The ever topical and misunderstood world of executive remuneration continues to baffle the best business brains. Many Board members are enticed into joining businesses, arriving with a fanfare only to leave after a relatively short tenure, hosed down with cash and seemingly rewarded for failure. But it is not just large corporate business that falls into this circular trap. Smaller businesses make the same mistakes, maybe on a smaller scale but with the same relative impact on their business.
Surely not that simple then?
Perhaps not, but some basic principles would not go amiss.
- By utilising a total reward model, executives can be remunerated in a flexible way to suit their circumstances and within a measurable cost to the business.
- Bonus plans should be aligned to business goals, affordability and the contribution made by the recipient.
- Long Term Incentive Plans must use performance metrics that are relevant, measurable and stable enough not to be manipulated
- All plans must be designed in a responsible way, with suitable governance provisions to deflect any accusation of fat cat behaviours and cronyism
No matter what size your business the impact of managing these issues badly can have far reaching consequences. I remember being told of an instance where the owners of a business briefed their 50 staff about poor trading and the need for austerity in all areas, including a freeze on pay rises and overtime, before turning up the next week with new Porsches, complete with sequential registration numbers. Every action has a consequence and in remuneration terms, ill thought out strategy can leave a contractual nightmare lasting several years, adverse publicity and low morale.
If you need help in reviewing your executive remuneration strategy call Mark Exley on 01604 763494 or fill in the contact form.