The Advisors' Blog

As Meredith blogged last week, compensation committees that connect the CEO compensation-setting process to the CEO performance review process are able to make and communicate pay decisions with better context. This Semler Brossy memo shares a sample annual review cycle that helps align these two important processes:

– Goal Presentation (March): The CEO presents annual goals to the Compensation Committee for alignment.

– Mid-Year Check-In (July): The CEO delivers a progress update against annual goals.

– Review Preview (October): The Compensation Committee finalizes assessment questions and processes — including target focus areas, a timeline for completion, and the self-review process — and shares a plan for the upcoming review, highlighting key focus areas such as leadership and strategic and financial direction.”

– CEO Self-Assessment (December): This assessment is shared with the full board as context for upcoming performance discussions.

– Active Review (January): Selected Compensation Committee members can divide up board interviews or send all board members an anonymous survey. In both cases, the Compensation Committee will meet to compile themes and key messages. The Compensation Committee refines those themes (sometimes with the help of a compensation consultant) and shares them with the full board for additional input.

– Results and Performance Review (February): The Board Chair and Compensation Committee Chair present the final review to the Compensation Committee and full board. The committee considers results in the context of next year’s pay decisions. Selected board members, such as the Board Chair and Compensation Chair, schedule and share findings with the CEO, then report back to the full board on how the feedback was received and any necessary follow-up. Ideally, the CEO would also use the next meeting to reflect on the feedback and discuss how it will inform the goals for the coming year.

While it is not included in the above calendar, it can be useful to also schedule a follow-up conversation with the CEO after their performance review. Doing so gives them time to reflect on the feedback and ask questions. The board may also consider setting aside time for its own review of the cycle to determine whether any changes for the following year are warranted.

The memo also dives into the pros and cons of various methods for collecting feedback and offers tips for delivering (sometimes difficult) messages in a way that your CEO can accept and positively act on it. Members can access more resources on these topics in our “Compensation Committees” and “Determining How Much Pay is Appropriate” Practice Areas.

– Liz Dunshee