Magazine article Workforce Management

Comp Reforms Could Mark Huge Hr Change at Financial Firms

Magazine article Workforce Management

Comp Reforms Could Mark Huge Hr Change at Financial Firms

Article excerpt

EXECUTIVE COMPENSATION

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," says 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," says Alan Johnson, a New York-based compensation consultant. …

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