May 15, 2020

Agenda – Boards Face ‘Real Distaste’ on Pay Discretion

By Melissa J. Anderson

Performance goals set early this year by the boards of calendar-year companies may be largely irrelevant since the Covid-19 pandemic set the stock market spiraling and companies scrambling. As a result, boards may find it difficult to motivate and retain some executives, compensation consultants and attorneys warn.

Although it’s still early in the year, comp committee members should start thinking about whether to issue discretionary awards to key executives at year-end or adjust performance metrics to make up some compensation shortfall, sources say.

Robin Ferracone, CEO of Farient Advisors and a director on the board of Trupanion, says she sees compensation committees falling into three buckets in these conversations. On one end of the spectrum, she says, are the companies that want to go “by the book,” and stick to the metrics they laid out at the beginning of the year. On the other end are those saying, “Let’s figure out what we can do. We want the people working hard to feel good, and we may need to work outside the plans to do that.”

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