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Carrots, Handcuffs, & Parachutes

Carrots, Handcuffs, & Parachutes . Compensation Best Practices in Times of Change Chris Crawford (281) 378-1353 crawfordc@longnecker.com. The Evolution of Rewards. 1980s-1990s. 2000s. 1950s-1970s. 1930-50s. Components. Hourly. Salary. Salary. Salary. Benefits. Variable pay.

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Carrots, Handcuffs, & Parachutes

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  1. Carrots, Handcuffs, & Parachutes Compensation Best Practices in Times of Change Chris Crawford (281) 378-1353 crawfordc@longnecker.com

  2. The Evolution of Rewards 1980s-1990s 2000s 1950s-1970s 1930-50s Components • Hourly • Salary • Salary • Salary • Benefits • Variable pay • Variable pay • Equity • Benefits • Equity • Retirement Benefits • Employment Agreements • The work experience • Perquisites

  3. Unparalleled Compensation Landscape • Sarbanes Oxley - 2002 • 409A • IRS Audits • FAS 123R • SEC Proxy Disclosure • Unfunded/Underfunded Pension Liabilities • Media attention on Executive Compensation • 70 Million Retiring Baby Boomers • Tremendous growth in Texas Energy & Banking markets

  4. Objectives of Employee Rewards

  5. Business Life Cycle Changes

  6. Compensation Best Practices: Start-up Amount of Pay • Target Compensation 3-4 years out Mix of Pay • Low emphasis on Base Salary, High emphasis on short term incentive, Highest emphasis on long-term incentive • Utilize actual stock (restricted stock, stock options) when possible • Multiple year, long-term incentive awards • Short-term incentives: formula + discretion • Employment Agreements: Non-solicitation • Emphasize Work Experience, Being able to affect change

  7. Compensation Best Practices:Growth Amount of Pay • Target Compensation 1-3 years out Mix of Pay • Market Base Salary, Market Benefits, High emphasis on short-term and long-term incentive • Utilize actual stock (restricted stock, stock options) when possible • Deferred compensation: Restricted Stock and/or Company Match • Employment Agreements

  8. Compensation Best Practices: M&A Retain, Retain, Retain • Acceleration of stock vesting – Be Wise! • Transition/Transaction Bonuses • Change of Control/Termination Payouts: Multiple of Base + Bonus • Employment Agreements • Non-Solicitation Agreements

  9. Compensation Best Practices: Tight Labor Market Attract & Retain • Sign on Awards • 1 Time Retention Awards: Stock & Cash • Deferred Compensation + Company Match • Recognition, Recognition • Diversify the long-term incentive awards • Tailor compensation programs

  10. Questions

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