Some time ago, I’d come across a Forbes article (now lost to three or four intervening moves and office clean-outs that discussed the effects on pension plans on executive compensation. One really interesting fact was that (as of June 9, 2003) only a “handful” of companies (including GE and Verizon) had excluded pension “earnings” from the input to executive compensation calculations. To me, this falls into the same category as the company that drafts such poor documents that stock splits trigger any kind of comp threshold at all (and I’ve always dismissed this notion as anti-corporate rumor-mongering, but experience has taught me that all these crazy things happen at least once).
Does this treatment of pension “earnings” hold true at your companies, or have more interested boards at most companies cleaned this up? I support the use of free cash flow as the primary metric for executive compensation, although a detailed FCF analysis might give a board specific sub-targets for a C-level officer to achieve in pursuit of higher FCF. None of those, however, would be likely involve pension earnings or stock split numbers.
(On a related note, I was wondering whether seemingly “senseless” increases or decreases in pension plan earnings assumptions serve as an early indicator of operating and stock performance.)
Tagged as:
finance,
governance
You’ve probably already seen our Five-minute Lawyer post on How to Form a Nonprofit, but sometimes people are at an earlier stage of the process, where they haven’t figured out what they exactly want to do. This process looks a lot like planning a for-profit business in the early stages, but here are a few hints.
In the course of forming a number of nonprofits as the lawyer on the team, I’ve seen the early stages of planning several times.
Most often, people think about what they want to do (mission) and how to approach the problem (strategy). They then turn to friends and colleagues to get a sense of whether the plan seems viable from both “will it work?” and “will people donate to this?” perspectives.
Then, depending on the plan, someone like me gets involved to talk about how to go about putting this activity into action (and here, the process parallels for for-profit process but with some different options thrown in the mix). What I’ve written elsewhere is that not everyone *needs* a new organization, and often times people take on new administrative burdens rather than starting their analysis from a “how best to solve the problem” perspective.
Moving back to the beginning, I’ve come to decide that the best way to go about this is to conduct a little thought exercise or scenario planning: imagine, and then work out with questions and details, what a day in the life of this as-yet-unformed organization looks like. What happens in the morning? Who is that person/people? Why are they there, what do they do? How do they get paid or compensated? Where does that money come from? Running through these sorts of questions further parallel the initial business planning process for traditional businesses, and help put things in perspective when it comes time to formalize a budget.
If you can describe the day-to-day operations of your organization in terms of the goal you have, the actions you take, what resources you will use and how you will acquire them, and the results you achieve, then you’ll be a lot further down the road to formalizing your plan when the time comes.
Tagged as:
governance,
law,
nonprofit
