Pay and Performance Alignmment

We Wrote the Book on Pay and Performance Alignment

Farient Advisors has always advocated that pay and performance be aligned and disclosed. In fact, at the onset of the Dodd-Frank legislation, our CEO published the definitive work on pay and performance alignment. That book, Fair Pay Fair Play, is particularly relevant today as the compensation of executives is increasingly linked to stakeholder incentives.

Highly Paid Doesn’t Mean Over Paid

Over the years, we have found that being highly paid doesn’t always mean overpaid. In fact, it’s often not the level of pay at issue; it’s a lack of alignment. When pay and performance move with one another, pay is reasonable relative to the size, industry, and results of the company.

This service includes:

Peer group development and review

We take peer group development to a new level by not only evaluating size and industry, but also conducting an in-depth analysis of the client’s business model to determine potential peers.

Benchmarking, pay levels, pay practices, and equity dilution

Market pay provides input into but does not dictate pay decisions. Our analysis goes beyond the data to provide a forward-looking view of pay based on multiple inputs including market dynamics.

Corporate performance benchmarking

Pay and performance are two sides of the same coin. To that end, we benchmark performance including market, financial, and ESG factors to assess program design, pay leverage, and realizable pay.

Assessment of performance and pay alignment

Using Farient’s proprietary Performance Alignment Reports as well as other diagnostic tools, we assess the strength of the relationship between pay and performance to inform pay program design and actions.

Assessment of pay practices (change in control, severance, ownership guidelines, clawbacks, perquisites, etc.)

Farient goes beyond comparative benchmarking to recommend pay policies. This process takes into account each company’s values, culture, and strategic objectives while also considering macro trends, regulatory context, risk, and the alignment between executive and shareholder/stakeholder perspectives.

Compensation risk assessment

Farient assesses whether the compensation system encourages undue risk-taking using its proprietary quantitative model, as well as our 16-point qualitative analysis.

Related case studies

  • How a Forward-Thinking Utility Came in From the Cold

    A midmarket utility with a lagging stock price, caused to some extent by its business portfolio, was also hampered by a poor Say on Pay vote. Farient Advisors was engaged to help turnaround the company’s Say on Pay vote and assist with a shareholder communications strategy.

    Read More >

  • Catalyzing Change at a Chemical Company

    This company was not a shareholder darling. In fact, shareholders had identified several pay-for-performance disconnects and clearly made their point with a 13% Say on Pay vote.

    Read More >

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We’re Here for You

Let us know how we can help you think differently about executive compensation and its alignment with performance.

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