The board's compensation committee has more on its plate than ever before and must carry out its duties under the intense scrutiny of shareholders and the public.
Ray Davis arrived at the helm of then-tiny Umpqua Holdings in rural Oregon in 1994 and over the next decade leveraged acquisitions and a unique retail culture to transform the company into a regional powerhouse with more than $8 billion in assets. Early this decade, the board of the now-Portland-based company put together a supplemental executive retirement plan, or SERP, for its CEO that seemed a just reward for a job well done—and a way to ensure the keeper of the vision would stay put.
The plan’s structure looked solid at the time. But as Umpqua continued to grow and prosper over the next several years, a problem emerged. Since the value of Davis’s SERP was tied to short-term pay (a typical arrangement), each year of bonuses and higher base pay ballooned his pension benefit to new heights.
By 2006, the plan had become a “runaway freight train,” says Bill Lansing, 61, an Umpqua director since 2001 and chairman of its comp committee. That was an especially unnerving development, given that new Securities and Exchange Commission disclosure rules would soon mandate laying out the numbers in all their glory.
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