Executive compensation remains a volatile topic both in the press and in the board room.  What are some of the major trends in public company executive compensation?  A panel at this morning’s breakfast meeting of the National Association of Corporate Directors/New England suggests among other things:

• In the United States, the range of CEO compensation is shrinking.  The median remains the same but the extremes are moving toward it.
• Boards are struggling with the degree to which they should push back against what is becoming more or less standard compensation packages, driven by shareholder advisors such as ISS and GL; boards want to exercise directorial discretion to craft solutions that fit their particular company.
• To compensate senior management based upon shareholder return is elusive; some shareholders are short-term, others are long-term.
• To some degree,” say-on-pay” is a referendum on company performance, disconnected from the quality of management performance.
• Salary is an emotional issue, CEOs want to track their peers, but it is not an incentive driver in most cases.
• Long-term incentives in public companies these days divide between use of “performance shares” tied to long-term corporate objectives, and  stock options or restricted stock in much the same fashion.
• Long-term goals can discentivize; if something unexpectedly interferes with incentive program goals early on, executives can become depressed and can cease to strive over the balance of the period.
• Sometimes forgotten is the board role in retention of the executive corps; good succession planning requires maintenance of a “deep bench” as well as reliance on outside resources, and the board should be asking: “who is ready now? if not now, who will be ready in three years?” and, for the latter group, what sort of training does that person need in order to make requisite progress.

The applicability of public company practices to private companies will vary depending upon scale, history, presence of outside capital, and the board involvement of founders.  However, the discipline of thinking about compensation in relation to identified goals, implicit in the public company world, nonetheless is a valuable skill for any mid-market enterprise.