Page 53 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Chapter 1. Executive Compensation Framework 39

January Previous year’s business plan results: i.e., strategies, objectives and goal(s) completed
February Business and support staff complete scan of internal and external issues, identifying
those pertinent to the organization
March Issues are prioritized and responsibility for each assigned along with review of
compensation objectives
April Drafts of next year’s business plan, including strategies, objectives, and goals, are
prepared and compensation objectives updated
May Vision and mission statements reviewed and modified if necessary, as is the
proportionate balance of the five compensation elements
June Drafts are reviewed by appropriate parties and a draft of a modified pay plan is
prepared
July Midyear review of current year business and compensation plans completed
August Modifications to next year’s business and compensation plans completed
September Final reviews of both plans completed
October Plans submitted to management committee for review
November Committee review completed
December Modifications incorporated and approved by board of directors, with both plans
communicated

Table 1-17. Annual planning and review process

The various stages of the market lifecycle (threshold, growth, maturity, decline, and turn-
around, sale, or demise) were reviewed. Organizational structure change was positioned in
terms of IPOs, mergers and acquisitions, and divestitures (sales and spin-offs). The various
types of companies (for-profit vs. not-for-profit, private vs. public, and new economy vs. old
economy) were defined and contrasted. The five compensation elements’ importance was
viewed in the terms of stage of market lifecycle and type of company. Additionally, the chap-
ter introduced topics to be covered later in the book, namely, performance measurements
(Chapter 2), current vs. deferred compensation (Chapter 3), stakeholders (Chapter 4), design
considerations (Chapter 9), and the board of directors (Chapter 10).
Table 1-18, summarizes the major design considerations in framing the executive com-
pensation plan. Within the framework of the design considerations in Table 1-18, Table 1-19
lists possible action steps.

1. Who is an executive and how many are there?
2. What is the company type?
3. What is the impact of the market lifecycle on pay?
4. What are pending changes in organizational structure?
5. What are the vision, mission, core competencies, and objectives of each organizational unit?
6. What are the internal and external threats to and opportunities for each unit?
Table 1-18. Executive compensation framework considerations