There is a global battle for talent. So the board of directors is becoming more involved in finding ways to attract talent.
“This larger, more diverse portfolio of responsibilities means that boards recognize the critical challenges facing global organizations today,” said David Cross, partner with Mercer, which released Executive Rewards Survey on April 21.
“These challenges include the shortage of leaders with expertise to run complex organizations, the intense competition for executive talent around the world, the surge in the cost of attraction and retention, and the outdated or frail succession plans that can leave organizations vulnerable.”
Issues that are affecting to recruiting talent include executive compensation, increased globalization, industry consolidation, changing technology and an aging workforce.
“The influence of shareholder regulatory groups and public scrutiny is causing many companies to coalesce around similar types of compensation programs, yet similarity in plans may not address unique business priorities, talent requirements or the complex environment,” said Gregg Passin, senior partner with Mercer. “Finding that delicate balance between managing executive talent as both a risk and a business driver will be a competitive advantage.”
Mercer’s survey shows that the economy’s influence on the adjustments being made to executive reward programs is declining this year. Also, the study finds that the impact of proxy advisory firms is slightly increasing as more organizations try to align programs with advisors’ guidelines. According to the survey results, changes to annual and long-term incentive programs, use of special retention grants, and grant values have increased in 2014 as a result of proxy advisors’ guidelines..
One notable change in plan designs is the continued shift away from options relative to the increased use of performance awards in delivering long-term incentives to executives. Survey findings show that few organizations are making changes to current stock option plans (4% of survey respondents are increasing use while 4% are decreasing use). More significantly, 10% of organizations are planning to increase the use of performance shares in 2014, and 5% are increasing use of restricted shares.
“It is clear that companies are going through a transition right now,” said Mr. Cross. “Strategic actions like aligning programs with global practices, integrating executive programs with broader workforce management issues, assessing all elements of compensation, and applying metrics to identify objective insights about organizational threats and opportunities can help companies be better prepared for the future.”