Rick Smith, senior vice president and executive compensation practice leader at Sibson Consulting, a division of Segal, says companies are struggling to ensure the wording in the proxy makes it clear that the current year's grants vest over a period of time.

Smith suggests compensation will remain a hot topic. As banks see business improve, "they are paying some big bonuses," he says. "It's making Washington nuts." Congress will likely vote later this year to require all public companies to give shareholders a non-binding vote on executive compensation, the so-called say on pay. Smith says that in anticipation of such a vote, companies are working to educate shareholders on what they pay top executives and why.

CASH MANAGEMENT
Polishing Up that Crystal Ball For Better Cash Flow Forecasts

At a time when every penny counts, companies are having a hard time keeping track of their coin. Only about a fifth of companies can predict cash flows over a two- to three-month span within 5% accuracy, according to a study the Hackett Group conducted recently with the National Association of Corporate Treasurers.

Of course, as customers pay more slowly amid the recession, it becomes harder to predict cash flow. The study shows almost half of the more than 100 companies surveyed have between 11% and 30% of their receivables past due. But slowing payments coupled with companies' scanty access to credit means having a firm grip on what cash will be coming in is more important than ever.

The information needed to forecast cash flow comes from not just the finance department, though, but such far-flung empires as sales and procurement. "Treasury and finance quite often know what the issues are, but to achieve the results, they need to bring along other parts of the company that they don't necessarily manage," says Stephen McCardell, a principal at Hackett subsidiary REL. For example, the outlook on payments due the company involves not just collecting receivables, but the terms the sales force quoted to clients in the first place, he says. .

Finance's effort to exercise leadership will go more smoothly if top executives adopt a focus on cash. And getting the entire company to focus on cash will increasingly involve making it part of pay plans, says Michel Janssen, Hackett's director of research. The survey shows that 15% of companies currently link incentive compensation to forecasting accuracy, but Janssen predicts that percentage will be higher by year-end. "The cash culture is starting to take much more of a foothold in organizations," he says.

Technology is another hurdle. The survey shows a heavy reliance on spreadsheets to put together forecasts. "There is no technology silver bullet," McCardell says, noting that the information involved in cash flow forecasts resides in a lot of different systems.

RETIREMENT
401(k)s Shifting To Stocks

As U.S. stock markets rallied during the second quarter, employees who participate in 401(k) plans moved almost $800 million of their assets out of fixed-income investments and into equities, according to the 401(k) Index maintained by benefits consultancy Hewitt Associates.

Amid the enthusiasm for stocks, stable value funds were the biggest loser, with almost $790 million of outflows during the quarter. Pam Hess, Hewitt's director of retirement research, says the movement of money out of stable value reverses the sizable flight to quality into that type of fund that occurred amid last year's market turmoil. "Over the past year, the most money went into stable value," she says.

Pre-mixed funds, like balanced funds and target-date funds, saw the biggest inflows during the second quarter, at $208 million, followed by large-cap funds at $205 million.

The average equity allocation among 401(k) participants jumped to 53.6% at the end of June, up from 49% at the end of March, according to Hewitt.

TECHNOLOGY
First Data Gets Citi's Lockbox

Citi is outsourcing its lockbox operations in the United States to First Data, the big payments processing company, the bank says. Citi's move echoes J.P. Morgan Treasury Services' announcement in April that it was outsourcing lockbox operations to 3i Infotech.

As consumers write fewer checks, retail lockbox volumes are shrinking, says Bob Meara, a senior analyst at financial services consultancy Celent. That's making the business increasingly competitive, which is leading to consolidation.

"I don't think this will be the last bank we see doing this, particularly on the retail side," Meara says. "This work will be in the hands of fewer and fewer processors."

Meara notes that wholesale lockbox volumes have held up better than retail since checks still dominate business-to-business payments.

While J.P. Morgan outsourced only its retail lockbox business, Citi's deal with First Data covers the processing for its wholesale, retail and "wholetail" lockbox businesses. First Data will sublease Citi's facilities and offer jobs to its lockbox workers. Citi will remain the point of contact for customers.

"I suspect that Citi concluded this is a lower-cost, long-term play than if they had maintained their own operations," says Meara, adding that Citi's customers also get access to First Data's broader geographic footprint.