The role of Remuneration Committees has been evolving steadily over recent years with key improvements implemented in areas such as accountability, governance and transparency.

With the ongoing and future impact of the pandemic, the landscape for Committees is changing rather more quickly. These changes were highlighted through a recent QCG survey of 24 not-for-profit organisations – issues we see repeated in the commercial sector.

Executives have forgone bonuses and taken pay cuts or freezes to support the wider organisation and their employees, with no clear view on where this will all end.

With the promising effect the vaccines are having, it is now time for organisations to consider their pandemic exit strategy and beyond (including remuneration).

Here is what we think Committees need to have on their agenda – short and long term – and why.

Direction and ongoing review of RemCo work

When considering how to approach the loss of Executive reward, there will be questions about the balance between affordability, competitiveness, reputational risk and external scrutiny to keep on top of. But like many aspects of the fallout from the pandemic, other new world factors will come into play, such as the greater attention being given to alignment between Executive remuneration and that for the wider organisation.

Will the sentiment prevail and, on which of the elements of the overall package, might that apply to, particularly when it comes to incentives and pensions? See below.

Then with these changes in the wind, governance arrangements may well come under closer scrutiny, for example regarding the scope of the committee, its terms of reference and its representativeness regarding a wider group of stakeholders.

What does being competitive really mean?

Our 2020-21 Remuneration Committee post survey event highlighted that organisations feel incentives are not working well but hang on to them for reasons of competitiveness.

At QCG, we stress the importance of aligning targets, performance measures and the calculation of bonus and LTIP awards with delivery of business aims and strategic goals. But what does this mean in a constantly evolving world where targets set at a point in time may no longer be relevant in six months, let alone a full bonus year or three year LTIP?

This brings us onto our next point – remaining competitive. It is important to keep your finger on the pulse in terms of trends for remuneration policy and benchmarking data. We recommend not relying on one data source which may provide a skewed view, instead source multiple data sets and policy changes to provide a comprehensive picture of competitiveness.

The annual cycle and reporting
Whilst it is important to get financial awards right, it’s not all about cash. In the decade since the credit crunch, pay constraints have forced employers to think more about the whole deal – and through engagement we are seeing this more widely at RemCo level, especially on matters such as social awareness, wellbeing, public service, agile and flexible working and influence.

How do you ensure the planning, preparation and evidence gathering is portrayed correctly in RemCo meetings and reports?

With all the evidence on the table and decisions required there will still be complex judgements to be made and carefully explained (where we have often found ourselves the facilitators of conflicting views).

When producing reports, it is key to ensure there is a compelling narrative around all decision making. Organisations should remain transparent and be honest and open with employees and stakeholders. The Committee may have to exercise discretion to act responsibly and avoid unintended consequences, particularly if targets were set pre-pandemic.

Where does all of this leave us?

In all our work with RemCos, there has always been change – but never a time when they have had to pay attention to such a wide range of issues arising from unexpected events.

It won’t be the case that all these issues relate to every organisation’s RemCo; every RemCo faces different challenges at different times.

However, the changing landscape cannot be ignored – now is the time to plan and be pro-active in addressing these issues. Get in touch today.

Beth Willrich, Junior Consultant at QCG - March 2021