September 6, 2018
How Often to Review Pay Programs?
– Liz Dunshee
This article from Meridian Compensation Partners makes the case for building “preventative care” into the compensation committee’s calendar & agendas. The idea is that companies can avoid major overhauls by reviewing short- & long-term programs every 2-3 years – even in the absence of a low say-on-pay or changes to management & compensation committee members. Here are six tasks to include in this regular review:
1. Review market data on program design in order to understand competitive practices & describe reasons that the company’s programs differ.
2. Evaluate whether annual bonus metrics remain aligned with business strategy.
3. Consider the goal-setting process to ensure that it yields goals that are appropriately rigorous.
4. Determine whether the mix of long-term awards remains aligned with business objectives – e.g. retention, pay-for-performance.
5. Examine termination provisions to make sure they’re appropriate & consistent among the company’s various agreements & plans.
6. Evaluate pay-for-performance to identify and fix any misalignment.