Compensation committees are an appointed group of individuals that have corporate governance over compensation and benefit programs for executives and company officers. The committee is typically chaired by the CEO and composed of both inside management directors and outside independent directors. Their work includes determining the types of pay plans, the amount of compensation and the performance measures that the executives will be upheld to in regards to the calculation of incentives.
Compensation committees play a strategic role within the business by aligning company performance and executive rewards. Individuals within the committee must create a compressive program, with the aid of compensation surveys and consultants, which motivates executives to achieve the overall goals and objectives of the company within their own positions. High performance is best achieved through the implementation of a strategic merit pay program, short and long term incentive plans including stock awards, retirement, and executive perquisites.
In addition to strategy, compensation committees also play an administrative role. They are responsible for completing studies, evaluating alternative compensation plans and outlining the compensation package. Compensation Committees often times have oversight over complex human resources issues such as equal opportunity and pay, executive succession planning, and director evaluation issues. How much oversight Compensation Committee has depends on many factors including composition of the committee, management engagement, corporate culture, and regulatory environment.
Over the years, executive compensation has become a rather large issue in the media. There are numerous media watchdogs that have the ability to relay information to the public more quickly than ever before. In addition to increased media attention, executive compensation has also seen tighter government regulation. Committees must accurately address the expectations of board members and investors. To keep investors happy, the executives must stay motivated to achieve the established business goals and objectives. Therefore, committees have an extremely important role in designing merit pay programs.
An effective executive compensation program will include performance evaluation that is both measurable and well communicated. The rewards for delivering results need to be meaningful to executives and competitive with what other businesses in the marketplace are offering. At WageWatch, our Executive Compensation Survey and Compensation Consultants can you’re your Compensation Committee to establish a budget for salary changes, benefits and merit pay, including any bonuses or incentives. We have the experience and capability to collect data for compensation surveys, salary reports and other studies in a wide variety of industries. To learn more about how our compensation surveys can help you to develop effective and competitive compensation strategy, please call WageWatch at 888-330-9246 or contact us online.