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CEO pay for performance; uncovering employees value; chief marketing officers role; more.
Proxy Analysis Reveals Pay-for-Performance Trend
A recent analysis by global consulting firm Watson Wyatt Worldwide of proxy statements from 92 large companies found that CEOs at the largest U.S. companies enjoyed a median 13 percent increase in their annual bonuses in 2006. In addition, the value of their equity-based compensation, which includes in-the-money stock options and restricted stock awards, nearly doubled during the same period. Watson Wyatt analysts say there was a strong correlation between CEO pay and corporate earnings and stock prices, which reflects the trend toward performance-based compensation.
Steven Seelig, executive compensation counsel for Watson Wyatt’s Research and Information Center, says the first proxy filings from these companies since the Securities and Exchange Commission’s (SEC) new disclosure rules went into effect do indeed make it easier to find out what chief executives receive in total compensation.
“The SEC nobly strove to come up with a single number for the summary compensation table” and succeeded in ensuring that “all the elements are there.” However, “What we would like to see, and what we recommend to our clients, is that they break this figure out into two tables.”
Seelig says separate tables for “pay opportunity,” which includes any grants the executive may exercise at his or her own discretion, and “pay realizable,” or the value of outstanding long-term incentives granted to executives over a specific time frame, would make it simpler for stockholders to learn the total compensation package. Teasing out the realizable pay can be done, but it requires “a studied eye and a calculator,” he says.
The SEC’s requirement that companies provide proxy information in “plain English” can still be problematic. “Because of the quantity of disclosure that is still required for very difficult programs, oftentimes the lead has been buried under an avalanche of other verbiage,” says Seelig. “We advise our clients to put the lead up front in an easy-to-read executive summary that spells out what is included in the proxy statement.”
Identity Crisis For CMOs
Chief marketing officers (CMOs) have an even shorter shelf life than CEOs today, according to a new study from the CMO Council, a nonprofit membership organization for senior marketing and brand decision-makers. To avoid an “identity crisis” among CMOs and reduce the high turnover rates, chief executives and their boards need to clarify the requirements of the role and clearly convey those requirements to executive search firms.
In addition, a CMO’s credibility is often undermined by “self-described ‘superstar marketers’ who leverage personal style to elevate and inflate their titles but whose narrowly focused marketing experience does not prepare them for the level of strategic thinking and breadth of business expertise required,” researchers found.
Other factors that contribute to a revolving door for CMOs include unrealistic expectations, flawed hiring practices, talent deficiencies, and lack of the necessary business and strategic leadership skills. Executive recruiters who fail to get clear directions from their clients also share part of the blame, notes the report.
“Conventional wisdom holds that the CMO is a strategic player in the C-suite, but this study shows a significant gap between perception and reality,” says Donovan Neale-May, executive director of the CMO Council. The council advocates a significant change, driven by the CEO, in the way the position is defined and structured.
The CMO should be a business leader as well as a marketing leader, concludes the report, which was sponsored by MarketBridge, a marketing consultancy headquartered in Bethesda, Md.
Everyone Has a Contribution To Make
Brad Anderson, CEO of retail giant Best Buy, knows from experience that first impressions don’t tell the whole story. Although he runs a highly successful company today, Anderson’s early years were unprepossessing, to say the least.
Speaking at a recent taping of an episode of the PBS television series “CEO Exchange” at the Zicklin School of Business at Baruch College, City University of New York, Anderson admitted he was a “C” student in high school. In fact, his guidance counselor told him he should forget about college. “I don’t blame him. He had all the evidence to support it,” he says.
In spite of this advice, Anderson did graduate from college. He enrolled in a Lutheran seminary, but later dropped out because he hated public speaking. Wondering what to do next, he took a job selling stereo systems at Sound of Music, a Minnesota store that later became Best Buy. He says he was so bad at selling audio equipment that he was on the verge of quitting that job. In a last-ditch effort to sell a set of speakers to a customer, he offered to deliver them to the customer’s home 80 miles away, install them and make sure they worked before leaving.
The customer accepted his offer, and Anderson’s persistence and enthusiasm brought him to the attention of the store’s founder, Dick Schulze. Schulze promoted Anderson from clerk to store manager and ultimately to CEO of Best Buy.
Those early experiences taught Anderson that “you cannot tell what the employee’s contribution is going to be by that initial impression.”
Today, Anderson spends a substantial amount of time mentoring Best Buy employees. He makes a point of talking to “every blue shirt at Best Buy” because he knows that each individual has some contribution to make.
Anderson tries to identify “the motivator that is driving the particular way [each person] looks at the world.” He says an effective mentor must “figure out what kind of character [the mentor] needs to be, to be able to help [each employee] get to the next accomplishment.” Some people actually need to be “bullied,” while “the next person, with exactly the same behavior, you could maybe pat him on the back.”
Since this unlikeliest of CEOs took over in 2002, Best Buy’s stock has risen 60 percent; in 2004, it was named a Forbes “company of the year.” Not bad for a “C” student who was told that he didn’t have what it takes for college. (For more about Best Buy and its unique Results-Only Work Environment program, see this month’s
The “CEO Exchange” is sponsored by the Society for Human Resource Management. For local airtimes and more information about this and other episodes of “CEO Exchange,” go to the
SHRM "CEO Exchange" page.
Board of Directors Fees Hold the Line
A survey from Upper Saddle River, N.J.-based consulting firm Compensation Resources Inc. reports that most companies, both for-profit and nonprofit, held steady on compensation for their boards of directors during the past year. Responses from companies in more than 13 industrial classifications found increased fees at only 30.2 percent of companies.
Among those that did raise compensation, a hefty average increase of 26 percent was reported. However, 67.8 percent of respondents at companies that did not increase fees agreed that no increase was called for.
Among other findings, most participants rated their board as effective in board and committee compensation, outside advice, executive pay philosophy, oversight of executive compensation, and annual approval and review.
The lowest rating was in the area of benchmarking, with nearly 40 percent of respondents reporting that their board was only “somewhat effective” in this area.
Executive Coaching: Face To Face or over the Phone?
Executive coaching customers and HR professionals have a different take from the coaches themselves on the value and effectiveness of various coaching methods. In its second annual coaching survey, Sherpa Coaching LLC, a Cincinnati-based coaching, training and certification organization, reports that coaching by phone is preferred by 54 percent of personal and life coaches, who believe it’s more effective than in-person sessions.
Among those who receive coaching and HR professionals who purchase such services, however, in-person coaching is the hands-down favorite. Virtually every respondent who had worked with an executive coach considered in-person coaching best (96 percent). HR and other professionals who purchase the service agree: 89 percent of self-described HR and training professionals and 82 percent of others who purchase coaching consider in-person coaching to be the most effective method.
An increasing number of executive coaches agree. Among this group, 70 percent judge in-person sessions as most effective, up from 67 percent last year. The most experienced coaches rate them even higher, at 81 percent.
This year, executive coaching sessions conducted in person increased to 44 percent, up from 39 percent last year. Phone coaching was next, at 37 percent. The remaining sessions were conducted via e-mail, Internet chat and webcam work. E-mail, however, is losing favor. This method dropped from 26 percent last year to only 15 percent this year.
Sherpa expects current trends to continue. “Since most of our communication comes from body language, it’s encouraging to see that more coaching is taking place in person,” concludes the report.
The survey is based on 800 responses from coaches, HR professionals and other business executives.
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