Caps on Pay Elements & Total Compensation

Fortunately, there should be ample opportunity for compensation committees to change and renegotiate a past practice. These opportunities exist each time any aspect or component of a CEO’s compensation is considered. For example, to be awarded a new option or restricted stock grant, the CEO could agree to fixes to past and outstanding awards. This could be accomplished by new provisions that cap the executive can earn under specific pay elements or the total pay package.

The advantage of caps is that it provides a safety net for compensation committees that might not understand complex pay arrangements – or even if they think they do, but something sneaks up on them. As a result, we recommend that caps always be used in combination with other techniques to ensure that total pay never reach unacceptable levels.

Here is information on other ways to deal with rolling back compensation:

1. Rolling Back Compensation Practice Area

 
2. Internal Pay Equity Methodologies Practice Area

 
3. Clawback Provisions Practice Area

 
4. Hold Until Retirement Provisions Practice Area