The rise of deferred incentives may go some way towards solving the issue of executive accountability but at the same time it is making the process of executive remuneration reviews increasingly complex and time consuming. This increase in complexity has led to the emergence of a new class of transactional HR tool: enterprise compensation management (ECM) technologies. The aim of such tools is to automate compensation planning and administration, supporting line managers as they make employee compensation decisions.
Fear of accusations about fat cats lining their own pockets with little regard for employees have haunted executive remuneration decisions in the past few months. Ever since last year's spectacular falls from grace by just a few US financial institutions, Australian executive packages have come under increasing media and shareholder scrutiny.
In April, the issue made national political headlines when the Federal Government announced a productivity commission inquiry into executive remuneration in Australia. While releasing the accompanying issues paper, commission chairman, Gary Banks AO stated, "The inquiry will specifically examine whether the current remuneration arrangements are effective in driving corporate performance or whether they have the potential to lead to undue risk taking or other actions that may not be in the best interests of shareholders or the wider community." With the final report not due until December 2009, interest in executive remuneration is unlikely to disappear in the near future.
Also in April, Insync Surveys released the study CEO remuneration - a boardroom perspective, in which 625 directors were asked for their views on executive remuneration. Only 55% of those surveyed considered that their CEO's remuneration packages were appropriate. When it came to assessing senior management remuneration, that figure dropped to 50%.
The business environment has changed. The economic situation calls for cost cutting, and fixed remuneration increases and incentive programs make a good target for immediate dollar savings. From a public relations perspective a new, cautious approach to remuneration makes sense.
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