Marsh & McLennan Tightens Up Executive Pay

It's had more than its share of troubles in the last few years—starting with the loss of hundreds of employees in the 2001 terror attacks in New York, and continuing through price-fixing allegations by New York authorities in 2005.

But Marsh & McLennan has taken a big step to get ahead of another problem: Aligning executive pay to performance.

In a filing with the Securities and Exchange Commission on Tuesday, the insurance brokerage said it would make it harder for its executives to earn some performance-related bonuses—and make it easier for the company to recoup bonuses that executives don't honestly earn.

On making it harder to get bonuses in the first place:

The board's compensation committee decided that executives won't automatically receive bonuses due to them if the company is merged or acquired, as was the case in the past.

Starting on March 15, 2007, a change of corporate control will cause equity-based bonuses to vest early only if the employee is terminated without cause or resigns for good reason within two years of the merger or acquisition.

On making it harder to keep bonuses awarded under false circumstances:

The board said it would cancel or demand repayment of "any incentive compensation" paid out after July 19, 2007, if the company has to restate the financial results that earned the executive the bonus and the compensation committee concludes that the executive's "intentional misconduct" led to the restatement.

There is a statute of limitations: The board said it would not seek to recover bonuses paid more than three years before the applicable restatement is disclosed.

Just to make sure no investors jump to wrong conclusions, Marsh & McLennan wrapped up its filing by noting:

"MMC is not currently aware of any facts suggesting that this policy requires the cancellation or reimbursement of incentive compensation paid to any officer to date."

Good to know.

by Mark Stein