HR REWARD AND BENEFITS
approved by shareholders.” But some experts believe the HR profession can make a valuable contribution to the process. Graham Rowlands-Hempel, a consultant in the employee incentives practice at law firm Linklaters, believes the Cable proposals will ensure there will be more contact between the HR department and the remuneration committee and investor relations team. “Increased scrutiny on executive pay and binding shareholder votes are going to be hot topics for any board in the future, and companies will want to ensure their pay policies are accepted,” says Rowlands-Hempel. “As such, HR will be asked to provide more information on
how pay and incentives are structured, how these rewards compare with employee compensation, and how they compare with other companies. HR will also need to ensure the details of executive remuneration are understandable, which is not always easy, as some incentive schemes can be very technical and depend on several variables.” Rowlands-Hempel believes while “there will undoubtedly
be an inordinate amount of time spent on ensuring executive pay packages are signed off by investors”, and HR will find it cannot devote as much attention to more strategic areas as it would like, “there is no doubt in my mind that the profession will benefit from Cable’s reforms. “HR will have more contact with remuneration committee and executive team and will forge better relations with the
Remuneration
committees will want expert
are using to determine top pay
that will gain investor support
Jim Wright/Cobbetts
guidance from HR that the metrics they
are the right ones
The remuneration committee – in brief
Typically, a company’s remuneration committee is chaired by an independent non-executive director, with at least the majority – if not all – of its members also being non-executives. It is also not unusual for the company secretary to be a member. However, in some companies, the chief executive also sits on the committee, except where his/her own remuneration is being discussed. As a rule, HR directors do not sit on the committee, but report into it and attend all of its meetings, which can take place three or four times a year. Committee members do not need to have prior experience of
HR-related issues, but it is becoming common practice for non-executive directors to receive training from HR to make them more aware of market trends and regulatory changes.
18 HR Supplement September 2012
investor relations department and in-house counsel,” he con- tinues. “I also suspect many companies will opt for annual votes on executive pay as part of best practice, so HR will be seen as a valuable internal resource to help with that process,” he adds. Charles Cotton, performance and reward adviser at the
Chartered Institute of Personnel and Development (CIPD), believes, ultimately, it will be the board that determines the level of HR’s input. “HR will be involved in the process as much as the remuneration committee wants it to be,” he says, adding that “HR is there to provide information and guidance to the committee, but it is not HR’s job to lead the process”. But Cotton also believes Cable’s proposals provide HR
with the opportunity to demonstrate its value. He elaborates: “While HR will not be directly responsible
for drawing up executive remuneration schemes, it is an invaluable tool for the remuneration committee to draw on, and it is more than likely committee members will call on the HR director’s expertise more regularly, particularly once the proposals come into effect. HR therefore has more direct contact with non-executives, and is in a position to raise other strategic issues HR could help with.” Jonathan Maude,
employment partner at law firm McGuireWoods, says the HRD’s involvement depends on the
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