Make

10 Questions For Your Compensation Consultant

Print

 

 


Combine public outrage at Wall Street pay and new Dodd-Frank regulations, and a compensation consultant is more important than ever. Here’s what to ask the payday experts.

 

 

By Ben Reeves

 

 

1. Do I really need an executive compensation consultant?





“Today’s disclosure process makes a consultant more important than ever,” argues Frank Glassner, lead consultant for Meridian Compensation Partners. Company proxies must clearly detail how pay aligns with performance, and new analyses, such as comparing CEO pay to average employee salary, are on deck for 2013.





2. How do you approach disclosure?





Thanks to Dodd-Frank, disclosure is the new buzzword. “Compensation consultants tend to take a very rigid view,” says Gary Hourihan, SVP at Farient Advisors, but “the Compensation Discussion and Analysis and proxy should be a tool to communicate, not a legal defense.”





3. How do you use compensation data?





Some consultants focus on industry data such as average wages and benefits, but “you want a compensation consultant who is not just going to look at that market data and give that back to you as an answer,” says Kristine Bhalla, a senior associate at ClearBridge Compensation Group. A great consultant will look beyond numbers to see trends.





4. Can you stand your ground?





“Executive committees and management should look for people senior enough and self-reliant enough that they’ll tell you what they really think,” says David Swinford, president and CEO of Pearl Meyer & Partners.





5. Are you conflict-of interest free?





New regulation has brought strong conflict of interest rules. The compensation committee must ask whether “there are any business or personal relationships between the consultant and the client,” Glassner says. Other questions: Does the consulting firm rely on only one or two clients for most of its revenue? Is it providing other services to the same clients?





6. How do you measure success?





“The big issue hitting compensation committees right now is how pay levels align with performance,” Hourihan says. The consultant should have a good answer.





7. What is your process for determining pay?





The best consulting firms understand the competitive pay environment, both within and outside your industry, and will have “people on the ground around the world” to provide real-time industry information rather than just public data, according to Glassner.





8. How do you break it to execs when they aren’t going to make as much as last year?





It’s all about communicating professionally. Make sure the consultant can “bridge the gap between the compensation committee and management,” says Hourihan. Often management will have their own consultants, so the compensation consultant must be able to work with them without fighting over turf.





9. What are your professional qualifications?





There are no certification standards for compensation consultants, so compensation committees should request a list of the consultant’s prior clients in addition to references. Ask, “What happened with the last client you lost?” Swinford says.





10. Do you take a long-term perspective?





Look to hire “someone who is able to do the best job they can to allow the company to prosper for a long time,” says Swinford. A well-designed compensation strategy will help your company retain talent and attract new execs.

 

 

For more information, contact: Kristine Bhalla, ClearBridge Compensation Group, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , 212.886.1017, clearbridgecomp.com; Frank Glassner, Meridian Compensation Parnters, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , 415.618.6060, meridiancp.com; Gary Hourihan, Farient Advisors, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , 626.656.4010, farient.com; David Swinford, Pearl Meyer & Partners, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , 212.644.2300, pearlmeyer.com.