October 15, 2020
Outside Advisors Critical for Comp Committees
– Lynn Jokela
For compensation committees, getting outside advice can be critical. A Pillsbury Winthrop memo discusses the value of collaboration between executive compensation counsel and compensation consultants, especially when developing and approving compensation arrangements. As much as it can be a hassle to coordinate busy schedules, the memo says taking steps to ensure both the compensation consultant and executive compensation counsel are present for committee meetings can have an immediate impact. The memo walks through several examples to highlight the importance of compensation committees receiving input from both advisers as part of the committee’s decision-making process. As one example, the memo discusses advance modeling of possible compensation decisions:
Having executive compensation counsel collaborate with a compensation consultant to model how different executive compensation decisions will be disclosed in a Form 8-K filing or in the proxy statement, specifically the CD&A, prior to approval is a great way for a compensation committee to screen out decisions that may garner scant support. This exercise eliminates the headache of drafting and defending poor or rushed executive compensation decisions at the end of the year after those decisions were made. Additionally, with the early exposure of gaps in potential compensation decisions, the two advisors can then work together to prepare an executive compensation decision that will receive better support.