A report from Pearl Meyer & Partners in collaboration with Directorship magazine, conducted a quick poll, asking board members, executives, and human resources professionals to weigh in on their how their companies make compensation decisions.
Thirty-nine percent of respondents who self-reported their overall executive compensation governance practices as “excellent” expressed different views than other respondents on other topics.
There was little difference in the responses of outside directors and firm employees on topics such as:
- The influence of the Committee, outside advisors and the CEO on the executive pay decision-making process (i.e., whether various constituencies had too much, too little, or an appropriate level of influence).
- Whether the Committee was provided with sufficient context and analysis to support effective decision-making.
- The relative importance of various considerations related to executive pay programs, such as pay-for-performance orientation, retention of executives, and risk/reward relationships.
Still, employees of the firm were more critical than outside directors regarding whether the appropriate time was allocated towards executive pay design, governance, and administrative activities.
Respondents estimated that over the last year, the average compensation committee member spend 25 to 50 hours on committee activities, including meeting preparation. Committee members who said they spent less than 50 hours believed their commitment level was “appropriate,” as opposed to committee members who spent more than 50 hours.
Overall, respondents felt positively about their strucutre (checks and balances, allocation of roles and responsibilties, etc.). The majority of respondents indicated the constituencies involved in executive pay decision-making each provide an appropiate level of input.