Executive pay is a sore topic for many people. But while styling the perfect remuneration strategy is incredibly tricky, that doesn’t mean we shouldn’t try Nigel Mills goes back to basics with a framework for getting it right.
Few companies get to devise the perfect incentive scheme from scratch. A remuneration consultant is often brought in when a problem with an existing set-up gets out of hand. But a realistic plan for many is to aim for “as good as you can”.
But what do we mean by “remuneration strategy”? Simply put, it should be the breakdown between the various remuneration elements in the compensation packages for the executives and employees that make up the workforce of the business concerned. The diagram, above right, depicts the various components of an executive remuneration structure, although in most situations not all these components will be offered.
Those are the components – the easy bit. But what about the objectives for an executive remuneration strategy? That’s more complicated. It should:
This is an extract from the Finance & Management Magazine, Issue 205, December 2012.