Executive compensation

Effective executive compensation balances long-term company performance and growth with the creation of shareholder value and appropriate rewards for individual executives. Successful compensation committees achieve this balance by developing pragmatic compensation policies, seeking innovative approaches to pay, reviewing the actual results, and maintaining an unwavering focus on the alignment between pay and performance.

These leading compensation committees frequently revisit and test their compensation philosophy to ensure that it is aligned with the corporate strategy. They focus on developing short-term and long-term incentives that drive performance. And they believe in and exercise discretion – upwards and downwards – to correct for irregularities that may emerge.

Well-crafted compensation plans ultimately depend on the flexibility and creativity of the compensation committee and their commitment to aligning pay and performance. Tapestry networks have generated insights into effective practices.

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Fall 2011: going back to basics

Members focused on topics such as peer groups and the role of an effective compensation committee chair. They were joined by guests to discuss two issues that affect most corporate directors – the Delaware Chancery Court and director liability.

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Four specific roles for audit committees in remuneration oversight

The increasing complexity of remuneration plans and disclosure requirements creates an opportunity for the remuneration committee to leverage the deep financial expertise of the audit committee in four specific areas of remuneration oversight.

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Annual target setting

Establishing annual performance targets is more art than science. But CCLN members have identified ways to align pay and performance, refining traditional target setting approaches and adopting emerging alternatives.

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The SEC, proxy advisers, and the compensation committee

Recent developments at the SEC and the most recent proxy season will impact companies in the future. CCLN members explored strategies for meeting these challenges and the role and influence of proxy advisers.

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Executive compensation in 2011: a hopeful look forward

Looking ahead to the first year of mandated say-on-pay for most US companies, members explored innovative compensation practices, talent retention, and management succession planning.

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Related links:

Compensation Committee Leadership Network

Related Issues

Board relationships with management

Succession planning