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| Best Practices: On the Board |
Sprucing for the Sale
Elizabeth Woyke
01/01/2005
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Logic of Largesse
Executive compensation confounds many boards, particularly those facing a liquidity exit, as corporate scandals in recent years have made directors extra mindful of avoiding past excesses. One way directors can minimize risk is to study the construction and implications of all the various parts (base pay, incentives and bonuses) of the compensation packages, Shear says. In addition, consultants charged with crafting the compensation packages should be outsiders, so the compensation committee has freedom to manage—or even fire—them.
Scott Collins, a general partner at Summit Partners’ London office, who has eight years of experience providing board-level guidance to later-stage companies, recommends keeping compensation plans as simple as possible. “Pick three or four goals or measurements and focus on those,” he advises. “Those plans tend to work out better and are easier to administrate than the ones that are based on 7.5 percent of this or the rolling average of that.”
Illustration by Wesley Bedrosian.
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