Executive Compensation Consultants Serving Public and Private Companies Worldwide.

Pay for Performance Alignment

Farient believes it’s all about performance-based pay.

Farient has been focused on Pay for Performance Alignment since the early days of executive compensation consulting. With the publication of our CEO Robin Ferracone’s definitive book,  “Fair Pay, Fair Play: Aligning Executive Performance and Pay” in 2010, we literally wrote the book on this topic, and Farient has been the industry leader in defining and measuring pay for performance alignment. Sure, everyone talks about performance-based pay as the holy grail of executive compensation, but in our experience, there is often confusion about what pay for performance means, and how to align executive interests with shareholder interests. To provide a framework for both corporations and shareholders, Farient continues to make significant investments in proprietary methodologies and thought leadership that are changing the way stakeholders look at pay for performance alignment and the requisite disclosures.

First, Farient has launched Farient Information Services, a division of Farient which focuses exclusively on pay for performance alignment, providing both an Alignment assessment service for companies as well as a pay for performance subscription database for investors. With extensive databases and proprietary research capabilities, Farient Information services has produced ground-breaking research including Pay Definitions: What Works Best in Pay for Performance Alignment and Performance Metrics and Their Link to Value.

Learn More About Farient Information Services

Second, we thought it was time to frame performance-based pay with a clear definition of what it is. There is a lot of noise out there regarding what pay is. How should pay be defined? Farient believes that there should be a standard definition of pay. After all, how can you accurately compare company pay programs without a consistent definition of what constitutes pay? Farient has addressed this critical need through the development of a pay measure designed specifically for pay for performance evaluation – Performance-Adjusted Compensation (PAC) We encourage you to check out our report referenced above that compares and evaluates the three most widely used pay definitions – Realized Compensation, Realizable Compensation, and Performance Adjusted Compensation.

Third, Farient’s Performance Alignment Reports™ (PARs) provide both companies and investors a clear, consistent and comparable evaluation of Pay for Performance alignment. “Fair pay” happens when total compensation, after performance has been factored in, is:

Reasonable relative to market comparables and for the performance delivered
Sensitive to company performance over time

It was clear to Farient that investors needed a transparent, effective approach to evaluating pay for performance. Farient’s PARs provide clear, graphical, “at a glance” analysis and ratings to shareholders, boards of directors and management, fully supporting Farient’s view of market convergence on pay for performance.

Fair pay, or aligned pay, is when total compensation after performance has been factored in, is sensitive to company performance over time, and is reasonable relative to the market for executive talent and the performance delivered.