Compensation Committee Process

The Issue

Good processes not only lead to better decisions, but also a better record that the Compensation Committee engaged in the appropriate discussions. Yet, even the most basic processes often are steeped in tradition and culture, and can be difficult to change.  Usually, Compensation Committee members know when the process is totally broken, but it is more difficult to pinpoint how processes can be merely improved. How can and should your Compensation Consultant help ensure your company is best in class when it comes to process?

Farient’s Point of View

We believe good compensation processes lead to better decisions. What are the characteristics of a good process? Planned, informed (i.e., fact based) and collaborative. While collaborative doesn’t mean that everyone gets their way, it does mean that the right inputs were gathered and heard. Why is this important? Because when the right decisions are made using various fact-based inputs and opinions, they are defensible and they stick.

How Farient Can Help

From the moment we engage with our continuity clients, we follow our own disciplined processes and also review the processes of our clients to make improvements, if warranted. As a way to formally engage with our clients, we set up key process materials, including an Annual Compensation Planning Calendar; a Roles Matrix, in which we outline the roles of the board, the Compensation Committee, management and the consultant; and an Executive Top Sheet^TM, which contains a one-page summary of the client’s compensation strategy, peer group, incentive plans and share usage. We also calendar all key dates, including Compensation Committee meetings, and reviews with management and the Compensation Committee Chair. For those we serve on a project basis, we adhere to disciplined work plans and deliver accordingly. We encourage you to follow your instincts. If you feel your process isn’t quite right, it may be time to talk to Farient.