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ISS Issues Survey Hinting at 2019 Policy Changes

Institutional Shareholder Services (ISS) took the first step in its yearly policy update process when it recently released its annual corporate governance policy survey to clients. Following the survey period, ISS releases draft policies in the early fall for a two week comment period, followed by final policy updates that typically come in November. Adopted policies are effective in February for the proxy season.
 

Getting Started with Your Compensation Survey Results

Understanding where you stand in the market helps you ensure that employee compensation spend is optimized for your firm. Overpaying relative to performance and the market could lead to increased shareholder pressure and sub-optimal financial results. Underpaying could weaken your firm’s ability to attract, motivate, and retain talent.

Infographic: Forces to Watch for Financial Services Firms Across the Globe

We are in an age of major global transformation for financial services. Technology disruption is happening all around us, forcing traditional establishments to innovate, re-think old tactics, and adapt to the ever-shifting digital world. In this current state of change, there are many new challenges that financial services firms must face head on, while contending with political and social unrest, economic fluctuation, and strong regulatory standards. From global expansion to new reward structures, client experiences, and entirely new sectors, here are the top trends affecting financial services firms across the globe.

Top Six Life-Health Insurance Industry Trends to Know

Insurance industry spend in technology and analytics has increased at significant levels, as companies continue to integrate innovation into business processes. The average insurance company increased spending by nearly 22% and roles within data analytics more than doubled since 2013. Companies are making big bets that emerging, innovation from InsurTech and leading outsourcers will streamline internal processes and improve the way that they interact with customers. In our 2018 Digital and Intelligent Innovation Survey, we found that 58% of insurers have reached the implementation phase on one or more elements of the new digital and intelligent innovation toolbox.

Top Five Property-Casualty Insurance Industry Trends to Know

Property-casualty insurance firms have seen a significant shift in the staffing profile in recent years. The average company added over 20% more staff in technology, actuarial, and analytical roles compared to a 40% decline in front office roles, including policy processing, data entry, and clerical work. We anticipate that automation will require fewer employees to directly interact with the customer and perform data entry tasks, as these activities are delivered through automated and digital methods.

The Spotlight: Brooke Green, Partner, Radford

Brooke Green is a Partner and leader of Employee Rewards and Talent Consulting for Aon’s Radford division. She leads consulting teams focused on providing talent management and rewards advice to technology and life sciences companies. Brooke has significant experience developing compensation and career frameworks for various firms, including small start-ups and large global industry leaders. She has been practicing in the San Francisco Bay area for over 20 years.

What We Learned from the 2018 Proxy Season

Another proxy season has wrapped up and, with it, the eighth year of say-on-pay votes are in the books for most public companies. Negative vote recommendations for say-on-pay proposals from Institutional Shareholder Services, Inc. (ISS) and Glass Lewis & Co. (Glass Lewis) went up slightly—as did the number of outright say-on-pay failures for both the Russell 3000 Index and S&P 500 Index. When it comes to equity proposal votes, ISS and Glass Lewis models are not always needed for sufficient shareholder support. Companies can obtain necessary shares to adequately fund their programs by engaging directly with their shareholders—even in the face of receiving negative recommendations. In any case, for both say-on-pay and positive share plan proposals, it all comes down to planning ahead.  

What's Trending in Major Financial Services Hubs Across the Globe?

The influence of evolving technology in financial services is changing industry landscapes and long-lasting practices across the globe. Certain economies and companies are finding it easier to adapt to the moving industry and to new regulations. For some countries, the challenge is creating a deep-enough pool of skilled workers to meet demand. For others, it’s a matter of cutting redtape to encourage new businesses, or embracing new industries and business models.

SEC Enforcement Action on Perks Disclosure Reminds Issuers to Be Mindful of the Standard

The SEC’s recent enforcement action against a large, US-based company for failure to properly disclosed executive perquisites is a good reminder to all issuers of the circumstances under which detailed disclosure is required.

SEC Expands Scope of Companies that Qualify for Reduced Compensation Disclosure

The SEC recently amended its definition of smaller reporting companies (SRCs), which could pave the way for nearly a thousand additional companies to take advantage of reduced compensation disclosure requirements. However, it may not be wise for every qualified company to scale back their disclosures, particularly if they have active investors who have expressed concerns via Say-on-Pay votes in the past.

Captive Finance: Gaining Competitive Advantage

Headline news can be a distraction. Evolving geopolitics and potentially disruptive economic and political outcomes block our field of vision from the deep connectivity of our world. Our technology, goods, and services are globally integrated on a massive scale. Everything, from children’s toys to shampoo to bulldozers, is part of a global supply chain that links people and resources to produce outcomes that would be unachievable without cooperation.

Understanding Your FinTech DNA to Create a Culture that Truly Stands Out from the Crowd

When it comes to creating compelling company cultures, financial technology (FinTech) firms are in an enviable position—they can pick and choose best practices and styles from both the financial services and technology sectors to carve out their own path.

Aon Reveals Its Ward’s 50 List of Top Performing Insurance Companies for 2018

The list of Ward's 50® top performing insurance companies was released by Aon plc, a leading global professional services firm providing a broad range of risk, retirement, and health solutions. Ward benchmarking is the leading operational and compensation benchmarking and best practices service for insurance companies.

What You Should Know About Rewarding Your People in China

Over the past decade, there has been an enormous amount of change in China's business and employment environment. We have seen the continuous reformation of state-owned enterprises, the rapid rise of private-owned businesses, extensive readjustment of industrial structures, and an increasing number of new employees entering the workforce.

Infographic: Large or Small–A Well Thought Out Rewards Program Never Goes Out of Style

Classic broad based compensation is enjoying a renaissance. We expect new approaches and automation to elevate its historically foundational components to a new level of impact. Workforce expectations continue to evolve. With more contractors, conditional workers, and alternative work arrangements as a part of organizational restructuring, the foundation of knowing what roles are, what accountability roles have, how to set goals and measure performance, and how to reward achievement of goals will become even more valuable.

Tech Convergence in Financial Services Industry: Your Questions Answered

The convergence of financial services and technology has caused firms to put the transformation of their workforce at the center of their strategy. Companies are focused on exploring new ways of working, redesigning their organizational structures, evaluating their entire employee value proposition to improve engagement, and making strategic investments in new skills and technology to support this transformation. In order to compete with tech firms and with the growing popularity of the Silicon Valley approach to attracting and retaining key employees, financial firms must acknowledge that the broader ecosystem of rewarding digital talent is changing and transform their value proposition with it.

Tackling Trusted Traditions: Examining Life Insurer Sales Incentive Design Practices

When considering sales incentive design practice among life insurers, the chorus from Fiddler on the Roof may come to mind—Tradition...Tradition...Tradition. While traditions can provide some consistency and comfort, at what point do we have to seriously reconsider and revamp incentive design practices? At what point do we have to ask, does it really make sense to keep doing it this way?

United States Regulatory Update

On May 24, President Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) (the Act) into law. This Act provides numerous areas of relief under the Dodd-Frank Act for both banks and credit unions alike. It is important to note that this Act does not provide for any provisions specifically focused on compensatory relief from the Dodd-Frank Act. While a separate bill, i.e., Financial CHOICE Act 2.0, does provide relief for a number of compensation items under the Dodd-Frank Act, its legislative future is uncertain at this point. McLagan will continue to monitor both legislative and regulatory changes that impact compensation management.

The Spotlight: Todd Leone, Partner, Global Head of Executive Compensation and Regional and Community Banking

Todd Leone leads McLagan’s global executive compensation practice and the regional and community banking sector team. Todd specializes in advising banks and compensation committees on complex compensation issues in the context of changing regulatory environments. He works with clients to design compensation plans that consider taxation, regulatory compliance, and compensation agreement provisions.

Questioning the Salary Question Ban: What are the Pros and Cons?

Inquiring about previous salary in job interviews may cause anxiety for both job candidates and hiring managers. It’s a touchy subject given the countless variables that could potentially be linked to an individual’s compensation history. Most cases of gender pay inequity are, in fact, initiated upon compiling the offer package for a new employee. In an effort to combat the disparity in compensation experienced by so many qualified candidates, several jurisdictions have or are enacting laws that impose restrictions on hiring managers with respect to asking applicants for their previous salary history.

Should Your Credit Union Think About Long-Term Incentives?

In today’s fiercely competitive market, credit unions are increasingly competing with the broader financial services market for top talent. This results in the need for new compensation plan design for credit union executives and key leaders. We’re beginning to see a rise in prevalence of long-term incentive plans (LTIPs) driven by three main factors:

  • Market trend towards performance-based compensation
  • Risk best practices
  • Tax law changes

The 2018 McLagan Perspectives Report: An In-Depth Exploration of Current and Future Trends in Financial Services

We are in an age of major global transformation for financial services. As technology continues to shape a new industry landscape, firms are forced to rapidly adapt to trends in the current market, including longstanding talent and rewards strategies to stay competitive in the race for tech-enabled talent. This is a challenge that financial services firms must face head on, while at the same time contending with political and social unrest, economic fluctuation, and strong regulatory standards.

Are You Creating a High Performance Culture at Your Firm?

Think twice before scrapping performance management at your firm. Rather, ensure that it delivers on its promise. Employees are attracted to firms that recognize their contributions and managers need to be held accountable for managing performance for their teams.

Executive Compensation: Hidden Questions in Bank Peer Group Selection

Most banks use peer groups to evaluate their executive compensation programs. However, since every peer group process is unique, creating hard and fast rules is not usually the best approach for firms to take. We have seven questions for consideration that may change the way you think about your compensation peer group altogether.

The Spotlight: Rob Northway, Partner, Head of Global Consumer Banking

Rob Northway, a Partner at McLagan, is head of the global consumer banking practice. Rob specializes in the design of compensation programs, guiding clients through the job architecture and leveling process, and supporting clients in aligning their human capital strategies with business objectives.

Fiduciary Rule Update

The roller coaster ride that has been the controversial Fiduciary Rule recently took a couple more hairpin turns. First came the news that the U.S. Department of Labor (DOL) officially delayed full implementation of its version of the rule. The DOL was quoted in an article published on March 16th by Bloomberg Law as saying, “Pending further review, the Department will not be enforcing the 2016 Fiduciary Rule.” Then on April 18th, the U.S. Securities and Exchange Commission (SEC) announced its proposed version of the rule, which, to nobody’s surprise, is not as strict as the DOL version. Below we provide our point of view, as well as responses from some of our clients on what we might expect to see happen in the near-term.

A Case Study in Leveraging Compensation Market Data: Re-Defining Your HR Function

The HR function plays a critical role in the future of financial services firms. HR helps ensure that organizations can effectively and efficiently attract, retain, develop, deploy, motivate, and compensate the talent that will help them reach their goals. We’re guessing that the average reader of this article is an HR or compensation professional, so they will already know and appreciate the breadth of these responsibilities. In order to fully achieve this vital role at time when there is a dramatic increase in the quantity of data available, HR needs access to data and to hire or develop individuals who can turn that data into powerful analytics to help answer business questions and inform talent strategies.

Aviation Finance: Navigating Executive Pay Programs

Second only to the weather, travel woes are the friendliest form of small-talk. Unexpected delays, airport congestion, and shrinking seat size are universally relatable for air travelers. However, it may come as a surprise that many aircraft are leased and not owned by the operating airline. In fact, a small group of organizations purchase, maintain, and lease aircraft to airlines. These aviation finance firms provide an interesting case study of compensation programs, reflecting the realities and forces that shape a specialty finance sector. The following article discusses the unique demands placed on executive management teams in aviation finance, why it is challenging to recruit and retain these individuals, and considerations for setting an effective pay strategy.

Winning the Talent War in China

According to our recent China McLagan Talent Pulse Study, talent management tops the agenda for an overwhelming majority of the 58 participating firms, ahead of growth, innovation, and customer service. We’ve outlined some of the innovative strategies that firms can adopt to stay ahead and win the best talent in China.

The Spotlight: Ephraim Edelman, Partner, McLagan Reward Data Solutions

Ephraim Edelman leads the reward data business for McLagan, including strategic initiatives of product development, platform roadmap, machine learning, and governance, as well as new data and analytics client solutions.

 

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