Incentive plans lie at the heart of the executive pay program, driving and rewarding business strategy execution. This approach has brought great economic success to the clear majority of companies. The typical annual incentive plan and long-term incentive (LTI) mix of multiple award types can capture most regular core performance metrics. A more contemporary design approach may provide significant focus and urgency regarding a company's strategic transformation, shifting business strategy, or competitive advantage in attracting and retaining talent.

Robert J. Jackson, Jr. is a new member of the United States Securities and Exchange Commission (SEC), having been appointed by President Trump in January 2018. Commissioner Jackson previously served as a New York University School of Law professor, where he taught in the areas of corporate law, corporate governance, corporate finance, and executive compensation.

For the first time, the Securities and Exchange Commission (SEC) mandated that thousands of companies disclose the ratio of CEO pay to median employee pay ("ratio") in their annual proxy statements for 2018. The S&P 500 company ratios disclosed thus far show substantial variation, with a median of 155:1 and a range from 0:1 to 5,000:1. While the ratio was never designed to facilitate cross-company comparisons, recent media coverage has done just that, and company management teams and Boards are asking, "What does our ratio mean, and where does our pay ratio stand versus those of our competitors?" Answering this is more complex than it may seem. There are many economic, organizational, and strategic variables that make fair and appropriate comparison between companies, even those within the same industry, technically challenging if not impossible.

Last year, two articles in the Wall Street Journal and Harvard Business Review criticized the overall CEO pay model at U.S. companies. , The authors of both articles, Robert Pozen and S. P. Kothari (both hereafter referred to as "PK"), link their criticisms to shortfalls in executive compensation governance (e.g., poor disclosure, misleading metrics, and selecting inappropriate peer groups) that have been allowed and/or encouraged by Board Compensation Committees. In this article, we address these critiques.

Any changes to long-standing executive pay rules-regardless of whether they concern taxes, accounting, or regulations-raise questions and uncertainty about whether they will lead to wholesale changes in how executive pay is delivered.

While U.S. companies are addressing the new requirement to report CEO pay ratio statistics to shareholders, U.K. companies are now required to report statistics on the gender pay gap. Such reporting is mandated for no later than April 4, 2018, and the reporting must occur on the company's public-facing website and submitted directly to the government using its dedicated online reporting service. Such reporting is in direct response to the U.K. Equality Act 2010 (Gender Pay Gap Information) Regulations 2017.

As we approach the 2018 proxy season, a key change for companies will be the first publication of the CEO Pay Ratio as mandated by the Dodd-Frank Act of 2010. Companies will begin publishing CEO Pay Ratios in proxy statements in early 2018.

Last month, Institutional Shareholder Services (ISS) released its 2018 voting policy updates for companies that have shareholder meetings on or after February 1, 2018. More recently, ISS revised its "Pay-for-Performance Mechanics" white paper, providing additional details on its 2018 policy changes, and updated its Frequently Asked Questions documents for both U.S. Compensation Policies and U.S. Compensation Plans. As many companies prepare for the upcoming proxy season, we are providing insight and additional guidance in navigating the latest ISS policy developments.

Talent retention is one of the executive pay program's most important objectives. In order to minimize situations when retention is an issue with the pay program-rather than one of its characteristics-it is important to ensure the core elements are well designed and operating effectively. A strong pay program foundation includes target pay opportunities at market-competitive levels, incentive plans understood by participants, and payouts commensurate with performance.