Pay Design and Policies
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 in the US, our CEO published the definitive work on pay and performance alignment. That book, Fair Pay, Fair Play: Aligning Executive Performance and Pay (Jossey-Bass, 2010), is particularly relevant today as the compensation of executives is increasingly linked to stakeholder incentives.
Composition of Goal Setting
Farient believes that of all the design features of compensation, goal setting has one of the most significant effects on alignment. Goal setting is all about striking the right balance between establishing measures and setting goals that are at once motivational to executives and accretive to shareholders and other stakeholders.
This service includes:
Our team develops pay structures that support each company’s strategic intent (e.g., to scale, attract critical talent in highly competitive markets, etc.)
The intersection between pay and performance is goal setting. Using our “360-degree” framework, we analyze and forecast performance based on shareholder expectations, historical competitive reviews, and gaps between expected and actual performance. This informs goal ranges including thresholds, targets, and maximums, and creates confidence that pay will align to performance
We analyze competitive dilution, proxy advisor caps, and equity needs to recommend equity pool authorizations and the disciplined use of equity. We also determine equity requirements and the optimal timing for requesting additional shares
Our team reviews planned compensation actions to determine whether they are consistent with the stated pay strategy and the implications when inconsistencies exist. These actions include severance, change in control, clawbacks, ownership guidelines, and executive perquisites
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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