A central guiding principle for executive compensation: Alignment

May 22, 2018

Alignment is important to executive compensation because it gets to the heart of pay for performance. The primary objective of all executive compensation programs should be to create alignment between the interests of management and the interests of owners. It should also be to motivate and reward excellent performance, but performance towards the goals and objectives of the company’s owners.

Alignment also goes beyond the relationship between managers and owners. Compensation plans can and should foster alignment from the top to the bottom of an organization, as well as across geographies and divisions. Part of our job as executive compensation professionals is to determine how much alignment is desired between different levels in the organization as well as between different business units, divisions or geographies.