Tags: corporate | earnings | adjustments | bonuses

WSJ: Corporate Earnings Adjustments Allow Execs to Earn Bigger Bonuses

By    |   Friday, 28 February 2014 09:20 AM

U.S. companies are calculating their earnings in unconventional ways when deciding how much to dole out for bonuses, helping executives earn juicy payouts.

In 2013, 542 companies said they based compensation on earnings results not based on generally accepted accounting principles, according to an analysis that consultant Audit Analytics performed for The Wall Street Journal. That compares with 249 companies in 2009.

Among the companies' techniques are excluding stock payments made to employees as expenses, excluding goodwill write-downs and excluding expenses stemming from acquisitions, The Journal reports.

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"Everything you can think of to manipulate this has been done," Gary Hewitt, head of research at GMI Ratings, a corporate-governance research firm, tells the paper.

Some financial market participants take exception to what the companies are doing.

"We're very frustrated with that," Michael Pryce-Jones, a senior governance analyst at CtW Investment Group, which works with union pension funds on shareholder initiatives, tells The Journal.

When companies deploy non-standard methods to compute earnings for bonuses, investors "are being given the upside, but they're not being given the downside," he notes.

IBM CEO Virginia Rometty recently renounced her bonus, saying the company's performance last year didn't merit it.

Forgoing bonuses may turn into "something of a trend," David Eaton, vice president for proxy research at shareholder advisory firm Glass Lewis, tells The New York Times.

"It's a little bit of public penance for poor performance. But what it really comes down to is increased scrutiny by large investors on executive compensation issues."

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U.S. companies are calculating their earnings in unconventional ways when deciding how much to dole out for bonuses, helping executives earn juicy payouts.
corporate,earnings,adjustments,bonuses
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2014-20-28
Friday, 28 February 2014 09:20 AM
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