December 16, 2019
CII’s Policy Overhaul: The Conversation Continues
– Lynn Jokela
A few months ago, Liz blogged about CII’s overhaul of its executive compensation policy – urging companies to reduce complexity of their incentive plans. Predictably, the suggestion that some companies may benefit from shifting away from metric-based incentives has generated a lot of discussion.
A recent memo from Pay Governance lays out a point-by-point response to CII’s policy, asserting that the practices outlined in the policy would weaken the link between pay & performance – against the wishes of many shareholders – and cautioning against oversimplification. This excerpt touches on one point of agreement, though:
We argue that companies must do a better job of communicating their incentive plan designs to participants and the investor community, explaining how particular plans are aligned with business strategy to improve company performance and influence executives to execute business plans that will create long-term shareholder value.