Athena In Action November 13, 2019

Salon Highlights: Demystifying Compensation Planning at the Board Level

By The Athena Alliance

Athena’s Insights on Board Compensation virtual salon hosted by Christine Heckart taught members the basics of director compensation, from what they should expect when considering a board offer to the structure and function of the compensation committee. Read our key takeaways below and view the full recording in the Member Resource Library (members only).

  • Know what the herd is doing. “You want to be careful and very thoughtful if you break away from the norm in some way. It’s good to know what the herd is doing. We challenge [the committee] to tell us what is trending. What’s early, what’s anomalous, what’s coming on the horizon that we should be aware of? Maybe you’ve seen it in a couple of companies and you think it’s a good practice or a red flag.”
  • Get clear on culture and philosophy. “With the management team, you can be really clear on what your philosophy is if you are clear on your strategies and objectives. Design culture, programs, rewards, etc. that are deeply aligned with those things, and even if you are away from the herd you will have that [alignment] in the proxy statement. You just have to show a good rational.”
  • Ask the right questions to understand the culture. “It’s important to ask good questions when you have employees in front of you who may be on guard. Help me understand how you experience the culture, are there places where you see what we desire as a culture and what you experience day to day, is there disconnect anywhere we should be looking to improve? Ask questions and probe for alignment. Listen for what they’re not saying… Are they being careful with their wording? Those are the red flags you’re looking for.”
  • Think about the talent mix of your committee. “Think about the talent mix the committee is trying to bring in to ensure it can take a broader role. Boards are being held more accountable for culture and the human factors of business. If you have diversity on the board, you’ll reflect that diversity on the compensation committee. A lot of boards don’t have a diversity of industry, background, philosophy, title… all of that counts as well.”
  • Build a culture of constant communication and trust. “Any number of targets can immediately erode the trust between the board and management team, and when that happens it can take years or decades to repair. As a board, you can get very misaligned either with your internal or external stakeholders… [when talking about] severance packages, guarantees, perks, excessive pay packages. How you deal with them is very important because you have to get in alignment.”

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