compensation Committee as one factor in determining compensation levels for base salary and total compensation.<br />
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The Committee also considers compensation data from Salary.com and <b>Economic Research Institute</b>, which takes into consideration company size, geography, base salary and variable cash compensation, but excludes equity incentive compensation information.<br />
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The Compensation Committee also reviews and considers applicable published survey data when making compensation decisions. In setting 2015 compensation, Longnecker provided applicable data to the Compensation Committee from the following survey sources: <b>Economic Research Institute</b>, Mercer, Pay Factors, and Towers Watson.<br />
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In addition to advice provided by Keating, the Compensation Committee utilized the following materials, along with other resources and tools, to render compensation decisions for 2015: (i) surveys and reports of executive compensation paid by other public companies with characteristics similar to ours and (ii) professionally published surveys from Towers Watson, WTPF Compensation Survey, Direct Selling Association Management Compensation & Benefits Survey, <b>Economic Research Institute</b> Salary Assessor, and HRA-NCA. These materials and other resources help to provide us with solid benchmarks for each component of our executive compensation package as well as a general understanding of best practices of companies in our industry who are competing for with us for top talent.
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The Compensation Committee, with the assistance of the compensation consultant, reviewed the companies comprising the Custom Peer Group in order to maintain its appropriateness for the competitive pay analysis. These companies were generally selected since they are all companies in the energy and energy services industry and have various rental, leasing or manufacturing components in their business with all having an acceptable range of relatively similar annual revenues and market capitalization. The Compensation Committee believes the Custom Peer Group reflects our current competitors for employee talent and that it provides an appropriate peer set for the purposes of evaluating our pay practices and the Chief Executive Officer's pay levels.
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For years prior to 2016, management would periodically obtain survey data of comparably situated companies from <b>Economic Research Institute</b> (“<b>ERI</b>”) to guide it in its recommendations of compensation decisions. The specific parameters defined for ERI typically are job titles, company revenue size, company SIC code and geographic location. Based upon these inputs, ERI supplies base salaries, incentive and total compensation information for comparable positions. Where comparable positions did not exist, further analysis would be done to determine appropriate comparable compensation parameters. Thus, because it has been our practice to have both an Executive Chairman and a President and Chief Executive Officer, the starting point for our consideration of the compensation for these two positions was determined by combining the <b>ERI</b> data for the position of “Outside Chairman” and the position of “Inside Chairman and Chief Executive Officer” and adjusting for the additional activities and responsibilities of our Executive Chairman. The key data obtained from ERI that the Committee used were the ranges of fixed compensation (base salaries), variable compensation, and total compensation, as well as the mean of each range. This data was then compared to the actual compensation of each executive officer for the prior year and the average actual compensation for the past five years.
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In developing compensation levels for the named executive officers for the year ended December 31, 2015, the compensation committee utilized the services of Arthur Warren Associates, an independent compensation advisory firm. Arthur Warren Associates assisted the compensation committee in the review of base salary and incentive compensation for 2015, particularly among Blue Hills Bancorp’s peer group, as determined through industry surveys and published proxy statements. The compensation committee also relied on other survey sources including Pearl Meyer & Partners 2014 Massachusetts Bankers Association Banking Compensation Survey, Pearl Meyer & Partners 2014 Northeast Bankers Survey, and <b>ERI Economic Research Institute</b> Survey.
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During 2015, the Compensation Committee engaged the services of Arthur Warren Associates, an independent compensation advisory firm specializing in community bank compensation plans. Arthur Warren Associates assisted the Compensation Committee in the review of Salisbury’s short term incentive program and Salisbury’s long term equity incentive plan. Arthur Warren Associates also assisted the Compensation Committee in the review of equity incentive plan design trends, particularly among Salisbury’s peer group (as identified below), as determined through industry surveys and published proxy statements. The Compensation Committee also relied on other survey sources including Pearl Meyer & Partners 2015 New York Bankers Association Banking Compensation Survey, Pearl Meyer & Partners 2015 Northeast Bankers Survey, and <b>ERI Economic Research Institute</b> Survey.
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L&A compiled compensation data for the peer group from the summary compensation tables within proxy statements, as well as narrative disclosures in the CD&A sections. The consultant also provided published survey compensation data from multiple sources, including the following surveys: <b>Economic Research Institute</b>, Mercer, Inc. Energy Survey, Kenexa, Towers Watson and L&A’s Energy LTI Survey. For each survey, L&A adjusted the data to appropriately reflect companies of a similar size to the Company.
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In addition to peer group data, the CRI market study also utilized data from the following six (6) published salary surveys: Benchmark Database Executive; William M. Mercer Comp Analyst; Salary.com/Kenexa for Professionals CSR Top Management Compensation; Towers Watson Executive Compensation; National Executive & Senior Management Compensation Survey; CompData Executive Salary Assessor Economic Research Institute(ERI) salary Budget Survey; WorldatWork
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For 2015, we also subscribed to an on-line compensation service available through the <b>Economic Research Institute</b> (“<b>ERI</b>”). <b>ERI</b> compiles a robust database on job competencies, cost-of-living increases and executive compensation surveys. These three databases are used to help gauge the competitiveness of our 2015 salaries and executive compensation practices.
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Survey data from various sources may also be utilized, including the following: Economic Research Institute Executive Compensation Assessor Towers Watson Top Management Compensation Mercer, Inc. US General Benchmark Survey Kenexa CompAnalyst World at Work Total Salary Increase Budget Survey IPAS Global Technology Survey
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At its January 2016 meeting, our Compensation Committee determined that our respective named executive officers’ salaries, cash incentive bonuses and equity holdings were at or below the median of named executive officers with similar roles at public companies having comparable revenues and that no material changes should be made to the cash compensation levels of our named executive officers until our annual named executive officer performance reviews, which were conducted in the first quarter of 2016. This median was derived based on a report we obtained from The Burke Group. The report compared our named executive officer compensation with the results of two surveys, involving companies in the aerospace and military/defense industry with revenues of between $100 million and $200 million, one from Towers Watson Data Services and one from the <b>Economic Research Institute</b>. Our Compensation Committee realizes that benchmarking our compensation against the compensation earned at comparable companies may not always be appropriate, but believes that engaging in a comparative analysis of our compensation practices is useful. In instances where a named executive officer is uniquely key to our success, the Compensation Committee may provide compensation above the median referred to above. The Committee’s choice not to recommend to the Board of Directors immediate material changes to the compensation levels following its review of The Burke Group’s report reflects our consideration of stockholders’ interests in paying what is necessary, but not more than necessary, to achieve our corporate goals while conserving cash and equity as much as is practicable. We believe that our compensation levels are generally sufficient to retain our existing named executive officers and to hire new named executive officers when and as required.
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Warren also relied on other survey sources including FDIC data as of June 30, 2014, Pearl Meyer & Partners 2013 New York Bankers Association Banking Compensation Survey, 2013 Northeast Bankers Survey, and the <b>ERI Economic Research Institute</b> Survey.
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The Villareal materials compared the NEOs; salary and total cash compensation to the 50 and 75 percentiles of the survey group, as follows: Survey group consisted of companies in the following published surveys: 2014 <b>Economic Research Institute (ERI) Executive Compensation Salary Assessor(ERI) -- companies with revenue of $1.36 billion were used to provide market data for the three corporate NEOs only; there were no positions in that survey that corresponded to the positions of the NEOs who are heads of operating segments; 2014 Mercer Survey for energy companies (the;Mercer survey;) -- companies with revenues of $1 - $3 billion were used to provide market data for the three corporate NEOs, and data from all companies was used for market data for the two segment heads; and 2014 ECI Survey for energy companies - companies with revenues above $1.5 billion were used for corporate NEOs market comparisons; for the drilling executive, companies or company divisions with $350 - $800 million in revenues were used, and for the E&;P segment head, market information was based on companies with revenues of between $150-$750 million. Mercer and ECI Surveys were aged by 2.0% to bring current to December 31, 2014.
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Our executive compensation programs seek to attract and retain highly competent executive management who will build long-term economic value for the Company. Our general compensation philosophy for our executives is that our executives’ cash compensation should generally be at levels that are reasonably comparable to those paid at comparable companies, and that our executives' opportunities for more significant compensation should be tied closely to our performance. Although, as discussed below (see “—Elements of Compensation—Why We Pay these Elements of Compensation; How We Determine the Amounts; and Interrelationships of these Elements”), the information the Compensation Committee reviewed in setting 2015 salaries and approving the 2015 Bonus Plan showed that the proposed salaries and estimated bonuses for the Named Executive Officers were substantially below the median cash compensation as shown by the data the Committee reviewed from the <b>Economic Research Institute</b> (“<b>ERI</b>”) for comparable positions, our executives recommended the salaries and the 2015 Bonus Plan, and the Compensation Committee accepted their recommendations. We strive to maintain an egalitarian compensation structure among our senior management team, as we believe that paying our Named Executive Officers holding Senior Vice President titles substantially the same annual compensation package promotes an environment of teamwork that benefits the Company. We also try to foster an environment in which management leads by example—they recommended 2015 salaries and a bonus plan expected to provide total cash compensation to our executives substantially below the <b>ERI</b> median cash compensation data for comparable positions. Further, our CEO refused to accept any salary at all from 2002 until 2011, refused to accept more than $100,000 annually from 2011 through 2015, and has never accepted a cash bonus. Our annual bonus pool plans are designed to pay for performance. See “—Elements of Compensation—2015 Bonus Plan (Non-Equity Incentive Plan)” and “Executive Compensation Action Taken After Year-End” below.
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For 2015, we increased the Named Executive Officers’ base salaries in order to, among other things, maintain their compensation at a competitive level. The independent compensation consultant reviewed with the committee the compensation levels of each of the Named Executive Officers and those from the previously identified peer group. The independent compensation consultant also examined with the committee the pay practices from other Pennsylvania, New York, New Jersey, and Ohio based financial institutions with assets between $1 billion and $2 billon, with data from the <b>Economic Research Institute</b> used to normalize the information for Johnstown, Pennsylvania. The compensation committee also considered a number of factors in setting these new levels, including the Named Executive Officer’s annual performance review, an annual review of peer compensation, and the overall performance of the company.
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Market competitive pay for each NEO was determined by evaluating base salaries and target incentive awards from our peer group, when available, along with reviewing external third party survey information from Mercer and TowersWatson for energy companies of similar size to us, the TowersWatson Liquid Pipeline Roundtable Survey, <b>Economic Research Institute</b> Survey and the Longnecker & Associates LTI Survey.
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Court Opinions
United States Tax Court: Eric G. Suder, Et Al., v. Commissioner of Internal Revenue (10/01/2014)
…Dr. Hafiz compared Mr. Suder to CEOs of companies with revenues in the $40 million range and an SIC Code of 3661, Telephone and Telegraph Apparatus Industry, in the Economic Research Institute (ERI) database... Mr. Longnecker compared Mr. Suder with CEOs in six different databases: (1) the ERI database of companies with an SIC code of 3660, Hi-Tech & Communications Equipment, in the United States; (2) the ERI database of companies with an SIC code of 3660 in Dallas, Texas…
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United States Tax Court: Aries Communications Inc. & Subs., v. Commissioner of Internal Revenue (04/10/2013)
...considered executive officer compensation and broadcaster gross income and profitability information from the National Association of Broadcasters (NAB) for the position of general manager and information from the Economic Research Institute...
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