The recent financial scandals, with stories of fat bonuses received by senior executives just the year before the Stock Exchanges collapse have once again increased the interest on the topic of executive compensation.
The concern about this topic is unanimous and ubiquitous: shareholders meetings, media coverage, political debates, regulators, auditors, etc.
While modern economic and managerial theory underlines the importance of aligning executives’ interests with their company long term value creation, most of today’s executives incentive schemes have actually fail to deliver the “reward for value creation” principle.
We believe that compensation systems must not be considered as “stand-alone” standard packages of metrics and technicalities provided by HR Consultancies, but as a key component of an overall value-oriented company management framework.
To ensure the “reward for value creation” principle, companies need to align their strategic goals to value creation indicators, set proper targets, identify plan and actions to achieve value targets, monitor and finally reward the value creation.
Our consulting experience in corporations listed on the stock exchange, with transparency requirements of disclosure on governance and compensation systems, has enabled us to develop effective frameworks to ensure alignment between managers’ reward and business performances, avoiding those distortions and pitfalls that public opinion and BoDs are now blaming.
Below we present some key features an effective compensation system linked to sustainable value-creation must have:
For additional information, please contact:
Gabriele Rosani, Manager
+39 02 36572150