How Executive Reward Drivers Have Expanded

There was a time when an executive’s financial reward was tied almost exclusively to their company’s performance. But increasingly, organizations are also linking compensation to broad initiatives and actions that contribute to and improve society, while better positioning themselves within an evolving business environment.

Here’s how executive reward drivers have expanded — and what can be done to help your organization.

The Issue

Shareholders, employees, and much of the public want to see executive compensation linked to efforts to improve society. Aligning pay with purpose and performance, with the right talent in place, sets up wins all around.

What Have Reward Drivers Expanded to Include?

There is a growing push for organizations to put initiatives in place that improve things external to the company’s performance. Once those are in place, the company needs an executive to carry them out. And a proven way to ensure that an executive does carry them out is to link such outcomes to pay. Carrying out such initiatives are an addition to the traditional financial targets that organizations have always required, of course.

There are about as many initiatives, projects, and efforts as there are organizations. But the broader initiatives some organizations take on can include those, for example, that are aimed at improving diversity, equity, and inclusion (DEI). Other companies might take actions that support, say, environmental, social, and corporate governance (ESG). 

In addition to helping society, the integration of ESG and related efforts into the executive compensation program also helps produce the agile rewards infrastructure that’s necessary in today’s dynamic and evolving business environment. Such executive compensation plans can, in turn, help you to be able to better lure, motivate, and hold onto the kind of talent that can flourish during this time of disruption.

What Can We Do to Align Purpose with Talent Strategy and Business Performance?

Chances are you need exterior help putting in place customized executive and director compensation and benefits plans that tie in performance and corporate governance. We recommend the firm Mercer for its deep knowledge and breadth of experience.

What Will We Gain?

If you pick a partner such as Mercer, which has a global reach of more than 130 countries, it can use its consulting and robust database to help you form and put in place your executive compensation program. And putting that in place will ultimately help you make more evidence-based decisions as well as enhance your ability to recruit, motivate, and retain talent. 

It will also ensure that compensation is lined up with your company’s needs and what the industry is paying. What’s more, through Mercer, you’ll be kept compliant with shareholder, legislative, and regulatory guidelines, and requirements. Mercer, for example, has a dedicated team of attorneys and governance experts who are on top of all things regulatory.

And regarding those initiatives that benefit society, putting in place the right executive compensation strategy for you will give you the transparency and flexibility you need to tailor rewards to purpose.

The Data You Need

With Mercer, you’ll get access to top-line resources such as regulatory, legal, and accounting research, plus global data and governance, shareholder relations, and executive benefits guidance.

What Kind of Perspective is Best?

Data is wonderful, but you also need a team that will also provide counsel. And such counsel calls for consideration of a host of perspectives, including those of board members, shareholders, and employees, in addition to competitive realities.

Now that you know how executive reward drivers have expanded to encompass actions and behaviors that contribute to a better world, you can enlist the help of an executive compensation consultant to help you bring it all together during this time of economic, social, and business upheaval.

Huynh Nguyen

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