IRMI Update
Risk Management
& Insurance Commentary, Tips, and Tactics
July 8, 2009 | Issue 209 | ISSN: 1530-7948
In This Issue
Colleague,
It is the rare individual who has the education, skills, and
personality to lead a large corporation to long-term success. When
their talents yield results, they deserve to be compensated just
as star athletes are. However, many high level executives in publicly
held corporations are over-compensated whether or not their companies
do well.
How should we put the brakes on runaway executive compensation?
Arbitrary caps will never work. Appointing a compensation czar to
oversee compensation at all public companies also won't fly.
In my view, the most important step is to increase the number
of truly independent directors on boards. They should develop systems
that reward for long-term success (measured over years rather than
quarters). Some other ideas include:
- Bar exercise of options for a specific number
of years or until the stock price exceeds a specific
benchmark.
- Charge the cost of option grants against corporate
income when exercised.
- Award stock that must be held for a number of
years, so the executives win or lose right along
with stockholders.
- Require shareholders—not simply the board of
directors—to vote on stock option grants.
- Require boards to retain an ability to withhold
or curb golden parachute payments.
What is your view? Are executives at publicly held companies
overpaid? How should a reasonable compensation system be structured
that would motivate and reward without a ludicrous payout for temporary
short-term results or outright failure? [See reader
responses].
While on the subject of directors and officers, IRMI is proud
to introduce the new
Management
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certification program. MLIS was designed with the goal of giving
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Insurance CE credit is available in most states.
Many thanks for subscribing to IRMI Update.
All the best,
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
International Risk Management Institute, Inc.
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Risk Tip
Covered or Excluded? Make Sure To Check
the Definitions!
Despite experience and education, it seems there is always something
to learn in the insurance business. Recently, while working with
a prospective client, I noticed an attached endorsement in a competitor's
non-Insurance Services Office, Inc. (ISO), general liability form
that excluded loss of electronic data. This exclusion was problematic
and (I thought at the time) would be an area that I could offer
better coverage. After checking the exclusion section of the ISO
coverage form that we were proposing and finding no exclusion for
loss of data, and then confirming with our underwriter that the
quote would not have the offending exclusion attached, I was ready
to proclaim a coverage advantage for our program. Then I looked
at the definitions section of the policy form and found that "property
damage" was defined as including "tangible property" only. The definition
went on further to specify that electronic data was NOT "tangible
property." The lesson here is that policy forms (in this case ISO
versus manuscript) can be different in their structure, and each
must be examined closely—in all their sections and subsections—before
a coverage determination is made.
By: Joseph L. Pilato, CPCU, Account Executive
Maran Corporate Risk Associates
Marlton, NJ
jpilato@mcrainsurance.com
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Submit an IRMI
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What's New in Your
IRMI Library
Carefully Analyze D&O Coverage
With no standard D&O policy form widely adopted by the industry,
there are very significant variations from one insurer's policy
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the provisions of two policies—is a daunting and tedious task. That's
why we do it for you in D&O MAPS. From ACE to Zurich, this reference
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form used in the U.S. marketplace, and two to three new or updated
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of ACE and Hartford policies). Far more than a simple side-by-side
display of policy provisions, D&O MAPS illuminates good (blue)
and restrictive (red) features to quickly alert you to the positives
and negatives of an insurer's form. If you subscribe to
D&O MAPS,
take a look at the D&O Policy Specimens and Analysis section in
the platform to which you subscribe and remember to refer to it
the next time you buy or sell a D&O policy.
For summaries of other new and updated information in your IRMI
library, go to
What's New on IRMI Online or
What's New in SilverPlume Sage.
Recent Articles on
IRMI.com
New Expert Commentary
There are over 1,100 risk management and insurance articles on
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links to the articles.
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