Executive compensation is a hot and dynamic topic, of critical importance to shareholders who want transparency, performance accountability, and regulatory compliance. It’s dynamic because of new tax laws, pay fairness and pay ratio compliance requirements, as well as changing trends in compensation design.
These topics and more were addressed in the recent Executive Compensation Conference in New York City on November 8-9, called “The Executive Compensation Landscape – How The Present Will Inform The Future,” of which beqom was a sponsor. The event was hosted by The Conference Board, a think tank which aims to help leaders navigate the biggest issues facing business and better serve society.
Our takeaways from the event:
Executive Compensation Matters
At beqom, we always like to ask “why” first. Why should we care about executive compensation? Like all forms of incentive compensation, executive compensation is a tangible expression of what is important to the company, and what behaviors it wants to encourage. This was the point made by Steven Hall of Steven Hall & Partners. In addition to providing the incentives that motivate employees to accomplish the organization’s goals, it gives shareholders insight into company priorities and direction. In fact, if shareholders are given input into executive pay, it can help to avoid potential shareholder backlash related to excessive Director pay. And of course, there are other important risk and compliance considerations as well, such as those related to IRS regulations and the Dodd-Frank Act.
Long Term Incentive Strategies are Evolving Globally
Long Term Incentive (LTI) design will continue to evolve and adapt, according to Michael Marino of FW Cook, based on regulatory factors, stock market conditions, advisory strategies, and competitive talent pressures. Global companies face special challenges in implementing LTI programs across different geographies. There are trade-offs amongst the different approaches, whether trying to apply standard guidelines globally, tailoring the program to each country, or something in between. For US companies, the trend is away from applying standard US guidelines globally, as it can result in unnecessarily high costs, since LTI levels in the US may be higher than in other localities. But to develop guidelines specific to each region or country requires market analysis and having the right systems in place to track, monitor and administer the programs. So, it’s important to have both the right advice and the right technology.
Social Responsibility Matters to Shareholders
According to Steven Hall, one of the hottest topics for shareholders this proxy season has been in the area of Environmental, Social and Governance (ESG) concerns. This includes matters pertaining to diversity, sustainability, gender pay equality, and Corporate Social Responsibility (CSR). The notion that corporations should “serve a social purpose” is gaining hold, which is a positive sign in a sometimes troubling world. At beqom we have always said that “life is bigger than software” and we applaud the efforts of shareholders, executives, and employees who take responsibility for making the world a better place.
Pay is Becoming More Complex to Manage
beqom’s own Vismay Gada, Global Head of Customer Success at beqom, presented an overview of some of the practical challenges in managing global compensation gleaned from our recent survey and conversations with customers. He spoke on issues around how CEO pay is perceived by employees; challenges with pay complexity, frequency and transparency; market pricing challenges; and organizational readiness for future technologies. One of his key points was that compensation programs at all levels of the organization are becoming increasingly complex, owing to factors like global regulations, demographic needs, competition for talent, and mergers and acquisitions. As a result, more and more companies are personalizing compensation packages, which increases the scale of compensation components. This has made it increasingly challenging to design, administer and measure effectiveness of compensation programs to ensure their alignment with the overall HR or business strategy.
Learn more about managing global executive compensation
If you have questions about managing executive compensation and how technology can help meet the challenges, contact us.