The Best Defense is a Sound Policy


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expert perspective telescopeExpert Perspective by Grahall.

An article published on May 8, 2009 in titled “Outcry on Exec Pay May Spur Rise In Whistle-Blower Suits” discusses two recent suits brought by former employees of McDonalds and Citizens Republic Bancorp, each alleging that they were fired for questioning the executive compensation practices of those companies.  Grahall finds it particularly noteworthy that McDonald’s, a high profile Fortune 500 company, finds itself in this situation.  It is more likely to see this kind of behavior in a small company with an “imperial CEO”.

Regardless of company size or the temperament of the CEO, the best way for companies to avoid unwanted publicity regarding their executive compensation practices is to make sure those practices are defendable and above reproach both by employees, the media, shareholders and the government.  Unfortunately for McDonalds and Citizens Republic Bancorp, not only were their compensation practices in question, it also seems that their human resources policies were objectionable.  And although in our system of laws, both these companies are “innocent until proven guilty” the court of public opinion will likely condemn these companies’ executives, boards and HR departments, regardless of the legal outcome.  

So what can companies do to avoid such negative publicity?  Well for those who might already have fired an employee for questioning executive compensation, the horse is already out of the barn and it would be wise to speak with counsel.  Counsel would be wise to recommend a complete review of executive pay practices and HR policies and procedures.  The best defense is a good offense, and fully analyzing and understanding the circumstances will help during litigation.

Certainly most companies won’t find themselves in such unpleasant circumstances as McDonalds and Republic, but it is still sound practice to review your compensation policies, and ensure that should an employee question these practices that they are defendable and that employees in fact have a safe haven to raise these questions without reprimand.

In our experience there are two paths that companies can follow to ensure that their compensation and HR policies either together or individually are not a Trojan horse of trouble:

1) Have a thorough review conducted by unbiased external resources
2) Have your staff and managers fully trained to conduct this review

Whichever approach you take, Grahall can assist. Our Consulting Partners and Rewards Temps have the deep technical knowledge and experience to conduct the review, make recommendations and help with implementation.  Grahall’s Learning Institute offers a 4-day intensive training course covering the Grahall Total Rewards methodology for reviewing, developing, and implementing a coordinated suite of pay and non-pay programs that enable an organization to better execute on its business strategy.  Participants leave with the knowledge and skill to revise or develop a Total Rewards Strategy system.

Contact us for more information on this subject.

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