Page 589 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Chapter 9. Design and Communication Considerations 575

easier than quantifying success, a failing design will lead to either continually tinkering with
the plan or abandoning it in complete disgust. For that reason.
The keys to success are alignment and communication. The pay-delivery system must be
closely aligned with the vision, mission, objectives, and goals of the organization. In other
words, performance measurements must clearly and consistently be tied to achieving these
goals. In addition, performance expectations and the pay-delivery system must be clearly
communicated to the beneficiaries and the administrators.
Table 9-30 summarizes the major considerations in design and communication of
the executive pay plan. Within the framework of the considerations listed in Table 9-30.
Table 9-31 lists are the action steps in designing and communicating the executive pay plan.

1. Stakeholders.
2. Current vs. deferred compensation.
3. Pay element characteristics.
4. Market stage significance.
5. Attract, retain, and/or motivate importance.
6. Pay philosophy.
7. Communication vehicles.

Table 9-30. Design and communication considerations

1. Prepare and get pay philosophy approved.
2. Identify the eligibles for short- and long-term incentives.
3. Identify and weight the key performance objectives.
4. Prepare incentive plan payouts in relation to objectives.
5. Determine how to measure performance.
6. Structure the short- and long-term incentive plans.
7. Determine the financial impact of plan and all legal issues.
8. Test the plan, making necessary changes.
9. Get necessary approvals.
10. Determine how to communicate and administer the plan.
11. Implement the plan, communicating to all appropriate parties.
12. Analyze results and make necessary changes.
Table 9-31. Design and communication action steps

Having reviewed design and communication considerations, let’s move to review the role
of the board of directors and its compensation committee in the process.
It is critical that the pay plans be reviewed in detail at least annually to ensure they are
current and accurate. The necessary filings with the IRS and SEC must be made in a timely
manner and communication with the stakeholders done in an ongoing basis.
Note: You are again reminded not to rely on accounting, tax, SEC, or other professional
service statements in this chapter. You need to seek appropriate professional counsel for such
guidance. Statements made in this chapter and elsewhere are offered as being illustrative to
help frame such further investigations by the reader with counsel.