July 2, 2020
Bringing “Purpose” Into Pay
– Liz Dunshee
Over on TheCorporateCounsel.net, we blog quite a bit about corporate purpose and shareholder vs. stakeholder primacy. This “Corporate Board Member” article brings that discussion to executive pay, asking Semler Brossy’s Kathryn Neel how companies are looking at purpose-related executive pay goals in light of the Covid-19 crisis. Here’s part of her response:
It’s absolutely true that purpose is as front and center as ever. There’s risk, maybe more so now than ever, for any organization unable to develop a strong connection for employees, the communities it serves and customers to their company’s purpose. Once they’ve been alienated, it may be difficult to win them back.
Shifts in financial objectives include things like managing or cutting costs in a fair, balanced way; maintaining investment in critical R&D; and protecting the solvency of the business. These may all become higher priorities than typical measurements of sales and profits.
Incorporating purpose-related goals into executive pay and incentives may also mean giving greater prominence to some non-financial objectives and letting purpose lead the way. This could mean, for example, a greater focus on the quality of the products a company produces, the perceived level of customer service it provides or, perhaps, the measured impact its operations have on the environment.