How can you determine the best executive compensation strategy?

3 Customize your approach

While benchmarking your peers can provide you with valuable data and guidance, you should not rely on it blindly. Your executive compensation strategy should also reflect the unique characteristics, needs, and preferences of your organization and your executives. You should customize your approach based on factors such as your culture, vision, mission, values, governance, risk tolerance, performance indicators, talent pool, and stakeholder expectations. You should also consider the individual attributes, skills, roles, and contributions of your executives and tailor their compensation accordingly.

4 Balance your mix

Another important aspect to consider when determining the best executive compensation strategy is the balance between the different elements of your compensation mix. Typically, executive compensation consists of four main components: base salary, annual bonus, long-term incentives, and benefits and perquisites. Each component has its own purpose, advantages, and disadvantages. You need to balance your mix in a way that supports your objectives, rewards your executives for their performance, and aligns their interests with those of the shareholders and the stakeholders.

5 Review your strategy

Finally, you need to review your executive compensation strategy regularly and adjust it as needed. The business environment, the market conditions, the regulatory requirements, and the stakeholder expectations are constantly changing and evolving. You need to monitor and evaluate your strategy to ensure that it remains relevant, effective, and compliant. You should also solicit feedback from your executives, shareholders, employees, and other stakeholders to identify any issues, concerns, or areas for improvement. Reviewing your strategy can help you keep it up to date and responsive to the changing needs and demands of your organization.