erformance-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
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