Practices

Compensation Philosophy

The importance of a formal executive compensation philosophy should not be underestimated. A carefully conceived and appropriately implemented executive compensation philosophy provides a conceptual framework for unifying all components of executive compensation. This statement is one of the building blocks of good governance and provides a foundation for compensation decisions. 

If your organization currently follows an informal compensation philosophy, we can assist in developing a formal statement that reflects the organization’s culture and the committee’s objectives. IHStrategies frequently assists organizations in developing a formal compensation philosophy statement or refining/revising a current statement. 

Our compensation philosophy development process begins with administering a survey that seeks confidential feedback from each individual committee member. This approach circumvents potential barriers occasionally created by group dynamics. Following this survey, we individually interview the CEO and committee members or conduct a group discussion, at your direction. Our final steps are to present a proposed compensation philosophy to the committee and draft the final statement based on committee member feedback.

Elements included in the development of a formal executive compensation philosophy: 

  • Assigning authority and responsibility for decision-making
  • Identifying a peer group or peer groups
  • Defining the desired competitive positioning of salaries, incentive awards, benefits, perquisites and severance
  • Identifying the preferred mix of total compensation elements

If you already have a formal compensation philosophy statement, we can assist in reviewing and either revising or reaffirming the philosophy statement. Periodic reviews are helpful, as committee members turn over and the in-depth understanding by those originally involved in developing the statement is no longer present or simply lost over time. Additionally, changes in the healthcare environment, competitive marketplace, and your organization can result in new thinking regarding peer group and competitive positioning.