The governance and the engineering of executive compensation

It is usually accepted that the purpose of executive compensation is to attract, motivate and retain. Benchmarking is supposedly the compass that guides decisions.

This approach is incomplete, for at least two reasons :

• Remuneration is a lever to support the implementation of corporate strategy, to increase performance and to manage change. Compensation should therefore result from a demanding thought process integrating corporate objectives, challenges, strategy and values.
• Taxes and social charges that apply to remuneration in France have become volatile and occasionally exorbitant. Traditional preferential treatment applied to certain compensation items (equity, retirement…) has ceased : convergence with cash compensation has not only been achieved but taxation occasionally goes the other way.

Consequence : corporations need regularly rethink their remuneration practices, and specifically equity compensation.

New crucial challenge for listed companies : the introduction of Say on Pay, initially on an advisory basis (French governance code AFEP-MEDEF), then as an ex ante and ex post binding vote. How should boards and remuneration committees manage ever increasing responsibilities?

Executive compensation has become crucial and complex.

Essere associés provides the necessary expertise.