As seen in NACD Directorship magazine – Quarter Three 2023
With proxy season behind most calendar-year end companies, the summer meeting is an opportune time for compensation committees to reflect on compensation programs more holistically, and ask, are we meeting our objectives to motivate, attract, and retain key talent?
There are many tools available to inventory compensation programs and determine if they are operating as intended. Two of the most effective ones are compensation dashboards and tally sheets.
Compensation Dashboards
A compensation dashboard is essentially a cheat sheet of the executive pay program. It can be especially valuable to new committee members, as it provides high-level, current information on committee decisions to date. It is considered best practice to include the dashboard in each set of committee materials (refreshed quarterly), typically limited to two pages.
A dashboard can be customized to fit the needs and preferences of the company, but typically covers the following:
Tally Sheets
Different from dashboards, which summarize compensation programs at an organizational level, tally sheets provide a more detailed perspective on individual executive compensation. For each covered executive, a tally sheet answers many of the questions committees are expected to evaluate.
Concluding Thoughts
Effective compensation governance starts with having access to the most up-to-date information. The pressures on committees to both make and explain informed pay decisions and programs during investor engagement have increased substantially over the past decade. Dashboard and tally sheets summarize the state of the pay programs, including their strengths and opportunities for change, and may identify a need to prioritize a review of realizable pay-for-performance, severance arrangements, or a more comprehensive review of incentive design.