EXECUTIVE COMPENSATION Leonard Pace
Director, Eastern Area MAS
Presented before the Yankee Chapter, Young Presidents' Organization, Woodbridge, Connecticut-October 1973
This paper was extracted from a presentation to the Yankee Chapter of YPO. The audience consisted of young presidents and their spouses. The nature of the topic, as well as an early-afternoon program slot, were important considerations
in the selection of a very informal tone for the technical material. That informality has been retained in this condensation because it was a distinctive feature of the original presentation.
Executive compensation is a yeasty subject. I'll even suggest to you that tinkering around with executive comp can be riskier than mountain climbing or precision aerobatics. Don't mistake the nature of that risk. Lives may not literally be at stake; but careers can be on the line, as well as the stream of future corporate earnings.
At Haskins & Sells, we get many requests to review the executive-compensation
plans of our clients. I suppose one reason for such interest is that most listed companies have executive incentives. Yet, I have concluded that a straight salary plan is about as effective as perhaps one out of every two bonus plans that I have reviewed.
There are many schools of thought on executive compensation. Some are inspirational; others are procedural. But executive compensation really deals with getting people to do the very best they can at a job they do every day. If we respond successfully to the challenge represented by executive compensation,
our people remain no different in many ways from their counterparts in other organizations. Except for one thing. They've lost a human habit—the habit of complacency.
Another thing about executive comp: It can get technical—the selection of benchmarks, tax considerations and other such things. Listening to a tightly organized thirty- or forty-minute description of alternative executive compensation
plans for a bonus company can turn me off. And it might turn you off,