Compensation committees in the Gulf have a hard job ahead. In some ways, they are picking up the pieces after a broken year. COVID-19 collided with the economy and threw compensation programmes into disarray.
On top of that, social movements in 2020 put a spotlight on human capital and ways we hire, promote, and compensate. Compensation committees do face novel challenges, and the issues presented are not going away any time soon.
As such, the answers we formulate over the next weeks and months will have deep ramifications for companies and communities.
Re-think on executive compensation
In September last, The Aspen Institute and Korn Ferry released The Aspen Principles: Modern principles for sensible and effective executive pay. This was the distillation of over two years of research in considering how executive compensation programme design and governance should evolve in concert with the broadening role of corporations and the changing expectations of executives who lead them.
It goes without saying that 2020 and 2021 have been anything but ‘business as usual’ for almost every company. Because of that, the executive pay decisions that need to be made for both years will be anything but business as usual. As companies begin to face these challenging decisions, it will be helpful to have an organizing construct.
1. Pay is unambiguously tied to the company’s purpose and the drivers of its long-term success.
2. Executive pay outcomes are fair.
3. The goals used in incentive plans are credible and their outcomes difficult to manipulate.
4. The executive pay program is fully described in clear, jargon-free language.
5. The Board bears ultimate accountability for making decisions about executive pay and for aligning pay with the long-term health of the enterprise.
Changing roles
Driven in large part by social movements and concerns about the availability of future employee talent, the domain of the compensation committee is expanding at an accelerated pace. This enlarged role is changing compensation committee charters, meeting agendas, and the profile of future committee candidates.
Companies cannot avoid dealing with social movements such as gender pay equity and nationalisation. Employees, shareholders, and the public expect companies to have positions and policies to address these movements due to their potential impact on business environments.
No place for inequity
The job market is heating up faster than anticipated and candidates too need to make adjustments for the pre- and post-pandemic job search. There is no doubt that there will be tactical changes that candidates need to make to aggressively connect with potential employers and re-connect with existing network.
Good networking hasn’t changed and it’s all about strengthening relationships. The challenge remains that new hires in 2021 are joining at 15-20 per cent less pay and as such creating a longer-term issue of pay inequity.
Overall, we see progress on gender diversity and expect to see more female involvement in senior management and board positions. In the new era of relevance, two items have become critically important for the board: the criteria on which the CEO is measured must be relevant and purposeful, and CEO evaluation must be considered an ongoing process.
