Executive compensation must promote -simultaneously and in a balanced way- the interest in improving the annual result, the execution of the budget and the business plan, but also the creation of value over time, ensuring a sustainable and ambitious future.
This is achieved by designing not only annual incentive schemes, but also by implementing Long Term Incentives that extend the interest horizon of the executives and allow them to have similar experiences to those of the shareholder.
CompStrategy can help define executive compensation policies, including the definition of competitive levels and monitoring guidelines, as well as short- and long-term incentive packages oriented to value creation, with the objective of achieving an adequate competitive advantage.
Typically, our services in Executive Compensation include the following elements:
- Assessment of the situation and needs of the Company
- Analysis of available accounting and financial information/business plan/risks
- Conducting executive interviews
- Analysis of mechanisms for business value creation
- Review of compensation in the executive market, recommendation and definition of the desired competitive level
- Design of short-term incentives based on value creation
- Review of alternatives for Long Term Incentives (stock-based and non-stock-based)
- Quantification of the impact of the recommended salary adjustments
- Recommend compensation update guidelines
- Documentation of the conclusions and recommendations in a report
CompStrategy can help with:
- Long Term Incentives Stock Options, Restricted Stock, Phantom Shares, Performance units/shares
- Short Term Incentives Share of Value Created, Value Trees, KPIs
- Executive Compensation Surveys: (data source/provider selection, processing and interpretation)
- Calibration of the incentive cost vs. the value created for the shareholder
- Valuation of options based on the methodology of Black & Scholes
- Executive Compensation Policy
- Design of the Salary Scale
- Follow-up and updating guidelines
- Competitive Strategy for the Executive Level
- Other elements of compensation associated with senior management, such as Board Compensation, Hirings Bonus, Golden Parachutes, Transaction Bonus, as well as executive perquisites and benefits such as company car, health plan, insurance and retirement
It is key to effectively communicate the compensation scheme. Designs should include "safety features" to ensure that payment is made only if the process is followed and the desired shareholder results are achieved. It may be appropriate to set caps that take into account external forces that may trigger the value of the compensation for non-management reasons, and mechanisms that recognize extraordinary management even in times of crisis.
These are some of our Areas of Expertise: