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 2017, 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 2017, 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 2016 New York Bankers Association Banking Compensation Survey, Pearl Meyer & Partners 2016 Northeast Bankers Survey, and Economic Research Institute (ERI) 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 Economic Research Institute (“ERI”). 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.
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For the reports determining historical under-compensation for Ms. Larios and Mr. Cowan and evaluating cash bonuses, both officers’ compensation was compared to the 75th percentile of compensation data from the following published salary surveys: the 2015/2016 ERI Executive Compensation Assessor by the Economic Research Institute; the 2016 CompAnalyst Compensation Survey by Kenexa; the 2015 Top Management Compensation Survey by Towers Watson; and the 2015 General Executive Benchmark by Mercer. No individual companies were used because the report covered fifteen years of data.
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The Committee also considers compensation data from Salary.com and the Economic Research Institute, which takes into consideration company size, geography, base salary and variable cash compensation but excludes equity incentive compensation information.
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The data used by L&A in its survey of compensation, which we refer to as the “compensation study,” was weighted so that 50% was from published surveys from Towers Watson, Economic Research Institute, Mercer, Pay Factors, Kenexa and WorldatWork and 50% was from disclosure in compensation peer group proxy statements. At the beginning of fiscal 2017 (spring of 2016) L&A reviewed the Company’s current peer group for appropriateness and provided the Compensation Committee with recommendations for any additional peers to be included. L&A analyzed the Company’s peer group and potential additional companies based on (1) other similar companies within similar industries, (2) revenue, (3) market capitalization, (4) enterprise value, (5) asset size (6) net income, (7) EBITDA and (8) one-year and three-year total shareholder return (“TSR”). Based on this analysis, L&A recommended removal of the following peers used in fiscal 2016: Globe Specialty Metals, Inc. (merged with FerroAtlantica); and Newpark Resources, Inc. (too small by several metrics). L&A recommended the addition of the following companies to the peer group: Summit Materials Inc., Continental Building Products, Inc., U.S. Concrete, Inc. and Headwaters Incorporated. Based on L&A’s recommendation, the Compensation Committee utilized the following 15-company peer group in analyzing fiscal 2017 compensation (“compensation peer group”):
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The published compensation surveys consisted of the following 2016 materials: Economic Research Institute -- Executive Compensation Assessor Tower Watson -- Top Management Compensation Mercer, Inc. -- US MTCS: Energy Sector WorldatWork -- Total Salary Increase Budget Survey Salary.com -- CompAnalyst
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The Nominating and Governance Committee periodically reviews industry data from the National Association of Corporate Directors Director Compensation Report and Survey Data and evaluates industry averages, personal liability risks and other factors relating to director compensation. On May 20, 2015, the Nominating and Governance Committee authorized the director compensation arrangement described below, which sets forth certain terms and conditions for director compensation but did not at that time increase the amount of compensation previously set in November 2013. On May 10, 2016, based on the Nominating and Governance Committee’s recommendation after reviewing market data for director compensation from the Economic Research Institute, Steven Hall & Partners and the National Association of Corporate Directors, the Board approved increases to the amounts of compensation under the director compensation arrangement.
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During 2016, all elements of executive base and incentive compensation were found to be within a competitive range. Compensation decisions were guided, in part, by review of the peer group data and in part by reference to industry survey data provided for the Upstream Oil and Natural Gas Support Activities industrial sector, on a nationwide basis by the Economic Research Institute (ERI), as well as additional published data for validation purposes (the peer group and industry survey data collectively referred to herein as the “market data”). In addition, the members of the Compensation Committee are familiar with competitive compensation programs based on their experiences owning and/or managing other companies and sitting on other private and public companies’ boards of directors.
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L&A compiled compensation data for the peer group from the summary compensation tables within peer group 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: Economic Research Institute, 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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During 2016, 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. In conducting its review, the Compensation Committee also relied on other survey sources including Pearl Meyer & Partners Northeast Bankers Survey, Economic Research Institute (ERI) Executive Compensation Survey, Banking Compensation Northeast and SNL for proxy compensation data for named executive officers for the approved peer group.
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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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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 ERI Economic Research Institute Survey.
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For 2016, we also subscribed to an on-line compensation service available through the Economic Research Institute (“ERI”). ERI 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 2016 salaries and executive compensation practices.
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At its December 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 2017. This median was derived based on a report we obtained from The Burke Group in January 2016. 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 Economic Research Institute. 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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Longnecker also reviewed survey data as a reference point to compare the compensation of our executives to those of a broad range of companies. The following published surveys utilized by Longnecker were: Economic Research Institute, 2015 ERI Executive Compensation Assessor; Mercer, Inc., 2015 US General Benchmark Survey; Towers Watson 2014/2015 Top Management Compensation; Kenexa, 2015 Compensation Survey; Longnecker & Associates, 2015 Long-Term Incentive Survey; and WorldatWork, 2015/2016 Total Salary Increase Budget Survey.
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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, Aon Hewitt, Economic Research Institute, Kenexa and World at Work Survey.
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We consider BDO to be independent of the Partnership and therefore the work performed by BDO does not create a conflict of interest. The BDO study was based on compensation as reported in the proxy statements, Form 8-K filings and the annual reports on Form 10-K by each company in the peer group. In addition to peer group data, BDO utilized the following published surveys: 2016 Economic Research Institute Platform, 2016 Kenexa Comp Analyst, 2015 Mercer Total Compensation for the Energy Sector, 2015 Towers Watson CBD General Industry Executive Compensation Survey, and the AON Survey of MLPs.
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The Compensation Committee’s charter requires that Citizens provide the Committee with adequate funding to engage any compensation consultants or other advisers the Committee deems it appropriate to engage. During fiscal 2015, the Compensation Committee engaged Wipfli, LLP to assist with reviewing our compensation practices and levels relating to Director, Executive Officer and Senior Management compensation. As part of this engagement, Wipfli, LLP prepared a comparative compensation report of a group of organizations or peer group companies within the banking industry. Their report and analysis was based upon an analysis of public filings by peer companies and a review of information taken from published industry compensation surveys, including the American Bankers Association Compensation and Benefits Survey, the Wisconsin Banking Industry Compensation & Benefits Survey, Wipfli’s Executive Officers & Directors Compensation & Benefits Survey for Community Banks, Crowe Horwath Financial Institutions Compensation and Benefit Midwest Survey Report, SNL Financial Executive Compensation Review for Banks and Thrifts, the Independent Bank Compensation Survey and Economic Research Institute. The Compensation Committee and Board considered the recommendations from the outside consultant when reviewing and determining base salaries, cash and equity incentive plans of our executive officers.
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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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