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The quality of being clear and transparent

The 2010 theme for compensation programs at all levels appears to be Transparency. I decided to look for definitions of this word/concept on the Internet. The first is mentioned in the above headline. The second is a bit more comprehensive and telling:
  • Transparency is a general quality. It is implemented by a set of policies, practices and procedures that allow citizens to have accessibility, usability, informativeness, understandability and auditability of information and process held by centers of authority (society or organizations).
While the news has been full of stories of executives in all industries making huge salaries and large bonuses (yes - this started long before the recent recession), this recession has finally brought out a more concrete response from shareholders and boards of directors.

Recent News Headlines:

  • General Mills shareholders voted to approve a "say on pay" policy. Under this new policy, shareholders will be able to cast an advisory vote every other year on policies and practices used by the company's Board of Directors Compensation Committee to set compensation for the officers named in the company's proxy statement.
  • Kennedy Consulting recently reported that Hewitt Associates executed a partial divestiture of its Executive Compensation Consulting business. With the recent SEC ruling on fee disclosure rules and the current political environment, clients want to move toward completely independent advisors when working with executive compensation.

Not just for executives

Employees at all organizational levels want transparency. While I do NOT know anyone that truly feels overpaid, people do want to better understand how and why they are paid what they are paid.
  1. Where did my salary range and actual salary determination come from?
  2. Why did my bonus pay out (or not pay out) at the level it did?
  3. What can I concretely do through job performance to impact my salary/bonus?

It all ties together - toward engagement

One of the key themes in the area of employee engagement is ongoing direct and honest communication. Compensation is no different. People want the truth - and should be able to understand it when they are given information and can engage in a dialogue with their management. The Shareholders and/or Board of Directors should NOT have to dictate compensation policy to achieve transparency. Enough said!