Posts belonging to Category executive compensation



Top Pay at Top Companies

exec paySo how do the best of the best pay their executives? A new report from Towers Watson highlights the executive-comp practices at high-performing companies (high performing as defined by the 50 companies in the S&P 1500 with the most-sustained outperformance in total shareholder return for the 15-year period ending in 2013, vs. the S&P 1500 overall). The goal was to find out whether top-performing companies pay their execs differently than other companies, said Todd Lippincott, TW’s exec-comp leader for North America. And guess what? They do.

“We found that many high performers take approaches and differentiate their pay programs in ways that many observers, including proxy advisory firms, would view unfavorably,” said Lippincott.

For example, stock options — often criticized for promoting short-term thinking at companies — are more heavily emphasized at top performers, representing approximately 50 percent more of the long-term incentive mix than in the broader market, according to the report. High performers also place less emphasis on long-term performance plans than other companies, the report found.

“It’s interesting that companies that actually sustained performance over time have embraced [stock options],” said Lippincott.

Meanwhile, the report noted that while target pay opportunities (target total direct compensation) were generally very similar between high performers and the S&P 1500 overall (adjusted for company size), the actual realizable pay at top-performing companies often exceeded market median levels by significant amounts — by 43 percent among large companies and 28 percent for small companies. Top performers also keep things relatively simple compared to non-top performers: they used fewer annual incentive plan metrics (often just one or two) and added metrics as they grew, and also used fewer LTI vehicles earlier in their life cycles and added them as they grew, as well.

The implications of the report’s findings are significant, said Lippincott:

 First, they reinforce the importance of considering company size when assessing the appropriateness of pay programs. Often, we see commentary about pay that doesn’t consider the company’s development stage. Second, these findings suggest that high-performing companies with revenues of $500 million to $2 billion are more likely than their similarly sized competitors to retain the less complex incentive practices associated with smaller start-ups and early-stage companies. In short, they keep it simple and focus on a few key goals.”

 

A Few Takeaways from Total Rewards 2014

WorldatWork has expanded its focus in recent years to include “total-reward” issues such as healthcare, financial wellness and work/family as part of its overall mix. But as anyone who’s attended the association’s annual conference lately knows, no one can ever accuse the Scottsdale, Ariz.-based association of abandoning its roots in compensation. (Some of you will no doubt remember the days when WorldatWork was named the American Compensation Association — and pretty much exclusively focused its attention on comp.)

totalrewards2014-500x334Certainly, those roots were evident this week at WorldatWork’s Total Rewards 2014 Conference & Exposition at the Gaylord Resort in Dallas, which attracted around 1,500 attendees.

Comp-specific sessions at this year’s event ranged from the tactical “Compensation as a Career” to the more strategic “Executive Rewards Trends and Predictions,” which I tried to attend but was turned away from at the door because, I was told, every seat had been taken.

I was able find a seat at an earlier session on Monday titled “The Danger of One-Size-Fits-All Executive Compensation,”  which included as presenters Steve Harris, managing director of Frederic W. Cook & Co., and Brynn Evanson, executive vice president of HR at J.C. Penney. (Evanson previously headed comp, benefits and talent operations at JCP and replaced Dan Walker as its top HR leader in April 2013. Some of you may remember Walker earned a whopping $20 million during his first and only year as JCP’s top HR executive and departed soon after Ron Johnson was ousted as CEO in early 2013)

I was especially interested to hear how JCP was tackling executive comp these days, considering all its been through. (In what has to be described as perfect timing, JCP reported its first decent quarter in quite some time last week, suggesting that its turnaround might have entered a new phase.)

Harris suggested that employers would be making a mistake were they to let the forces at work today, such as increased government oversight and the efforts of proxy advisory firms, significantly influence what they do — and, more importantly, don’t do.  Considering no two companies have the same challenges and business objectives, he said, there’s a real danger of “falling into the trap” of “sameness” when it comes to exec comp.

Of course, he said, it’s not all bad to be formulaic, but it’s also not all good.

When you look at the pay-mix charts today, Harris said, you don’t see a whole lot of difference between your company and the median company.

True, he said, being somewhere in the middle goes a long way toward preventing scrutiny, but that doesn’t mean it’s the best approach.

Harris stressed the downside of formulaic incentive plans that emphasize pre-established goals and downplay comp-committee discretion and judgment in determining payouts. Following a herd mentality, he said, can often stifle innovation and undermine an organization’s ability to achieve its business’ objectives.

Instead, Harris said, employers need to be able to balance shareholder support for performance against proxy-adviser angst, use good business judgment and “manage the influence of peer comparisons.”

As Evanson made clear in her remarks, as far as executive comp is concerned, flexibility has been an important factor in JCP’s turnaround efforts.

As most of you are aware, JCP has seriously underperformed against its peers in recent years, with its stock price going from $36 in 2011 to around $8 today. During that period, the Plano, Texas-based retailer went from being a coupon- and discount-based retailer in 2011, with Mike Ullman at the helm; to a lowest-price retailer in 2012, with Ron Johnson in charge; back to being a coupon- and discount-based retailer in 2013 and 2014, again with Mike Ullman leading the firm.

Each phase required a very different strategy, Evanson told attendees.

As part of JCP’s turnaround efforts, Evanson said, JCP has recently been using spot awards for top talent, promotions, and learning and development to hold onto key talent.

(Before moving on, I probably should mention a story in the Dallas Morning News that reported  all of “the hiring and firing in 2011 and 2012 cost Penney $236 million in bonuses, stock awards, transition and termination pay: $171 million for officers and $65 million for other corporate executives.”)

I also had a chance to speak on Monday with Mercer Senior Partner Steven Gross and Partner Mary Ann Sardone prior to their session titled “Learnings from Managing Global Talent, Compensation and Benefits.”

On the global-comp front, Gross said, employers are focused on “segmentation” and “figuring out how money gets allocated, especially for many of the more critical positions.”

Recognizing critical workforce segments is a core component of a successful total-rewards strategy, Gross said.

He also said it’s no coincidence that the expo hall at WorldatWork has so many rewards-and-recognition vendors exhibiting, since compensation budgets aren’t expanding and companies are looking for other cost-effective ways to acknowledge the efforts of employees. (Achievers, BI Worldwide, Globoforce, O.C. Tanner, MTM and Michael C. Fina were among the dozens of exhibitors at the show in this space.)

In an effort to successfully align comp with business and talent strategies, Sardone said, she’s seeing more and more companies attempting to create “an eco system” across their organizations, where comp and talent management are more regularly talking to each other.

Mercer released this week its Total Rewards Survey, which suggested that companies still have a lot more work to do when it comes to aligning comp to business priorities. While more than half (56 percent) of organizations surveyed said they made a significant change to their total-rewards strategy in the past three years, less than one-third (32 percent) said their total rewards and business strategies were fully aligned.

It is critical that the rewards strategies of companies align with their business strategies to achieve overall success, Gross said.

On Tuesday, I also sat in on a session titled “An Insider’s Guide to Compensation Committee Meetings,” during which a panel of experts shared a few common-sense best practices HR and comp leaders might want to keep in mind as they work with their comp committees.

Robin Colman, vice president of compensation, benefits and HR operations at eBay, pointed out that it’s important for the comp person to know the preferences, biases and points of view of the people in the room and adjust his or her approach accordingly. Often, she said, that includes knowing what committee members might be seeing and hearing at other boards they may be sitting on.

John England, managing partner at Pay Governance LLC, a consulting firm that works with comp committees, advised those working with their comp committees not to be “another personality” in the room, since there are enough “personalities” in the room already.

If you have something to share, he advised, make sure no one is ever surprised.

Paying CEOs to Find Their Replacements

successorWant to pave the way for the organization’s next leader and light a fire under your current chief executive in the process? Rewarding your CEO for helping to find and groom a successor may be one way to go.

A recent Wall Street Journal article calls this practice the “hottest corporate fad,” citing firms including Avnet Inc., Intel Corp. and Marriott International Inc. as examples of large companies offering incentives to chief executives for their efforts in ensuring a smooth transition when they eventually turn over the organization’s reins.

Motivated at least in part by “investors’ anxiety over rocky corner office transitions,” these and other companies have taken to linking CEO performance awards to succession planning, with 16 Fortune 1000 firms disclosing such links in their latest regulatory filings, the article notes.

At the Santa Clara, Calif.-based Intel, for instance, now-former CEO Paul Otellini has received $4 million in stock and cash since January 2013 for his part in bringing along Brian Krzanich, who took over Otellini’s old post in May of last year, according to the Journal. Otellini, who has already gotten $1 million in cash, can sell half of his $3 million worth of shares this May.

Other organizations are taking a slightly different tack. Phoenix-headquartered electronic component distributor Avnet is basing chief executive Richard Hamada’s next annual raise partly on his succession planning prowess. Promoted to CEO in July 2011, the 56-year-old Hamada told the Journal he “hopes to run Avnet for a total of eight to 10 years,” but noted that he now gives detailed succession updates at every board meeting.

Board members at Marriott International believe that “continuity of management is critical,” David Rodriguez, the Bethesda, Md.-based hotel chain’s CHRO, told WSJ.  As such, CEO Arne Sorenson’s ability to secure the board’s approval of his CEO transition agenda factored into the amount of his bonus in 2012, according to Rodriguez. He estimated that roughly 10 percent of the nearly $1.95 million bonus bestowed upon Sorenson reflected such individual achievements.

The Journal article may describe the practice as a fad, but, as directors become more involved in grooming future leaders, this type of reward system “will be commonplace in a decade,” Dennis Carey, vice chairman at Los Angeles-based Korn/Ferry International, told the paper.

In fact, the number of companies taking this approach is poised to triple in the next five years, according to Patrick McGurn, special counsel for proxy advisory firm Institutional Shareholder Services Inc.

Time will tell if that prediction is on the money, but McGurn makes a compelling—not to mention concise—argument for tying a CEO’s pay to his or her role in succession planning efforts.

“Nothing tends to focus CEOs’ attention,” he told the Journal, “like … good, swift kicks to their incentives.”

Shareholders Shift Their Focus

It’s been widely reported that companies have fared quite well as far as Say on Pay votes have been concerned. Indeed, Semler Brossy Consulting Group reports that, as of April, 94 percent of employers have passed such a vote (with a 70 percent approval rating).

Say on PayTo be sure, that’s good news for companies and their comp committees. But it does raise the question:  Who’s failing?

According to researchers at Towers Watson, the answer: smaller companies.

While key shareholder voting outcomes have improved very slightly for the Russell 3000 overall, the analysis found, smaller companies are failing their Say on Pay votes at almost twice the rate as last year. (Towers Watson defines failures as receiving Say on Pay support from less than 50 percent of the votes cast.)

In an article posted Monday on Towers Watson’s website, the authors note:

Through May 24, a total of 27 Russell 3000 companies received failing Say on pay votes from their shareholders. Only two are in the S&P 500. Companies outside the S&P 1500 … accounted for almost two-thirds (63 percent) of the failures. Last year, these smaller companies accounted for only 31 percent of the Russell 3000 failure.”

James Kroll, a senior consultant at Towers Watson and one of the article’s authors, said he isn’t surprised to see shareholders start to shift some of their attention to smaller companies. “We’re most of the way through proxy season and we’ve seen a refinement of efforts at the largest companies—so it’s natural that the focus would start to shift downward in terms of company size,” he said.

In light of this, Kroll said, smaller companies might want to take some cues from their larger peers, including revisiting their disclosures and fine-tuning their messaging so shareholders have a much clearer picture of what’s happening.

Put simply: Be more engaged with your shareholders, something many larger companies have  gotten much better at.

And if you’ve failed a vote? “Shareholders,” Kroll said, “are going to be looking at how you’ve responded … .”  In terms of responding, he adds, some companies are doing a better job than others.

Say-on-Pay Movement Growing Globally

Momentum continues to build in the European Union to give shareholders greater powers of oversight on executive-pay practices.

166843264 -- globe and moneyA release from New York-based Mercer announcing its latest perspective on the topic details some of what’s going on “across the pond”: In the United Kingdom, binding say-on-pay votes will be implemented starting in October; in Switzerland, a March referendum to introduce binding say-on-pay votes was just supported; and, with similar measures being discussed in France, German and Spain, the EU is planning to introduce legislation later this year to require all 27 EU countries to implement mandatory, binding say-on-pay votes. (The link takes you to Mercer’s “Perspectives” landing page; the April special issue, Executive Pay Regulation: The Potential Impacts of Proposed European Reforms, is at the top right.)

As the perspective notes, there’s a certain European “hardening of attitudes” going on:

The political impetus to regulate executive pay has accelerated in Europe. Recent regulatory developments that would give shareholders greater oversight of executive pay and cap bonuses in the financial services sector, reflect a hardening of attitudes among European politicians and the public. In an era of low or nonexistent economic growth, consumer price inflation, and falling average real wages, executive remuneration will continue to be a sensitive issue.

This is particularly true in the banking sector, where the continued payment of bonuses, in the face of taxpayer-funded bailouts and revelations such as the Libor fixing scandal in London, has sparked outrage. But with other countries and regions taking a less prescriptive approach, an unlevel playing field is emerging and may result in executives leaving the EU for less regulated markets.

These proposed regulations, which have, for the most part, been supported by shareholders, will nevertheless require them to be more active in their oversight of executive pay. One consequence of this greater investor workload may be to extend the influence of proxy advisory firms.

The piece goes on to note exactly what’s going on globally, including in the United States, where say-on-pay votes are still non-binding but have, nonetheless, “influenced executive pay practices [by eliminating] many problematic practices and [increasing] shareholder-engagement efforts.”

Indeed, in this blog post written by Senior Editor Andrew R. McIlvaine about a session at the recent WorldatWork Total Rewards 2013 conference, he goes into much more detail about some of the ways say-on-pay is impacting — pro and con — the business community.

One of the most notable quotes in his post comes from John England, managing partner of Philadelphia-based Pay Governance, who fears what the European binding-vote wave landing on U.S. shores might mean. (He is clearly not a fan.)

“When CEO pay escalates sharply against average worker pay, it will inflame things,” England says in the post. “I do believe we are just one or two scandals away from the prospect of a binding say-on-pay law … in this country.”

What are employers to do with this information? I ran that by two Mercer thought leaders. Here’s what they both had to say. First from Vicki Elliott, Mercer’s senior partner and global financial-services consulting leader:

Companies should not let tighter regulation in financial services and other sectors define their objectives for compensation and talent-management effectiveness. Be creative and don’t succumb to a one-size-fits-all. Companies will [also] need to rethink their employee value propositions and the power of non-pay methods — it can no longer be all about pay.

And from Gregg Passin, senior partner and executive rewards leader for North America:

As say-on-pay develops, it is very important to simplify and clearly communicate remuneration strategies and programs to shareholders. It is [also] likely that there will be more focus on building talent from within so processes for managing talent pipelines such as succession planning and career development will be critical.

 

The “Biggest Thing Happening” In Exec Comp

It’s a global trend that’s sweeping financial capitals all over the world, and it’s going to keep things quite interesting for HR leaders at public companies.

The “it” in question is say-on-pay, or the practice of letting shareholders vote on the renumeration awarded to executives of publicly traded companies in order to discourage or prevent corporate boards from granting excessive pay packages not linked to actual performance. Here in the U.S., a provision included as part of the Dodd-Frank Act of 2010 gives shareholders a non-binding vote on executive pay. Earlier this week at WorldatWork’s Total Rewards 2013 conference in Philadelphia, three executive-comp experts discussed its potential long-term effects.

“It’s going to lead to greater homogenization of pay,” said John England, managing partner of Pay Governance LLC. Say-on-pay “is causing some boards of directors to operate in a mode of ‘Let’s keep our heads down and stay under the radar screen.’ I’m not so sure that’s best for shareholders or companies in general.”

Companies in highly competitive sectors — such as technology and bioscience, for example — should be able to adapt their pay practices as they see fit in order to lure and retain the sought-after executive talent in those fields, he said.

Nevertheless, say-on-pay has also “been helpful in providing focus and strength to boards to clean up compensation practices that were not working,” said Steve Harris, managing director of Frederic W. Cook & Co. “I think boards are now at a point where they understand the implications of compensation decisions that may risk a backlash.”

Say-on-pay has also affected executive bonuses, said England. “I do believe it’s much more common now, thanks to say-on-pay, for bonuses to to be much more linked to performance,” he said. “In the past, executives received bonuses even when targets were missed, with the explanation that ‘Yeah, but the targets would’ve been hit had the market conditions not changed.’ Now, there’s no more ‘Yeah, but’ — when targets are missed, no bonus.”

The rise of say-on-pay has made communicating with shareholders a bigger imperative than ever, said England. “If you can influence your shareholders and tell them a story before they read the Institutional Shareholders Services report, that’s good. And it should not just be the HR and legal folks talking to shareholders — if you can get the board members talking with shareholders, that’s great.”

It can be very effective when a CEO meets with shareholders to “tell the company’s story,” said Harris. “Shareholder engagement needs to be done on an ongoing basis, not just when there’s a crisis,” he added. “Develop the relationship now and maintain it regularly; otherwise, you may not have these shareholders to turn to when you do have a crisis.”

Shareholders “love context,” said Blair Jones, managing partner of Semler Brossy Consulting Group. “They eat it right up. Develop a dialogue with your shareholders.”

The specter of a say-on-pay law that is actually binding — a number of European countries have taken, or are considering taking, this step — should keep boards and HR on their toes, said Harris. “I’m concerned about what is happening in Europe coming across the pond and infecting the U.S.,” he said. “Right now, I think Washington’s attention has shifted to jobs and growth, not executive pay. But we have to be careful. When CEO pay escalates sharply against average worker pay, it will inflame things.”

“I do believe we are just one or two scandals away from the prospect of a binding say-on-pay law … in this country,” said England.

Some Cool Philly-isms at Total Rewards

I witnessed two distinct ties to my City of Philadelphia just now while covering WorldatWork’s Total Rewards 2013 conference. Both occurred back-to-back, but it was the latter that convinced me it just might be worth sharing.

152178005--ben franklinOn leaving a session titled Tales from the Trenches: Managing Executive Performance Share Programs, I couldn’t help but notice the conference snack of choice — in fact, the sole snack for this session break — was an assortment of Tastycakes: krimpets, cupcakes, juniors, pies, etc.

For those conference-goers who appeared caught somewhere between bemused, confused and impressed, I proudly shared that the Tasty Baking Co., makers of the treats before them, hailed from this fine city (birthplace of both my sons, though I chose not to share that part with them). Anyway, nice touch, WorldatWork!!

Moments before, at the session mentioned above, moderator James C. Heim, managing director at Pearl Meyer & Partners, was serving as the go-between for Walter Cox, senior manager of executive compensation at Raytheon, and Carley Finkenthal, executive compensation leader at United Technologies Corp. The stories from both panelists on the decisions made and the lessons learned surrounding their performance-share and compensation programs was compelling and seeds for a story down the road — perhaps on our website, perhaps in HRE.

But it was Heim’s wrap-up witticisms that caught my ear and reminded me (and everyone else) what city we happened to be in. Using actual quotes from Philadelphia’s greatest claim to fame, Benjamin Franklin, Heim interpreted each one as if Franklin were alive and well and … well, moderating the panel himself. Here’s “Benjamin Franklin’s Roadmap for Success” as delivered by Heim and designed to make you a better executive-comp guru:

“When in doubt, don’t.” Do not implement a performance-share program if it is not administratively possible to do so.

“Be slow in choosing a friend, slower in changing.” Beware how far down you want to drive performance and be very careful in considering eligibility.

“Well done is better than well said.” Select performance metrics that are demonstrably correlated with long-term shareholder value creation. It’s better to have measures that drive value than measures that are easily explained.

“We must, indeed, all hang together or, most assuredly, we shall all hang separately.” Compare your proposal to industry prevalence data — is it different because it’s better or is it just different? And if it’s better, then don’t be afraid to follow your own lead.

“Being ignorant is not so much a shame as being unwilling to learn.” Model your proposed executive-compensation plan under a variety of scenarios — both proactive and reactive — to better understand the impact of your proposal across a variety of performance scenarios.

“How few there are who have courage enough to own their faults, or resolution enough to mend.” Revisit your plan periodically, and fix it when it needs fixing.

Remember, Heim said, “changing plans sends a powerful message” to the company and to the outside world that you’re on to something bigger and better, and carefully laying out new plans.

 

Walker’s Future at JCP?

It’s been well reported that CEO Ron Johnson is out at J.C. Penney Co., following the company’s dismal performance since he took over. (Since joining JCP, shares have plummeted more than 50 percent.)

540px-JCPenney_2012_logo.svgSo what does this mean for JCP’s chief talent officer, Dan Walker, who previously served as CTO at Apple during Johnson’s tenure there? Today’s Wall Street Journal is reporting sources as saying that “other Apple veterans at the top of Penney are likely to follow Mr. Johnson out the door.”

Among those “most vulnerable,” the article says, are COO Mike Kramer and Walker. (The Journal reports Kramer and Walker didn’t respond to requests for comment.)

The article also reports:

Many longtime Penney’s employees said they felt that new hires [from Apple] judged them or felt that they weren’t smart. Apple references were constant.”

In Johnson’s case, he’s not going to be leaving with the typical seven-figure package.  “Johnson opted not to enter into a termination pay agreement, according to the company’s latest proxy, which says the former CEO would be entitled only to any unpaid salary and $143,924 from a savings plan and the value of unused vacation,” according to the Journal.

Walker, however, would apparently do a bit better. Forbes reports that the CTO would see about $4 million were he to lose his job without cause.

Some of you may recall Walker topped our HR Elite list last year, with a total comp package of around $20 million.

 

Simplifying Executive Comp

Executives from the Center on Executive Compensation of the HR Policy Association headed a session at WorldatWork’s Total Rewards 2012 conference on Tuesday to offer some insights into best ways to structure pay-for-performance strategies — and how to best tell their story to investors.

Nearly all companies this year received approval on their say-on-pay votes — about 89 percent — but seven have failed so far, said Timothy Bartl, president of the Center, but he noted: “No company that failed in 2011 has failed in 2012.” That indicates the companies learned from the experience and were able to not only tell their stories better but to have better stories to tell.

Common reasons for a lack of support, he said, were the comparison of CEO pay to a company’s performance, poor pay practices, significant changes in the structure of CEO pay and poor disclosure.

Most companies just don’t explain their compensation strategies very well, said Charles Tharp, CEO of the Center. “The question is why do we overcomplicate it?”

One issue that can be misunderstood — and needs to be better communicated — is the issue of  “board discretion,” he said. Many investors see that as a way for companies to increase compensation, when, he says, it is more often used used to decrease it.

Bartl says it’s important to understand that the primary audience for executive-comp disclosures are the company’s largest institutional investors, proxy advisory firms (But Tharp notes, remember to design your comp strategies for your organization’s goals, not for the advisers, but “be sensitive to how they read these” and know their “hot spots.”), the media, regulators, competitors and employees.

The template for any effective pay summary, Bartl says, is to outline the company strategy, performance objectives and results, how pay varies with performance outcomes, actual pay vs. performance and changes going forward.

“Truly it’s two stories,” Tharp said. Companies need to validate they have a good executive comp strategy and they need to show what their plans are for the future. “It’s two pieces of the pie.”

 

Taking Back Bonuses Based on ‘Erroneous Data’

Following the $2 billion trading loss at JPMorgan Chase, the issue of clawbacks has “caught the public’s attention,” said Mike Melbinger, partner and global head of employee benefits and executive compensation, during a session at the WorldatWork conference.

And, he says, “When something catches fire like this, it’s almost always bad news.”

The current discussion of whether the lender will attempt to take back bonuses that were paid to executives may have a substantial impact because the U.S. Securities and Exchange Commission is still in the midst of writing regulations to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.

That law requires the implementation of clawback policies when bonuses or compensation paid to executive officers is based on “erroneous data,” Melbinger said. Previously, the law said companies “may” clawback such compensation; now it says they “must.”

“There is a history of … bad facts making bad law,” in this area, said Melbinger, noting that Dodd-Frank is “very short and open ended, so all of the real action will be in the rules.”

The issue requires organizations to revisit their pay-for-performance philosophy, said Daniel P. Moynihan, a principal at Hay Group who focuses on executive compensation. Companies should also consider providing documented statements of their clawback policies and key design attributes to employees.

Another issue, of course, is how to get that money back, he said. A $100,000 employee who got a $10,000 bonus may no longer even have that money anymore, so one potential solution is to have a policy that allows the company to recoup that money from future incentives.

Even more problematic, he said, will be trying to clawback bonuses from employees who no longer work at the company. Since clawbacks can go back three years, employers may want to have departing employees sign an acknowledgement that a clawback could be a possibility.

The fallout of the JPMorgan Chase case will be interesting, said Irv Becker, national practice leader on executive compensation at Hay Group.

Unlike some previous clawback dramas, this wasn’t an issue of a “rogue trader,” but was instead an investment strategy that “wasn’t sufficiently safeguarded or implemented.”