Data validity in executive compensation systems

by on June 30, 2009 · 0 Comment POSTED IN: HR Info Center

Effective comparison of executive compensation systems needs good data

There’s been increased scrutiny of data and pure analysis from shareholders directly through institutional shareholder services or ISS. Institutional investors, analysts, they’re all looking very closely at executive compensation systems data. Compensation analysis is partially an art and partially a science. And they’re starting to look very closely at the art side of the equation in terms of how are we identifying those peers.

Going back to Kevin’s example earlier of Albert Pujols and Alex Rodriquez, you know, is that the appropriate comparison or is there another baseball player that we should be throwing in that makes it a more appropriate comparison? And so they’re starting to look very closely at not only the art side of that but in a pretty fine level of detail.

Reliable data and peer group selection impact on comparisons of executive compensation systems
Clearly, it’s important to use reliable valid data with executive compensation systems. As we see and work with clients, there’s a lot of garbage out there. We’ve all come across some of the free data on the internet as it relates to salaries. It’s worth what you pay for there or possibly even less. So the quality of data is particularly important.

And the selection of peer groups can have a dramatic impact on the end result of compensation. Certainly, they should be similar size, similar industry but there can be performance considerations. And it’s important not to cherry-pick peers based on driving the results.

Edited remarks from the Rapid Learning Institute webinar: “Executive Compensation Trends: New Benchmarks & Changing Regulations” by Edward Rataj and Kevin Nussbaum

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