Example-based executive leadership and incentive compensation plans

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

Executives need to lead by example with cuts in both incentive compensation plans and base pay

Certainly the questions arise about executive salary, that’s base pay. What about bonuses and incentive compensation plans and those things? The trend that we’re seeing is towards these reductions. Some extreme examples are going down to a dollar a year salary.

The reasons behind the reduction in executive incentive compensation plans
Where are the reasons for this? Obviously, economic conditions are the key driver of those. But realistically, as we try to dig into the data a little deeper and look not just at the economy, if we’re going to as a CEO or as an executive team ask our staff to take pay cuts, potentially ask a union to make us significant concessions, you need to lead by example. We’re willing to do our part as a management team.

There’s also certainly a pay for performance consideration in incentive compensation plans. We’re seeing that not just on executive compensation but across the broad spectrum of employees where a lot of organizations are saying, “You know what, the poor economy is forcing us to make decisions that we should have made five years ago. You know, we can’t afford to carry some of these people anymore.”

In this poor economy, we may be forced to look at executive compensation harder. We may be forced to get rid of some of our poor performers. The economy is used as a reason for making some of those changes.
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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