External pressures to conform to generic pay standards and so-called “best practices” are undermining the ability of Compensation Committees to create differentiated compensation strategies that are grounded in their own company’s business needs and priorities. That’s bad for investors and employees alike.
Pearl Meyer & Partners’ white paper, The 2013 Compensation Committee Agenda: Go Beyond, gives practical guidance for five key areas where – by thinking outside the box of generic pay designs – Directors can design and communicate performance-focused programs that are right for their company.
- Buck Trends and “Best Practices” in Favor of Business-Based Plans. Compensation should reflect the needs of the business. Our goal is to build great companies. If we perform, Say on Pay will take care of itself.
- Link Realizable Pay to Compensation Decision-Making. Understanding pay targets is important, but analyzing actual pay relative to actual performance gives Committees real, actionable information.
- Spend More Time on the Performance Side of the Equation. There are two sides to the pay-for-performance equation. It’s critical that we get both sides “right.”
- Apply a New Lens to Equity Plan Design and Award Values. The LTI vehicles we use and the size of awards we make need to reflect performance and retention strategies.
- Customize Your Risk/Reward Profile to Your Business. Compensation plans should evolve to reflect the business risks and HR needs of companies at different life-cycle stages.