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Article | Executive Pay Memo – Western Europe

"Guiding Principles": Linking purpose to companies' HR priorities

Executive Compensation

By Scott Matarese | August 8, 2018

Executive compensation is still a relatively young profession and field of study, but core, overarching principles have started to coalesce, including the principle of purpose.

Executive compensation is still a relatively young profession and field of study, but core principles have started to coalesce, as discussed in “Four core principles of executive compensation,” Executive Pay Matters, July 24, 2018. The importance of these core principles is further detailed in an article published in the June/July 2018 issue of Workspan magazine, a piece in which Don Delves, Willis Towers Watson’s executive compensation practice leader for North America, focused on the four overarching principles, including the principle of purpose.

Purpose captures why a corporation exists, its mission with its various constituents, and its strategy and objectives. A company’s purpose, and the link between its purpose and rewards program, are particularly relevant today as a broad range of stakeholders — including investors, employees and customers — are demanding that companies consider and articulate their social purpose and hold management accountable for pursuing that purpose.

The pharmaceutical industry has historically been, and continues to be, held to a “social contract” that balances its interests with those of patients and society. As the former head of executive compensation for a global pharmaceutical company, I was able to experience firsthand how that purpose is considered across all aspects of the business. As many industries also balance the interests of multiple stakeholders, we are witnessing daily the very public challenges to companies to articulate their purpose and manage their business in line with their purpose.

My experiences as a company insider were affirmed by responses to Willis Towers Watson’s 2018 Getting Compensation Right Survey, the latest installment of the Talent and Rewards Breakthroughs Survey series. The results show that companies are universally focused on the interplay of social issues and rewards. Fair pay and transparency are changing the way we view the role of rewards and how technology can enable decision making in an increasingly complex environment. While the challenges are daunting, the potential for true impact has never been higher. With the right resources, rewards leaders are positioned to have a more meaningful and positive impact than we have had at any point in this evolving practice.

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