The value of the independent advisor to the Remuneration Committee

How an independent advisor to the Remuneration Committee adds value to the work of C&B

Discover the value of a good independent advisor to the Remuneration Committee

Remuneration Committees (RemCos) are a topic which seems “far away” for many of the C&B professionals in the field, even the most senior ones, and especially in the Gulf countries, the region where I’m currently based.

Yet, sooner or later, we are all confronted by requests coming from “The Board”, or documents to prepare for evaluation by the Remuneration Committee.

Illustration : the governance structure at an  (atypical) conglomerate

Governance is different in the Gulf, and Board members in semi-government entities are sometimes nominated for reasons other than their experience in the industry of the organisation.

At the same time, in family-owned companies (which for the most part are not listed), family members and family friends are the most likely Board members.

Yet, I was once lucky to work for a GCC conglomerate that was structured much like a public, western organisation with respect to its governance.

There was a Group Board and Boards of operating companies whose members were mostly independent Non-Executive Directors.

They were excellent professionals with outstanding careers in fields related to the industries of the conglomerate, and they dedicated a true portion of their time to the duties of their role as Board members, doing more than just showing up at the meetings and signing off documents.

The RemCo structure at that company

Each Board had a dedicated Remuneration Committee, separated from the Nomination Committee.

First good sign : these RemCos were made of Board members who had truly chosen to be on this Committee and had a real interest in the human capital aspects of the organisation.

Second good sign : the Chairman of the Group Remuneration Committee was  a former HR Director at a globally known and respected British multinational. He understood the situations we were facing and brought both a functional and a business perspective to them.

Third good sign : the RemCos were supported by independent, external advisors who were specialists not just in governance but also in HR. Any feedback we received from them was sensible and realistic, and aimed at designing the best solution to the challenges of the organisation.

What the independent advisor to the RemCo actually did

As Head of Compensation & Benefits for the Group, along with the EVP of HR, I attended every single one of the 50 to 60 RemCo meetings that took place during my tenure.

It was a wonderful experience to see how good governance, supported by true interest and functional expertise in HR, common sense and a clear business vision, and a willingness to work together, can help shape the human capital strategies of the organisation.

In particular, I worked closely with the independent advisor to the Group RemCo, not only prior to the meetings, but also while shaping the new rules of the Long-Term Incentive Plan and preparing for a thorough due diligence for a massive project impacting the whole Group.

The advisor was not content in reading the presentations we were sending out to the RemCo ahead of the meetings.

Representing the interests of the shareholders through the Board, he was also involved in the “philosophy” discussions that led to decisions about incentive features, succession planning approaches, characteristics of the pay for performance system, and more.

The value the independent advisor brought to my role as Head of Performance & Reward

What a fantastic opportunity that was ! Yes, it seemingly added one layer of informal approval to any significant design changes we wanted to introduce in our Talent and Reward strategies.

But a Head of C&B is often in a difficult place, trying to balance the interests of the business and those of employees – and often under informal but nonetheless real pressure to keep the Top Management of the organisation happy… which does not always instantly align with the interests of the shareholders.

That alone puts you in a tough spot when sitting on the RemCo meeting and trying to defend the proposal you are putting forward on behalf of the organisation.

And to top it up, you don’t get much real understanding internally from your peers, colleagues and leadership, as C&B is quite specialised and few people in the organisation can really take the time to learn and understand the real, human implications of what sometimes appear as purely technical decisions.

This can be a very lonely job….

Which is why I was so happy to have this independent advisor to debate with.

  • He knew and understood the technical complexities and implications of some decisions.
  • He knew and understood the needs of the business, and of employees.
  • He knew and understood the needs of the shareholders, as expressed through the Board members.
  • And he also genuinely tried to find the best possible way forward, helping me forge a balance between these sometimes conflicting demands.

This was true support.

Not an absolute opposition by principle, and not a systematic, thoughtless approval.

Sometimes he helped me change some features or approaches and convince the CEO and Leadership Team, and sometimes he supported some of our proposals and helped me convince the RemCo members that this was right for the organisation.

He challenged some of my thinking, brought his external vision to the discussion, and also learned from me about the cultural elements influencing pay design in the region, as well as some of the more practical aspects of the job.

All in all, I considered him a true peer and colleague who brought value to my role and impact in the company.  Thanks Drew !

My wish for all C&B professionals

I hope this kind of interaction happens to all C&B professionals who have to work with the independent advisors to their Remuneration Committees.

When, right from the start, you view the relationship as helpful and fruitful, you will derive great benefits from working with these advisors, and the quality of your own work will increase as you produce proposals that are balanced and respect the needs of all stakeholders.

On to you now : Have you worked with independent advisors to the Remuneration Committee ? What was your experience ? Please share your story in the comments !

 

Related posts :

A slightly different version of this post first appeared on the Teneo blog.

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