On the 2021 compensation committee agenda

The events of 2020 and rising expectations for more engaged board oversight of corporate leadership; employee health, safety, and well-being; and the company’s evolving role in society all suggest a new era ahead for compensation committees. The continuing impact of COVID-19 on people, communities, and the economy as well as the heightened attention to systemic racism and income inequality has put a spotlight on a host of issues in the compensation committee’s wheelhouse. From the alignment of compensation plans and incentives with long-term strategy and corporate purpose to the focus on human capital management (HCM) and telling the company’s story with meaningful metrics, the issues that will feature prominently on the committee’s agenda will be pivotal to how the company navigates 2021 and positions itself for the future. 

The following considerations may be useful for compensation committees to keep in mind as they develop and carry out their 2021 agendas:

• Redouble the focus on getting the compensation right.

• Consider expanding committee oversight of HCM. 

•  Clearly align incentives with long-term value creation.

• View shareholder proposals related to compensation and HCM as bellwethers.

• Leverage expanded disclosures requirements and ongoing shareholder engagement as an opportunity to tell the company’s’ story.

• Be aware of the continued scrutiny on director pay.