In the words of Lewis Carrol, “if you don’t know where you are going, any road will get you there”. A company’s reward and recognition program starts with a clear, concise and focused remuneration strategy. It is the compass that guides an organisation, without it, you won’t know where you’re going!
Is benchmarking a necessary evil or a precise positioning tool?
Because there is a lack of homogeneity across most Australian businesses, benchmarking is only one of a number of remuneration assessment tools available to determine both internal and external comparability’s.
However, properly applied remuneration benchmark assessments using consistent audited data can provide Boards, shareholders, and other stakeholders with a high level of comfort that Board and KMP remuneration is ‘fair and reasonable’ all things considered. In today’s governance environment it is a minimum requirement for most companies.
Variable remuneration should be designed to ensure that a company’s fixed employment costs are lower when its performance (for whatever reasons) is poorest. This should ensure a company has the flexibility to ride through periods of uncertainty and volatility without having to resort to material ‘ad hoc’ redundancies.
It also means that executives will usually receive higher compensation when a company is most able to afford it.
Appropriate incentive design and documentation is the bedrock of a sound “pay for performance” culture essential for any market facing business.
So much effort is expended in the myriad of employment regulations encompassed in employment contracts.
The key elements of an employment contract, from a shareholder’s perspective, that are often overlooked, include:
