Compensation committees wondering how to structure 2021 incentive compensation plans and goals should keep three principles in mind, says Laura Hay, managing director at Pearl Meyer, in a panel discussion focusing on compensation matters at Bank Director’s BankBEYOND 2020 experience.
Less complexity in a plan will bring more clarity to employees and the bank, she adds.
“Don’t overthink it,” she advises directors. “Think through what you’re trying to achieve and what would move the business forward.”
Plans should give employees “some control over the ability to control those outcomes,” she says, and should be developed with an eye toward the environment remaining uncertain for the time being. If a bank’s plan uses absolute metrics, which have performed particularly poorly in 2020, compensation committees may want to widen the performance range and reduce the absolute payout.
Hay was joined in this conversation with Bank Director CEO Al Dominick by Ken Derks, managing consultant at NFP Executive Benefits, and Todd Leone, partner and head of executive compensation at McLagan.
You can access all of the BankBEYOND 2020 sessions by registering here.