Know the Public’s Breaking Points on Exec Pay

Fichthorn, who is vice president in the Philadelphia office of Hay Group, offers the following chart to clarify what employers want and how it compares to what the public wants.

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What Does the Future Hold for Executive Compensation and Benefits?

Looking at the results of the recent Hay Survey and his knowledge of the executive compensation landscape, Fichthorn sees the following:

• Executive benefit packages have not been altered significantly as a result of the economic recession.
• Organizations continue to offer a suite of benefits to executives to attract and retain their key talent.
• However, proxy disclosure requirements and public scrutiny have caused organizations to ask the question: Is this benefit critical to the execution of the executive’s job duties? Increasingly, if the answer is “No” then the benefit is eliminated.
• Organizations will continue to offer deferred compensation programs in order to be competitive, although the reduced participation in these programs may be an indication of uncertainty regarding future tax rates.

• Companies will seek greater “longer term” related compensation. The years 2010 and 2011 saw a number of companies increase the time horizons of incentives by extending vesting periods and implementing holding requirements. (Fichthorn is beginning to see some programs that take vesting/holding times beyond 3 to 4 years.)

• The public will continue to focus on issues like CEO succession (Apple, Hewlett-Packard, etc.), environmental impact (BP Petroleum), worker safety (Massey Energy), and data security (TJX), and that will cause many Boards to review their own oversight policies, resulting in more work by Boards and Committees in the short term and possible long-term changes in practices.

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