Long-term incentive design in compensation management

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

Concerns in the design of executive compensation management programs

We’re very concerned about things in compensation management such as, how do we want to – how much of these awards do we want to pay in the form of cash? And how much do we want to pay in the form of equity? How do we want to balance those two?

Multiple answers to design problems in compensation management design

The answer to that maybe based on items, based on the company. What kind of focus do you want to give people on the equity versus business criteria? And also what is your population that’s going to enthuse your population – your executive population? Are they currently overloaded with stock and therefore they’d like some cash to be able to spend it on second homes or boats or college or whatever it is they may need. And if so you may find the plan that would payout some cash might be more appealing to people.

Do you want to use performance vesting or time vesting in your compensation management program?

If you’re a public company and you’re subject to some of these shareholder votes, you’re going to find that performance vesting is much more favorable to shareholders and they appreciate those kinds of things. If you’re in a private company, you may find that you have onus that say, “I’d like to focus people on performing before I give them many things.” So that’s the argument for performance in compensation management. The issue that comes in there is if you aren’t achieving the performance goals, what you find is that you don’t have a lot of holding power on executives. And if all that retention element that we spoke about before which is mainly accomplished through long-term compensation may be missing. And the way we accomplish that is usually through time vesting because it’s something that you’re certainly going to get if you stay with the company.

Edited remarks from the Rapid Learning Institute webinar-Executive Compensation: What Worked and What’s Fair by Steve Hall

Leave a Reply


Request a Free Demo

We'd love to show you how this industry-leading training system can help you develop your team. Please fill out this quick form or give us a call at 877-792-2172 to schedule your one-on-one demo with a Rapid Learning Specialist.