In this Client Briefing, we present an assessment of three pay-for-performance methodologies: Realizable, Summary Compensation Table, and ROX, Exequity’s preferred methodology. In assessing how well executive compensation and shareholder returns align under each analysis, we illuminate the key shortcomings of Realizable pay (as defined by The Conference Board) and Summary Compensation Table pay (as used by proxy advisors). Using ROX, we find that executive compensation at S&P 500 companies is very strongly aligned with returns to shareholders. We also find that Realizable pay and Summary Compensation Table pay align relatively poorly with shareholder returns, resulting in pay-for-performance “disconnects” where under ROX none may exist. ROX provides compensation committees a powerful, comprehensive, and reliable tool to illustrate the link between executive pay and performance.
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On May 23, 2008, Lynn Joy presented "The New ROX Index" which took a look at a new way to analyze the relationship between compensation and performance.
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This article by Mike Sorensen and Ross Zimmerman was published in the June/July 2007 issue of Directorship magazine. The article examines a new methodology for analyzing company performance, return on executives (ROX™). A summary table showing the ROX™ Scores for the Top 20 S&P 500 Companies in 2006 is included.
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