By Staff Report
Jun. 16, 2009
The Obama administration’s executive compensation proposals would not only increase the workload of compensation and HR managers, but they may also change how firms—particularly those in the financial services sector—recruit talent.
On June 10, Treasury Secretary Timothy Geithner proposed a series of changes to how companies determine executive compensation. Among them was allowing shareholders to have a nonbinding vote on executive compensation and an effort to reduce incentives that result in executives taking excessive risks. Specifically, the administration wants companies to replace short-term bonus plans with more long-term incentive plans, such as granting restricted stock.
If passed into law, these proposals could mark a massive change for financial services firms, which largely rely on mammoth annual bonuses to recruit and retain talent, experts say.
“The days of an individual producer making a $20 million bonus in a year are going to decline,” said David Swinford, president and CEO of Pearl Meyer Partners, a New York-based executive compensation consultant.
The challenge for HR and compensation professionals will be to figure out how to define risk and structure compensation in a way that makes sense, experts say.
“What’s troubling about this idea of defining risk is that when you look at the blowup we are living in right now, it didn’t seem incredibly risky before it happened,” said Alan Johnson, a New York-based compensation consultant. “Who thought we could go broke on mortgages?”
To address this, compensation and HR executives will have to work closely with their compensation committees to develop an analysis that assesses the risk of their companies’ incentive plans, said Andrew Goldstein, co-practice leader of executive compensation in North America for Watson Wyatt Worldwide.
While the proposals still have to go through Congress, experts agree that these changes along with President Barack Obama’s call for increased regulation of financial services companies will result in these companies changing the profile of their ideal job candidates.
“I do think that HR will put more emphasis on people who follow rules well as opposed to the super-entrepreneurial types,” Swinford said.
The days of getting rich quick on Wall Street are over, and that means companies are going to want employees who have a longer-term perspective, said Jack Dolmat-Connell, CEO of DolmatConnell & Partners, a Boston-based executive compensation consulting firm.
All of the increased regulation over the financial services industry may make it harder for these firms to attract and retain talent, Goldstein said.
“The question is whether those people who would have otherwise been attracted to work in this industry still want to do so, given more government regulation,” he said. “I think some of the bloom is off the rose.”
We build robust scheduling & attendance software for businesses with 500+ frontline workers. With custom BI reporting and demand-driven scheduling, we help our customers reduce labor spend and increase profitability across their business. It's as simple as that.
Employee Engagement12 practical employee appreciation ideas for better engagement and retention
Summary Showing appreciation to your employees improves engagement and retention. There are 12 practica...
employee appreciation, engagement, HR, raccoons
ComplianceCalifornia fast food workers bill: why it’s more than meets the eye and how to prepare
Summary: California signs bill establishing a “fast food council” that has the power to raise the indus...
Employee Engagement7 statistics on employee turnover in 2022 every HR manager should be aware of
Summary July 2022 saw 5.9 million total separations – More Replacing a full-time employee can cost up t...
employee retention, employee turnover