EXECUTIVE COMPENSATION PROGRAMS FOR ALL STAKEHOLDERS
fair · mission-oriented · competitive · compelling
Executive compensation practices are under fire from all sides. Sometimes complaints relate to a perception that the money paid to executives should be spent elsewhere – toward the services the organization provides, to reduce prices, or perhaps paid to other employees. While the practices may be necessary and competitive, it can be difficult to respond to a very fundamental complaint – “it’s just too much.”
ElementOne believes that executive compensation programs should be established and maintained for the betterment of the organization and achievement of its mission. Most executive compensation practices, particularly among small employers, are not inherently flawed and would not be termed “excessive.” Executive compensation does suffer from a perception problem – our view is that the best way to correct the perception problem is to create a program that is truly justifiable.
In the private sector, most executive compensation programs are designed to be competitive. Some owners might seek the best way to maximize compensation in order to reduce the impacts of double taxation in the “C” corporation environment. Other organizations might wish to pay more reasonable compensation to non-owner executives to maximize profits.
Family-owned businesses face additional challenges, as family members with various levels of involvement in company operations must feel they are compensated fairly. Professional services firms have to balance the need to provide competitive pay with the fees they can charge. They must also ensure that the benefits of firm ownership overcome the added stress of membership.
Among non-profits, where compensation is disclosed and generally available to the public, the issues are more complex. However, the same principles can be applied to satisfy virtually any audience or constituency, in the for-profit or not-for-profit environment. These “best practice” programs include:
- Philosophy – A board or owner approved “compensation philosophy”
- Oversight – An independent “compensation committee”
- Objectives – Meaningful job descriptions and formal performance objectives
- Value – Pay ranges based on the internal value of jobs and credible market data
- Review – A timely and transparent pay review process
- Wisdom – Use of an independent compensation consultant
ElementOne’s approach begins with the simple question: What are you trying to achieve? Our program designs are tied to your mission and values, the value of each job to your organization, the competitive environment and the very real concerns of your organization’s constituencies (owners, employees, customers, regulators, media).
An ElementOne-designed executive compensation program will stand up to scrutiny because it will be fair and competitive, well documented, and appropriate to the situation. ElementOne consultants have experience in the for-profit and not-for-profit sectors, in both the privately-held and publicly-traded environments, in most every industry. ElementOne is able to design and optimize executive compensation programs that deliver value and withstand scrutiny. ElementOne consultants are qualified to act as independent compensation consultants for not-for-profit organizations as well as publicly-traded companies.