Executive pay is linked to recruiting, engagement and performance management, thus the chief talent officer is in a perfect position to develop a process for sound decision making. By partnering with management, boards and compensation committee members, talent leaders can build unassailable compensation designs.
Outraged shareholders, legislators, regulators, investor activists and the media decry the disconnect between corporate performance results and executive compensation payouts. These angry voices question the effectiveness of current executive pay decision-making processes and protocols. They demand greatly enhanced accountability for executive pay decisions by the board, the compensation committee and corporate leadership.
Because of these demands, an intense spotlight has focused on pay decision making. Tensions are high. Boards, compensation committees and corporate leadership recognize effective decision making is not just about responding to external demands for "say on pay." Pay decision accountability has to balance external expectations with the need to reward the unique executive performance standards companies require. Every company must establish a process and protocols to ensure this balance.
The chief talent officer (CTO) is well-positioned to provide leadership for a process and protocol that supports pay accountability. The CTO`s role requires an expansive understanding of how executive pay decisions are integrated with the organization`s talent attraction, engagement, development and individual executive performance management imperatives. As a trusted advisor to corporate leadership, the board and the compensation committee, the CTO`s candid insights on human resource management already are valued. No one else, insider or outside the organization, is positioned at the key intersection of pay strategy, pay design and pay decision impact. CTOs who successfully partner with corporate leaders, the board and the compensation committee to build unassailable compensation designs and decision-making protocols often embrace four specific actions.
Action No. 1
Develop an informed strategic perspective on pay and pay economics for the company. The CTO traditionally is the steward of the executive value proposition (EVP) and its accompanying value exchange. The CTO is expected to see talent and rewards through a lens that says: Our organization must provide the right EVP to attract, engage and retain talent to create the sustainable business outcomes our investors expect.
Today`s CTOs also must understand the strategic and economic context for pay at the company - the facts and the numbers. As the CTO of one of the nation`s largest Fortune 50 companies with global operations said, "All business is driven by numbers. You can talk about `drivers of business` all you want, but unless you understand the intricacies of the numbers, you won`t have the impact you should."
To develop the requisite strategic perspective on pay and pay economics, CTOs can adapt and expand checklists for corporate directors, CFOs and legal counsel. Collaborating with their C-suite colleagues, they can research and develop a detailed, personal response to each item. Here is an example of a checklist that considers company and business issues and the corresponding pay implications:
1. Identity
What is the "elevator pitch" that succinctly describes the company`s business, strategy and differentiating factors?
2. Threats
What are the primary risks to the company`s sustainable, profitable growth?
3. Peers
Who are the company`s competitors in each industry sector? How do industry analysts assess the company`s performance relative to its peers?
4. Revenue and expense
What are the company`s main revenue and expense drivers? What is the prognosis for the current year and the next two to three years?
5. Shareholders
Who are the largest shareholders? What are their investment objectives? To what extent are their decisions influenced by institutional advisors?
6. Pay for performance
How does the annual "total spend" for the top five executives` compensation compare with that of peers in aggregate and relative to performance achieved? How have industry analysts and investor activists assessed the pay-for-performance relationship of the company`s executive compensation plans? Have any poor pay practices been cited by institutional advisors?
A thorough understanding of these items will align the CTO with the context in which pay decisions by corporate leaders, the board and the compensation committee are made and evaluated.
Source:
http://harvinderjit.multiply.com
Outraged shareholders, legislators, regulators, investor activists and the media decry the disconnect between corporate performance results and executive compensation payouts. These angry voices question the effectiveness of current executive pay decision-making processes and protocols. They demand greatly enhanced accountability for executive pay decisions by the board, the compensation committee and corporate leadership.
Because of these demands, an intense spotlight has focused on pay decision making. Tensions are high. Boards, compensation committees and corporate leadership recognize effective decision making is not just about responding to external demands for "say on pay." Pay decision accountability has to balance external expectations with the need to reward the unique executive performance standards companies require. Every company must establish a process and protocols to ensure this balance.
The chief talent officer (CTO) is well-positioned to provide leadership for a process and protocol that supports pay accountability. The CTO`s role requires an expansive understanding of how executive pay decisions are integrated with the organization`s talent attraction, engagement, development and individual executive performance management imperatives. As a trusted advisor to corporate leadership, the board and the compensation committee, the CTO`s candid insights on human resource management already are valued. No one else, insider or outside the organization, is positioned at the key intersection of pay strategy, pay design and pay decision impact. CTOs who successfully partner with corporate leaders, the board and the compensation committee to build unassailable compensation designs and decision-making protocols often embrace four specific actions.
Action No. 1
Develop an informed strategic perspective on pay and pay economics for the company. The CTO traditionally is the steward of the executive value proposition (EVP) and its accompanying value exchange. The CTO is expected to see talent and rewards through a lens that says: Our organization must provide the right EVP to attract, engage and retain talent to create the sustainable business outcomes our investors expect.
Today`s CTOs also must understand the strategic and economic context for pay at the company - the facts and the numbers. As the CTO of one of the nation`s largest Fortune 50 companies with global operations said, "All business is driven by numbers. You can talk about `drivers of business` all you want, but unless you understand the intricacies of the numbers, you won`t have the impact you should."
To develop the requisite strategic perspective on pay and pay economics, CTOs can adapt and expand checklists for corporate directors, CFOs and legal counsel. Collaborating with their C-suite colleagues, they can research and develop a detailed, personal response to each item. Here is an example of a checklist that considers company and business issues and the corresponding pay implications:
1. Identity
What is the "elevator pitch" that succinctly describes the company`s business, strategy and differentiating factors?
2. Threats
What are the primary risks to the company`s sustainable, profitable growth?
3. Peers
Who are the company`s competitors in each industry sector? How do industry analysts assess the company`s performance relative to its peers?
4. Revenue and expense
What are the company`s main revenue and expense drivers? What is the prognosis for the current year and the next two to three years?
5. Shareholders
Who are the largest shareholders? What are their investment objectives? To what extent are their decisions influenced by institutional advisors?
6. Pay for performance
How does the annual "total spend" for the top five executives` compensation compare with that of peers in aggregate and relative to performance achieved? How have industry analysts and investor activists assessed the pay-for-performance relationship of the company`s executive compensation plans? Have any poor pay practices been cited by institutional advisors?
A thorough understanding of these items will align the CTO with the context in which pay decisions by corporate leaders, the board and the compensation committee are made and evaluated.
Source:
http://harvinderjit.multiply.com
