In my work with the compensation committees of boards of directors, as both an internal compensation expert as well as an external consultant, I’ve found that the most effective committees have certain qualities and behaviors in common. If you want to maximize your performance as a compensation committee member, here’s my best advice.

Want to make an impact as a compensation committee member? Know your role, stay curious, know there's no single right answer, and use your resources! #compensationcommittee #boardofdirectors #boardmembers Click To Tweet

1. Know your role.

Simply put, compensation committees represent and advise the full board of directors on executive pay. As a committee member, you’ll play a role in determining pay (including base pay, bonuses and long-term incentives) for the CEO and key officers. Most compensation committees also conduct CEO performance reviews, and advise the board on the overall compensation and benefits philosophy for the organization, stock or equity awards and compensation for the board of directors itself.

Compensation committees also hire experts to help and advise them, including legal, accounting and compensation consultants. And they typically share responsibility for the overall organization’s total rewards (pay and benefits) budget with the board’s finance committee.

2. Stay curious.

If you haven’t been directly and regularly involved with executive pay, getting visibility to compensation for an entire organization’s leadership team can be a little overwhelming. If you can stay curious (and ask tons of questions), you’ll learn lots, and you’ll be able to assess where best to focus your efforts.

When you’re first assigned to the compensation committee, you may find things that don’t immediately make sense to you. Curiosity can serve you well here, too. Seek to understand before jumping into solution mode. There might be good reasons for the way things are. That said, if you’re uncomfortable with anything, ask questions.

While compensation is by nature data-oriented, there’s no single perfectly correct answer on how to reward people.

For example, company benefits are influenced by the organization’s culture. What might be a priority for an athletic equipment manufacturer (free on-site gym) may not be the priority for a veterinary clinic (discounted pet care). And CEOs of nonprofit organizations will likely be paid less then their for-profit company counterparts of similar size.

Pay should be informed by competitive data, market conditions and company and executive performance (both short- and long-term). You, as the compensation committee, must consider all of these factors when making decisions for the company you’re advising. And because there are many ways you could go with each decision, it’s even more important to decide from an informed position.

4. Get the most out of your resources.

As a compensation committee member, you’re not expected to be a technical expert on compensation. Your role does, however, require you to have a working knowledge of pay and benefits practices and to call on experts when you need them.

Compensation experts inside the company will have valuable insights on the practical aspects of how pay policies come to life in that company. When you’re recommending program changes, these internal experts can help you understand — and plan for — the consequences (both intended and unintended) of your decisions.

In addition, strong external compensation, tax and legal consultants have the advantage of seeing pay practices across companies and over time. By using that experience to inform your decisions, the committee can both save time and avoid potentially costly mistakes.

It’s not always easy to be a compensation committee member. When you know your role, stay curious, explore solutions and use your resources wisely, you’ll be more effective in your role, and you’ll probably have more fun too.

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