NFP Compensation Insights | November 2023
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The Dynamic Process of Setting Executive Compensation
Executive pay continues to be a highly controversial topic as media reports tend to focus on egregious compensation packages to seemingly undeserving executives. While this is true in some cases, it is not the norm. And while pay for performance will always be a main factor tied to compensation, it’s not the be-all and end-all in justifying pay. Setting executive compensation is a dynamic process with many moving parts and elements that need to be considered.
This is the focus in this month’s edition of Compensation Insights. In our featured article, we highlight several key factors that should be taken into account when developing a proper executive pay package. We hope the information presented helps paint a clearer picture in understanding executive compensation. As always, don’t hesitate to reach out to NFPCC for expert assistance in developing an effective and defensible executive compensation plan.
By Kevin Kuschel
While not all pay is justifiable, executive compensation continues to be unnecessarily painted in a severely negative light. In the world of governance, it is a common topic which bands together the masses against the few, falsely highlighting inequity and greed. While several cases of this nature do exist, they are highly uncommon and are the exception, not the rule when it comes to executive compensation. There have been several examples in corporate America that cause us to shake our heads in disbelief.
How to Use Compensation Survey Data to Set Executive Pay
The compensation survey is the Oracle of Delphi of the compensation world. Compensation wisdom seekers look at all of the reported data when trying to find a definitive answer to the perennial question: “What’s the right mix of pay?”
Unfortunately, survey results do not provide categorical insights into the intricacies of executive compensation. Moreover, the amount of information may be overwhelming, especially if all of it isn’t applicable to all organizations.
The CEO Shareholder: Straightforward Rewards for Long-term Performance
To be successful, companies need to attract and reward leaders who create value over the long term, but executive remuneration often focuses on short- term targets. Shareholders and their advisors similarly focus on short-term returns as a primary metric in the evaluation of pay plans. Replacing these short term-oriented approaches with direct long-term stock ownership by executives is a better solution.
NEWS & UPDATES
Avoid Risks and Gain a Competitive Advantage in Your Industry
As you prepare for 2024, don’t miss this essential part of your budget planning – conduct a pay equity assessment and ensure you start the new year on the right foot! A pay equity analysis by NFPCC can identify any problematic issues in your compensation plans that could possibly have a negative effect or that are not in compliance with current pay equity regulations. NFPCC can conduct an honest and objective review of your pay structures to determine the possible existence of pay discrimination within your company and identify red flags so you can rectify before it happens.
Ensure compliance and boost retention with a pay equity analysis.
Learn more about our process.
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NFP’s latest Leave Management and HR Trend Report provides powerful insights for Employers on how to manage the various types of leave policies. Impactful information for HR leaders including the latest trends and best practices to help their organizations attract and retain top talent!
