Executive Compensation Philosophy Design
Overview
An executive compensation philosophy serves as a crucial guide for organisations as it outlines the fundamental principles upon which executive compensation decisions should be based. Having a formal philosophy in place not only ensures consistency and transparency in pay decisions, but also fulfils a mandatory requirement from regulators in many industries.
Our Design Approach Our approach to designing an executive compensation philosophy is based on four key pillars.
- Competitiveness
We assist our clients in maintaining a competitive edge in executive compensation by aligning their pay levels appropriately with market standards. This enables them to attract and retain top executive talent. We also assist them in defining peer groups and selecting relevant roles for comparison within those groups.
- Performance-Orientation
Stakeholders have begun to recognise the powerful role of performance-linked incentives in advancing an organisation’s business goals. This is why we build executive compensation programmes with an appropriate focus on performance, incorporating an optimal mix of fixed compensation, annual incentives, and long-term incentive plans.
- Risk Mitigation
We work closely with our clients to design executive pay programmes that discourage excessive risk-taking. We help define incentive structures that strategically align with their desired outcomes, while limiting adverse behaviours. Our expertise also extends to providing clients with global best practices in risk mitigation mechanisms such as clawbacks, malus provisions, and stock ownership guidelines.
- Governance
We take care to ensure that our clients’ executive pay programmes comply with local laws (e.g., Companies Act 2013) as well as regulations and guidelines issued by regulatory bodies (e.g., SEBI, RBI, IRDAI). We also take into account the perspectives and potential reactions of institutional shareholder advisory bodies and proxy advisors when tailoring our solutions for clients.
