How to Get Closer to Pay Equity

From WCD’s press release…

In an effort to critically examine key boardroom issues, WomenCorporateDirectors (WCD) has formed the WCD Thought Leadership Council (TLC) – a commission of corporate board directors and advisors. TLC issued its inaugural report today. It tackles one of the most visible boardroom agenda items – executive pay – exploring what’s working and what isn’t.

Boards face numerous challenges and distractions when setting compensation strategy. TLC offers recommendations to improve governance and increase public confidence in their decisions. Here are a few of their suggestions, click here to see more.

What Boards are up against: Being handcuffed by data. The decision to set pay solely through the use of competitive market data ignores vitally important considerations such as individual performance (especially during unusual company circumstances) and the variances in actual job duties from company to company even for nominally the same title.

TLC recommends: Target the position, pay the person. “Data should serve as only one factor in making decisions,” says the report. Multiple other variables and individual circumstances must go into the mix.

What Boards are up against: Skepticism over need for retention pay. Shareholders and other stakeholders tend to be skeptical of pay for retention, especially when the economy isn’t doing well.

TLC recommends: Retention is worth paying for. “Unwanted turnover in the senior ranks has a cost to the organization.” This includes hard costs such as executive search fees and replacement costs for “trickle-down turnover” in reporting positions, and soft costs such as the organizational distraction that happens during a top-level change.” Retention of a strong management team is as legitimate an objective for compensation design as performance.