Johnson Associates in the news
“I think at the big programs, that’s a fair estimation,” he says. “They run a pretty big operation. They’re responsible for a lot of money. It’s an extraordinarily competitive business. So, yeah, they certainly look much more like a CEO than they did 20 or 50 years ago, in simpler times when the money was not as big.”
That said, Alan Johnson, managing director of compensation consulting firm Johnson Associates, pointed out that the level of director pay is set in a competitive marketplace and has actually grown at a slower pace than that of company executives.
“The real issue is the income growth of the middle [class] has been sluggish,” Johnson told CNBC in a phone interview. “We have to grow our economy so the middle-class American will feel better.”
“It will actually be worse than it was before – the problems that it was intended to cure will get worse,” Johnson says. “[Recruiters] can certainly ask their salary expectations, and the better the negotiator you are, the further you’ll get with that, but the truth is, most candidates don’t really know [how much they should be paid].
Another issue to consider is how executives and potential recruits will react if the clawback provisions are viewed as too onerous, unclear or open-ended, says Alan Johnson, a New York–based executive compensation consultant. A potential worry for executives could be that “five years after I’m gone there will be a witch hunt, and they’re going to call me the witch,” Johnson says.
“He’s done a great job, but the standards to earn it are way too easy,” says Alan Johnson, managing director of New York-based compensation consultancy Johnson & Associates. “You’re going to get paid an enormous amount of money if you finish in the top third of the race? Really?”
“Regulatory and political unknowns continue to spread caution throughout the industry,” Johnson said in the report. “Market activity and interest rates will be key 2017 incentive drivers going forward.”
“The rules never really got a full debate, so I don’t think it’s a bad thing that they have been killed, because I think the pendulum has swung too far,” said Alan Johnson, managing director of Johnson Associates, a compensation consulting firm. “But there will be some blowback on this.”
The fact is that financial services organisations are moving jobs to lower-cost destinations regardless of whether their personnel want to move – largely because they want to cut costs. For employees, this means taking a lower salary in a cheaper location. Alan Johnson, the founder of compensation consulting firm Johnson Associates, says that pay is typically 15-20% down in locations where banks are moving jobs. But this isn’t necessarily all bad.
“Companies used to apologize to employees but they don’t do that anymore – they say, ‘The sticker number of your comp will be less, but factoring in the cost of living, you actually may come out ahead,” he says.
Alan Johnson, an executive pay consultant who is no fan of excessive compensation plans, says $1 pay schemes for CEOs sound nice, but they rarely work for shareholders. They tend to have a chilling affect on what a company will pay for other top talent. “Was Whole Foods able to get the best talent possible the past 10 years?” Johnson asked.
The new rule is intended to create a level playing for “bad negotiators” who’ve been paid less (women in particular) and who will in future be liberated from the shackles of their historic low pay. However, by encouraging banks to come in with incredibly low offers in an attempt to flush out pay levels, Johnson says legislators will simply make existing discrepancies worse.
For their part, banks will need to carefully document the process leading to candidates disclosing their pay levels voluntarily. – There are fines of $250k for organizations which actively ask candidates to provide the information. “Banks are going to need a paper trail,” says Johnson. “- You’ll have lawsuits over this. Three years later, banks will need to be able to point to a signed declaration saying the employee gave his or her information willingly.”