Setting Up Performance-Based, Long-Term Incentives
We are particularly effective in working with compensation committees to solve difficult and complex issues, especially when they may involve adverse publicity:
The Board of a large credit card company retained The Delves Group to thoroughly examine the overall compensation structure for the top 30 executive positions. The company had been cited in the media for its extraordinarily high pay levels, and the Board suspected that a serious exposé might be damaging to the Company. Although the Company had performed extremely well for more than a decade, growth rates and margins were beginning to decline.
We conducted an in-depth analysis of every element of compensation covering a 10 year period, including the cumulative effect of option and stock grants over the time period. In a series of meetings with the Compensation Committee, Board members came to terms with the magnitude and pervasiveness of the situation. With the Board’s backing and direction, we worked closely with Management to develop a plan to substantially reduce compensation over a two-year period and create significantly stronger ties to long-term performance.
With our assistance and Board oversight, Management cut total compensation by 50% over two years and converted time-based, long-term incentives to performance-based, long-term incentives. Management also substantially reduced its perquisites, and the Board improved its corporate governance oversight practices. In the end, the Company transformed from being an obvious target of executive pay critics to being written up by the Corporate Library for its exemplary executive pay and governance practices.
