It’s no secret that the new administration has very different governance practices and priorities. Congress and CEO Pay Ratio regulations are being examined and the SEC has opened the topics for discussion. Change is here and boards will likely encounter unforeseen challenges during the transition. This begs the question: How can boards prepare their organization for this? What should we look out for? How will this impact deregulation and disclosure? How will these rules be enforced? How can we still attract, retain, and reward key executives? What are the best paths to take? Executive Benefits Network will be keeping a careful eye on answers to these questions.
We feel that it’s important to ask yourself questions that’ll cover all your organization’s bases and then form educated game plans to protect your company, customers and shareholders. It’s to your benefit to consider the following areas:
- How to attract, retain and reward executives
- Internal and external questions for CEO pay inequality
- Short and long-term interests of shareholders, compensation and results
- Compensation committee’s direction and role
Consideration # 1: How to attract, retain and reward executives
What competitive programs are being used to attract, retain and reward your key executives? Are these programs business and employee based? What operational goals are being planned for and executed? Does your leadership team have a clear vision and understanding of your strategic compensation designs?
Executive Benefits Network can help educate you and help craft executive compensation plans that are in line with current market trends. One method is using a Short-Term Incentive Plan to target key employees who are the future of your organization. Another method is designing nonqualified plans which will provide a highly flexible way to provide tax deferred benefits to your key employees. The nonqualified benefit plan can be employee or employer funded through defined contribution or defined benefit and its effective design provides additional motivation to join and grow with your organization.
Consideration # 2: Internal and external questions for CEO pay inequality
What’s happening with the CEO Pay Ratio disclosure regulation? Is your executive team prepared to react to this and respond to the media’s compensation inquiries? What are some potential risks? What narrative is in place to internally speak about income fairness and equality in comparison to the internet’s disclosed pay information?
Like consideration # 1, we can equip you through executive compensation education and help craft CEO plans in line with current market trends.
Consideration # 3: Short and long-term interests of shareholders, compensation and results
Does your organization practice quarterly or annual guidance? How are goals translated into annual incentive plans and payouts? Are your annual bonus funds measured against your organization’s ROI vs. the management performance? How are executives held accountable for fulfilling performance beyond one year? Is that accountability consistent and disclosed? Are succession plans in place? What tax implications will be faced?
Executive Benefits Network can help protect your organization, increase shareholder value, and help you plan and invest accordingly. Examples of plans: Bank Owned Life Insurance (BOLI) and Corporate Owned Life Insurance (COLI) are the predominant investment assets for financing the cost of employee benefit plans. Earnings from these programs are tax-free (if held to maturity) which represents an inherent earnings advantage over other eligible investments. We’ve helped hundreds of clients in successfully implementing and administering these programs and we’d be happy to help your organization.
Consideration # 4: Compensation committee’s direction and role
What are the objectives and deliverables of your compensation committee? What leadership topics are discussed with this board and should their agenda expand more? How are governmental policy issues translated into executive compensation?
Finding answers to all the above thought provoking questions will only help your organization in this time of change and uncertainty. Please let EBN know if we can be of any assistance. We specialize in BOLI, COLI, Executive Benefits Planning, Personal Planning, Estate Planning, and Employee Benefits and we’d be happy to further educate you and serve you where we can.