Compensation Design Group says Companies Must Pay Extra Attention to Executive Compensation During a Downturned Economy

NEW YORK, NY - January 8, 2002 -- As companies go through the process of restructuring their organizations to survive in this troubled economic environment, opportunities for restructuring executive pay practices should not be overlooked, according to Frank Glassner, CEO of the Compensation Design Group.

"Now is an excellent time to revamp compensation programs with focus on three principal areas," said Glassner. "Pay top compensation for top performance, emphasize long-term results and seek fairness."

Glassner said that with earnings created by eliminating unnecessary functions and non-earned incentive payouts, companies can apply the savings to breakthrough levels of compensation for the high performing executives and key employees who remain. "In doing this, companies must ensure that they have the right people at all levels so that those performers at the top will be worth the larger sums they are paid," said Glassner.

When emphasizing long-term results, Glassner noted that the focus should be on development of compensation programs where the level of pay depends on the level of results achieved by executives and key employees. "In this light, executives eagerly welcome an opportunity to feel that they have real ownership through stock or other equity-based incentives," said Glassner. "The method of determining the incentive value should be fair to both executives and shareholders, but not too unwieldy to be applied annually."

Glassner noted that companies must also seek fairness in designing their compensation programs - particularly during a downturned economy. "Too often, big compensation packages and rich incentives go to an individual who has been hired from the outside," said Glassner. At the same time, there is a natural tendency to pay existing executives only about as much as it takes to keep them. After a few years of this practice, there is a gradual loss of the most capable, the biggest risk takers."

Glassner said that the process of revamping an executive compensation program should involve a review of the current overall compensation programs, making note to retain the elements of the programs that work well. Also, sunset programs that are least useful, or the most abused, and reconstruct the balance of the existing programs. "A company's compensation program should always carry a clear message about the organization's strategic direction and performance demands," said Glassner.

In closing, Glassner said, "Companies should make the rewards as big as the challenge, dare to be different, and bet on people -- and let them know it."

Headquartered in New York, the Compensation Design Group focuses on delivering cost effective and customized compensation, benefits and human resources programs. The company's team of experts is among the nation's top professionals in the field and is dedicated to ensuring that the client experience with the Compensation Design Group is both rewarding and profitable.