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Performance Payday

Performance-based compensation rules the day among the top-paid 30 HR executives of 2007. And given that these are the executives overseeing the compensation plans for their workforces, that’s good news for employees and shareholders, experts say.

September 30, 2008
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Related Topics: The HR Profession, Benefit Design and Communication, Workforce Planning
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Performance-based compensation rules the day among the top-paid 30 HR executives of 2007. And given that these are the executives overseeing the compensation plans for their workforces, that’s good news for employees and shareholders, experts say.

Of the 30 executives on the list, 12 received discretionary bonuses. Ten of those executives received the discretionary bonuses on top of formula-based bonuses. The list was compiled for Workforce Management by Salary.com.

     "That might suggest that the formula-based bonuses didn’t effectively reward these executives for their performance, and so the companies needed to go beyond that," says Russell Miller, managing director of Executive Compensation Advisors, a New York-based subsidiary of Korn/Ferry International.

The challenge with formula-based bonuses is that boards determine them at the beginning of the year. Given the tough markets that many companies started seeing in 2007, it would make sense for these firms to want to give their executives something more based on their actual performance, Miller says.

At the same time, the base salaries for the HR executives on the list fall into a tight range. "The vast majority of these salaries fall between $250,000 and $500,000," Salary.com president Bill Coleman says. "That’s a good thing from shareholders’ point of view because they would rather see more variable compensation and less in base pay, which can be viewed as an entitlement."

Coleman also notes that given HR’s role in determining compensation levels at the company, it makes sense that their pay should be in line with the best practices. "There is a general concept that base pay should be less than $1 million," he says.

While no one on the list stands out for overall compensation, experts say they were surprised to see that C.J. Duvall, executive vice president of HR at Alltel Wireless, received $5 million in "all other compensation."

However, the $5 million comes from a change-of-control agreement that Duvall and the other four top-paid executives at the company had in place. In November, Alltel was acquired by Atlantis Holdings, a private equity firm, thus triggering the change-of-control payments.

Duvall’s change-of-control agreement calls for him to receive two times the sum of his annual base salary plus the maximum of his short-term incentive and long-term incentive bonuses, while the other named executives are earning three times that amount, observers note.

"This could be something that HR executives look at and say, ‘See? This proves we are not as valued as the other executives,’ " Coleman says.

Workforce Management, September 8, 2008, p. 37 -- Subscribe Now!

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