The guidelines, announced June 18, have been dubbed the “Aspen Principles” for the place where the idea germinated. They attempt to break the cycle of top managements’ knee-jerk reactions to Wall Street’s expectations for quarterly earnings. Instead, the signatories to the Aspen Principles recommend rewarding top executives for creating long-term strategic values for buy-and-hold investors.
 
The Aspen Group seeks to help companies set long-term executive compensation goals, helping investors know and understand the long-term goals of corporations.
 
Members include the Council of Institutional Investors, the Business Roundtable (which represents more than 150 of the nation’s largest corporations), as well as Citigroup Inc., Pfizer Inc., Xerox Corp., Pepsico Inc. and pension funds such as the New York State Common Retirement Fund and the California School Teachers’ Retirement System.
 
The guidelines call for companies to stop providing quarterly earnings guidance to securities analysts, compensation committees to be comprised solely of independent directors with relevant expertise and require companies to disclose their succession planning process to investors.
 
The principles also recommend that companies award stock options and other equity compensation at fixed times each year to prevent the manipulation of grants, and advocate that corporate directors communicate with long-term investors on executive pay.
 
The Aspen Principles also require senior executives to hold stock for the long term, and allow companies to recoup incentive compensation if performance targets were falsely met or if companies restate earnings.