Boards That Deliver by Ram Charan

Author:Ram Charan
Language: eng
Format: epub
Publisher: Wiley
Published: 2011-03-14T16:00:00+00:00

Compensation Committees can be of great service to their boards by rolling up their sleeves, sorting out with management what a philosophy might be and how the CEO should behave in these four areas, and then discussing their thinking with fellow directors. Some Compensation Committees have convened off-sites dedicated to developing a compensation philosophy to bring back to the full board.

David Fuente, Chair of the Compensation Committee at Ryder Systems and at Dick’s Sporting Goods, and former CEO and Chair of Office Depot, describes Ryder’s process in these terms: “Before you bring the philosophy to the full board, you have to take the time to get your Compensation Committee off on its own for a day or two, so they form their own opinion of compensation philosophy and get a clear idea of the compensation programs that already exist. That way, the committee is fully informed and can lead that discussion at a larger board meeting.”

At Ryder, Fuente’s Compensation Committee did just that. “We basically got the executive vice president of human resources and the CEO to sit down with us and philosophically go through compensation: What role was it going to play? What various compensation programs were in place? Then we could critique them, in essence philosophically discussing where the compensation programs lined up with the strategic direction of the company.” Only then was the Compensation Committee fully prepared to go before the full board to develop the framework that links pay with performance.

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