Nadia Haddad· Director of Rewards, MEA, Qasr Holdings
Posted in Executive Compensation ·
UK listed housebuilder, around 4,500 staff. Last year the bonus formula produced 82% of maximum for the executive directors. Profit was ahead of target, largely because land sales were brought forward. In the same year we had a serious site accident and a customer satisfaction score that dropped a full band.
The committee reduced the outcome to 55% of maximum. No formula told it to. It took three meetings, and the hardest part was that the chief executive agreed with the principle and disagreed with the number.
What helped: a written framework agreed the previous year listing what the committee would look at before confirming any outcome. I am curious how others structure the discussion so that discretion does not feel arbitrary to the people on the receiving end.
0 reactions · 5 replies · 5 views
Priya RaghunathanGRS, CSI
Head of People Analytics, Calibre Software
We have a similar framework and one addition: the committee records its view against each item even in years when it makes no adjustment. Five years of that record meant that when it did reduce an outcome, nobody could say the test had been invented for the occasion.
Dana WhitfieldCRP, GRS
Director, Global Compensation, Meridian Health Systems
The number is always the argument. We now ask management to propose the adjustment themselves before the committee discusses it. Twice out of three times the chief executive's own proposal was within a few points of where the committee would have landed, and it changes the tone completely.
James OkaforCRP, CEP
VP, Total Rewards, Halcyon Financial Group
I am uneasy about how one-sided this has become. In fifteen years I have seen downward discretion used perhaps twenty times and upward discretion twice, both times followed by a significant vote against. If the committee can only ever reduce, executives will price that in and ask for higher maximums.
James OkaforCRP, CEP
VP, Total Rewards, Halcyon Financial Group
On the upward point, our committee used it once, when a disposal the board had asked for knocked earnings below threshold. It adjusted the target for the disposal and paid 40% of maximum. We consulted the top ten holders beforehand and the vote was 92%. It can be done if the cause is a board decision and you speak to holders first.
Dana WhitfieldCRP, GRS
Director, Global Compensation, Meridian Health Systems
Recording a view every year is something we have not done and should. On asymmetry I agree it is a risk. Our framework does say adjustments can go either way, but I doubt anyone on the executive side believes it yet.
