In this video, Pearl Meyer Managing Director Mike Esser outlines the compensation governance challenges driven by today’s Say-on-Pay environment and an overreliance on market practices. He offers four clear actions that Compensation Committees can take to regain the governance high ground by ensuring a well-designed compensation program flows from and supports the business strategy and leadership objectives of the organization.
Transcript
"In today's say-on-pay environment, all too often compensation programs are designed to meet shareholder advisory firm tests or are tuned to market practices without considering what's appropriate for the company. We think that constitutes bad compensation governance. So how do we get to good governance for compensation? We believe that well-designed compensation programs flow from and support the business strategy and talent development needs of the organization. How do we break out of the trend towards the one-size-fits all approach? We recommend four actions.
One, take a different viewpoint of external viewpoints and market practices in general. Have them inform, but not dictate compensation program design. Second, recognize that compensation plans, incentive plans in particular, necessarily bear management's imprint. Three, exercise business judgment when it comes to compensation programs. Discretion is not a bad word. And fourth, be transparent with respect to the intent and the outcomes of the compensation program design."
