Proxy Statements That Mention ERI Data
The Compensation Committee, with assistance from our executives if required, researches compensation levels by investigating comparable company records, purchasing third party compensation surveys or engaging compensation consultants. The acquired data is evaluated by the Compensation Committee and is one factor in establishing compensation plans for the NEOs. 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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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.<br />
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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”).<br />
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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.<br />
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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 the majority have relatively similar 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. The published compensation surveys consisted of the following 2017 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.The Compensation Committee used the competitive pay information and surveys as a “market check” to ensure, in its subjective judgment, that the Chief Executive Officer’s base salary, target total cash compensation, long-term incentive awards and total direct compensation remain competitive. The Compensation Committee does not target any individual pay component to fall within a specific range or percentile of the competitive pay information. While the competitive pay information is important to the Compensation Committee’s approval process, it is just one of several factors considered by the Compensation Committee in approving executive compensation and the Compensation Committee has discretion in determining the nature and extent of its use.<br />
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Lifeway believes the interests of the Company and its shareholders are best served by developing and maintaining compensation policies that are consistent and competitive with peer group companies. Therefore, each year, the Board, in consultation with management, analyzes market data regarding base salary, cash bonus awards, equity incentive awards, and other benefits paid to executive officers and independent directors by companies the Board considers our primary peer group. The Board relies on management and external research to identify the individual companies that make up this group. In identifying the peer group of surveyed companies, management uses the Economic Research Institute, an industry- and region-specific compensation database, to assemble market data on publicly-traded companies having similar industrial characteristics and revenues to ours. Management and the Board review the gathered data for each of the independent director, NEO, and other key employee positions and adjust for the scope of employee’s responsibilities at Lifeway as compared to equivalent responsibilities of positions within companies included in the survey data.<br />
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The Compensation Committee retained Crowe Horwath LLP in 2017 to review each component of the Corporation’s director compensation program, including that of its Chairman, Vice Chairman, and Committee Chairs. The review included benchmarking our compensation components with market based data from peer comparisons of similar organizations (the “2017 Survey”). The 2017 Survey was based on a comparison of industry surveys, proxy statement information of peer institutions, and data from the Economic Research Institute. The review included collecting the 25th, 50th, and 75th percentile data from each of these sources and comparing them to the amounts paid to the members of our Board. The Compensation Committee reviewed and considered the results of the 2017 Survey, but took no specific action as a result.
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For 2017, 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 2017 salaries and executive compensation practices.<br />
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The Villareal materials also included 2016 market compensation information based on survey data for executives with positions comparable to the NEOs, obtained from the 2016 Mercer Survey for energy companies with a $1.0 to $3.0 billion revenue range; the 2016 ECI Survey for energy companies and company divisions of size comparable to Unit; and Economic Research Institute’s Executive Compensation Assessor, providing data covering 2,000 industries and over 500 top management/executive positions, including energy companies of comparable size to Unit.<br />
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At its February and March 2018 meetings, 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 2018. This median was derived based on a report we obtained from The Burke Group in March 2018. 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 Willis 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.<br />
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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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For 2017, 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 provided an updated study to the committee which included 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 generally between $1 billion and $2 billon, with data from the Economic Research Institute used to normalize the information for Johnstown, Pennsylvania. The compensation committee also considered a number of factors in setting these new levels, including an annual review of peer compensation and the overall performance of the company.<br />
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While independent compensation consultants are only retained periodically, annually, the human resources staff purchases subscriptions to financial and executive compensation databases. In fiscal year 2017, the human resources staff utilized subscriptions to the Economic Research Institute (“ERI”) and Equilar, Inc. (“Equilar”), both of which are leading third-party compensation data providers. Utilizing the data provided by ERI and Equilar, the human resources staff reviewed the compensation of executives of peer group companies based on a number of criteria including, but not limited to: (i) geography, (ii) revenue, (iii) growth rate, (iv) types of products and (v) EBITDA. The scope of Equilar’s and ERI’s services to the Company during fiscal year 2017 was limited to providing access to its database to the human resources staff.<br />
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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 published surveys utilized by Longnecker included the following: Economic Research Institute, Executive Compensation Assessor; Mercer, Inc., 2016 Mercer Total Compensation Survey for the Energy Sector;Towers Watson, 2016 CSR General Industry Top Management Compensation Survey Report; and Longnecker & Associates, Energy Industry Long-Term Incentive Compensation 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 this information was not available, we reviewed third-party survey information from Mercer and TowersWatson for energy companies of similar size to us and Aon Hewitt, Economic Research Institute, Kenexa and World at Work Survey. <br />
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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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