The Tide is Turning on “Cookie Cutter” Compensation Plans
Dear Friend,
This past quarter, I had an opportunity to participate in three National Association of Corporate Directors (NACD) programs around the country, the most recent of which was with the NACD Carolinas Chapter in Charlotte, NC. My colleague Dayna Harris and I facilitated the “Dinner, Directors and Discussion (3D)” peer exchange for 20 Charlotte-area public company directors and CHROs responsible for executive compensation, corporate governance and talent. The evening’s discussion was framed around Compensation Committees and CHROs:A Powerful Alliance to Build Tomorrow’s Company Today, with the primary focus on the following themes:
Winning the war for talent
Preparing for the organization of the future (recognizing the constraints of today)
Daring to be different on incentive plan design
While all topics promoted lively discussion, the last theme – daring to be different – is one I feel deserves particular attention in this newsletter. Increasingly, boards are recognizing that every company needs to approach compensation in a way that is appropriate for their specific company to properly incentivize and retain executives versus a cookie cutter, check-the-box application.
I hope you enjoy the articles below, and please look for Directorship Magazine articles and our Forbes.com blog for more detailed information on recent NACD programs.
How much does Amazon’s unique compensation structure contribute to its success? In this Forbes.com article, I analyze Amazon’s distinctive pay approach, the reasoning behind it and why it is an example of the payoffs of “daring to be different.”
At Leading Minds of Compensation – East, I, along with several other compensation leaders, discussed how the new generation of executives require both complete, compelling and defensible pay packages. The world of executive compensation is evolving and this is a different approach than the past generations of old guard leaders may have taken.
Companies that reward their CEOs with comparatively high compensation are often publicly criticized. But what are the reasons behind boards’ pay decisions? In this Fortune article, Farient Partner Marc Hodak offers insights into Disney’s controversial pay package for CEO Bob Iger.
Though the popular narrative remains fixated on “excessive” CEO pay, there are wide discrepancies in compensation from company to company, and industry to industry. This Wall Street Journal article, featuring Farient Partner Dayna Harris, explains why companies’ pay ratios and median pay fluctuate so much.
In a plan to encourage longer-term strategic thinking at the executive level, Japan’s largest car maker is moving away from paying its leaders almost entirely in cash to using stock for a portion of pay.
Following an unusual rejection of the snack giant’s executive pay packages last year, Mondelez International is shifting its compensation plan to emphasize performance-based recruitment compensation and adding commitments to performance-based vesting.
Please join Farient Advisors in Denver, CO, July 28-30 at the WorldatWork Executive Compensation Forum. Valerie Danna, Head of People, Trupanion (TRUP), a pet insurance provider, and I will lead a session entitled, Dare to Be Different: Strategic Alignment in Executive Compensation. This session looks at what companies do wrong and what they do right. We will explore how proxy advisors contributed to homogenized executive compensation plans over the past several years and why this is changing.
Robin Ferracone is founder and chief executive officer of Farient Advisors. With more than 30 years of consulting experience, Ferracone advises clients on aligning compensation to business and organizational strategy, performance measurement and goal setting. She is the author of “Fair Pay Fair Play: Aligning Executive Performance and Pay,” and currently serves on the boards of Trupanion, WildAid and Women on Boards 2020. She is a member of Women Corporate Directors and Committee of 200.Learn more about Robin.
Farient Advisors, 654 Madison Avenue, Suite 1209, New York, NY 10065
