ABSTRACT
At a staff meeting, human resource student Don Howard asked the group about whether they really should engage in executive compensation consulting as a part of their practice. Whereas executive management determines how much and how employees are compensated, it is typically the board that is responsible for managing executive compensation. Prevailing compensation levels in the marketplace are determined in a number of ways: proxy information, surveys, board members, analysis done by human resources and/or outside consultants and even the newspaper and magazine reporting. The SEC disclosure guidelines include a requirement that the compensation committees of the board develop and articulate a compensation philosophy and demonstrate that the programs they approved were consistent with that philosophy. The compensation for being a board member has shifted substantially from being mostly cash to being mostly stock options or other devices whose value is determined in a manner similar to that of shareholders, which should encourage alignment with shareholder interests.
