Onboarding discussions have certainly become more frequent in today’s boardrooms, but we still see little dialogue related to onboarding committee chairs—particularly compensation committee chairs. Stronger guidance is needed in this area. What characteristics, knowledge, and skills do the best committee chairs share? How can they swiftly and effectively get up to speed in their new role? And how can chief human resources officers (CHROs) support the process?
In this episode, Part 1 of a two-part series, host TK Kersetter talks with Tim Bartl, the CEO of the Center On Executive Compensation. The Center has just released The CHRO’s Guide to Compensation Committee Chair and Director Onboarding, which compiles best practices for selecting, transitioning, onboarding, and educating compensation committee chairs and board directors. In part two, board member Laurie Siegel will talk about her experiences serving on the compensation committees of CenturyLink, FactSet, and California Resources Corporation.
Prerequisites, processes, and preferences from the field
According to Bartl, the Center’s new guide emerged to meet an urgent need. “Our subscribers started asking us for resources that could help them, like templates on committee chair onboarding,” he said. “We found there weren’t a lot out there.”
The Center interviewed compensation committee chairs, CHROs, and heads of total rewards programs. Among the questions they asked: What did they look for in an ideal compensation committee chair? One universal preference was for directors with CEO experience. “They have led large organizations. They understand the link between strategy and rewards, and they have also had to do a lot of external engagement as well,” Bartl said.
Although onboarding processes varied from informal to formal, compensation committee chairs themselves expressed a strong preference for detailed step-by-step processes, clear communication about the level and amount of detail they’d need to master, and strong facilitation throughout the process.
Ideally, this onboarding would include at least one full- or half-day session with the CEO, the general counsel, the CFO, the CHRO, and the heads of business divisions, “to get that nexus into strategy and how compensation has worked in practice,” Bartl said.
“Those first 90 days as the chair are so important,” he said, noting the alignment of the committee chair with the calendar for meetings and preparation and determining how the chair wants to work with the team. This team includes proxy advisory firms and possibly the board’s external consultant to learn what’s worked effectively before and what hasn’t.
“A thinking partner” for the CHRO—and corporate strategy
[Compensation committee chairs] have to have an interest, even a passion, for the link between business strategy and rewards.
— Tim Bartl, CEO, Center On Executive Compensation
Bartl noted that his group’s new guide explicitly lists what a compensation committee needs to know before its first meeting. For starters, the chair needs the acumen to understand how metrics and targets align consistently to business strategy.
“Compensation can help drive the strategy the company wants to achieve. Being able to understand and appreciate that nexus is so important,” he said.
The chair also should appreciate the link between strategies for talent and compensation. “We found that a lot of compensation committees have talent as one of their primary objectives, and that’s increasing.”
Having someone who’s been on the compensation committee and knows how things operated before is important, Bartl said. So is having a chair with both the presence of mind and understanding to pull in current practices, conduct due diligence with outside consultants, and influence both management and committee members.
“You really want somebody who’s going to be a thinking partner with the CHRO and their teams who can create constructive disagreement to effectuate the best arrangement for the company,” he said.