Will TARP impact the executive compensation plan design of non-TARP companies?


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business-strategy-chess-41Ask Our Experts:  Grahall’s Garry Rogers reflects on how TARP may impact executive compensation plan design.

In the course of our work with clients we answer questions. Sometimes these questions are very “client specific”, sometimes more general.  We thought it would be valuable for our OmniMedia readers to hear some of the questions posed by our clients and some of the insights we shared on these topics.

Recently a client inquired about our thoughts about the impact that TARP will have on the compensation plan design of non-TARP companies. The full breath of the impact is yet to be felt, but one major change is that the dialogue in the Board Room and with Compensation Committees is no longer simply how to pay for performance, but how to pay for RISK-ADJUSTED performance. We applaud this change!

Firms and Boards must start to examine an executive’s total compensation potential: what an executive could earn based on company and stock price performance.

For years Grahall has used a methodology when developing plans that used rigorous scientific and mathematical modeling including risk analysis and incorporating the client’s business and people strategies.

Our EIA (Economic Impact Analysis) considers the entire range of payouts that would be due to an executive across the entire spectrum of performance – below, at and above targets.

EIA provides an alternative way of viewing executive compensation pay packages that is different from a typical executive competitive pay analysis.


1) Illustrates the potential compensation opportunity individually for the various compensation components and in total over a period of time. Pay is not a static amount that remains the same as of the day it was awarded.
2) Shows the relationship between pay and performance in terms of company financial and stock price performance and incorporates risk.
3) Simulates the potential results of a compensation plan using historical performance as a predictor of future expected performance.

Our goal for executive pay consulting assignments is to have the Board, the shareholders and even the media satisfied with an executive’s pay rather than shocked and angered: where pay is high so will be risk adjusted performance. Grahall’s methodologies and experience delivers this result.

If you have a question pertaining to executive compensation, total rewards or any other aspect of Grahall’s business expertise or want to further information, please write to Garry Rogers  at garry.rogers@grahall.com or contact our OmniMedia Editorial Director  at edie.kingston@grahall.com.

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