Get the Right Mix of Experience for Comp Committee Success

By Pamela Babcock Dec 16, 2009
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​NEW YORK—Corporate governance and executive compensation are all the buzz these days, as corporations are increasingly being pressed to make sure that they are in compliance and meeting shareholder expectations.

But when it comes to handling executive compensation issues and making sure your compensation committee runs effectively, it’s important to have a clearly defined framework for meetings, objectives and a “cadence” for the process, one expert said recently.

“Our framework keeps us from getting frantic with all the whitewater coming about executive compensation,” said Jerry Warren, senior vice president of compensation for McKesson Corp., to attendees Dec. 8, 2009, during a senior HR executive conference presented by The Conference Board.

During the session, Warren provided an overview of how the compensation committee for his San Francisco-based health care services and information technology company works.

It typically meets five times annually (January, April, May, July and October), and each meeting has a main theme “so that expectations and the cadence are clear and well-established,” Warren said. “We try to look through the lens of the user, since all of these people are on other boards.”

Warren said the following are some ingredients for an effective committee relationship:

  • Having stable, committed committee members who appreciate and understand “the need to balance many things.” After all, Warren said, “it takes time to understand the company’s approach, history and what has been effective.”
  • Recognizing that occasionally, your company may need “new eyes, a fresh perspective and new ideas.”
  • Having members with differing points of view. For example, McKesson’s compensation committee includes both an investment banker and a non-profit leader.
  • Experience and insight help provide guidance and accountability. For this reason, sitting and former CEOs can “understand the tradeoffs required for a healthy business in the longer-term,” Warren said.
  • Lastly, Warren said a productive compensation committee relationship benefits from trust, “open, direct and respectful dialogue,” and the company working to live its values with its board as well as with its employees and customers.

While Warren admitted that the dialogue is often direct and honest, he added that “it is not contentious, which I appreciate.”

Pamela Babcock is a freelance writer based in the New York City area.

Related Articles:

Fortune 500 Executive Comp Peer Groups: How Large?, SHRM Online Compensation Discipline, October 2009

Keeping Compensation Committees on an Even Keel, SHRM Online Compensation Discipline, April 2009

Compensation Committees Adjusting CEO Pay Programs, SHRM Online Compensation Discipline, December 2008

Comp Consultant Relations: Advice for Compensation Committees, SHRM Online Compensation Discipline, December 2005

Piecing Together Executive Compensation: What Compensation Committees Do, HR Magazine, May 2002

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