Q&A Ronald James: Compensation Committees on the Hot Seat

by Jamie Reeves for Boardmember, June, 2011.

Corporate Board Member recently interviewed Ronald James, president & CEO, Center for Ethical Business Cultures and compensation committee chair for Best Buy Co. With all that is swirling around proxy season, we knew there would be no shortage of hot topics on James’s mind.

Ron, what do you feel are the top three executive compensation issues in 2011?

One, everyone is focused on say on pay, and rightfully so. That’s the most immediate issue, because it’s inviting shareholders to weigh in on whether they approve or disapprove of executive compensation.

Second, while not directly tied to executive compensation, I’d have to say the SEC deliberations on the whistleblower policies are on my mind, primarily because they provide an incentive for people to go externally and report to the SEC any questions about fraud or bad behavior inside the organization. This has the potential to undermine investments that organizations are making in getting the culture right, a culture where people feel comfortable coming forward to disclose [information] internally and thus giving the company a chance to remedy concerns.

Last is this notion of there being an imbalance on the time and attention of the executive compensation committee. I think executive compensation committees have taken on the role of looking at the human resources element of organizations; specifically, are we creating talent and a talent pipeline in the organization? Do we have good succession plans in place? Compensation committees, on behalf of the board, also need to think about their organization’s culture and diversity, [although] those themes take a back seat when you need—and rightfully so— to focus time and attention on making sure you’re complying with the emerging executive compensation rules and regulations.

Do you have a preference on the decision for say-on-pay vote frequency?

My perspective is still a longer term—perhaps a three-year vote on say on pay. There needs to be time for the shareholders’ feedback to be reviewed and incorporated into new thinking and applied to new plans, and time to evaluate whether those changes or new ideas are actually working.  (continue reading… )

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