Board of Directors Governance and Pay

Abstract

Board governance and rewards program design needs to be an active, dynamic, adaptive and situational effort and should be considered within a strategic framework that includes the role of the board, industry phase and important influencers (government, public, competitors, etc.), company stage, vision, mission, values and beliefs, strategies and/or company performance. Not only does this expansive approach provide a more complete framework within which to understand and develop appropriate board governance and pay, but it sends the right message to shareholders and executives as well. While director compensation can be structured in many ways, simplicity and transparency should be the guiding principles. Each company should determine the optimal approach to the “money, mix, messages and management” of components. These must reflect the organization’s size, situation and the role and importance of each director to a company’s long-term success.