Designing compensation plans to manage today’s risk environment

Citation

Moynihan, D.P. (2011), "Designing compensation plans to manage today’s risk environment", Human Resource Management International Digest, Vol. 19 No. 4. https://doi.org/10.1108/hrmid.2011.04419daa.013

Designing compensation plans to manage today’s risk environment

Article Type: Abstracts From: Human Resource Management International Digest, Volume 19, Issue 4

Moynihan D.P. and Wells S.Compensation and Benefits Review (USA), January-February 2011, Vol. 43 No. 1, Start page: 17, No. of pages: 6

In light of the oil-drilling disaster in the Gulf of Mexico as well as the series of recalls in the auto industry, this article looks at how best to manage risk in the design of incentive compensation plans. This includes a look at the myriad risk issues and how boards can properly evaluate those risks and build in safeguards in company pay plans to mitigate these concerns. The key risk areas evaluated are strategic, cultural, performance measure and reputational risk. Finally, the authors suggest examining whether the plans in place align with business goals and ensure the company’s business reputation is preserved and is not tarnished. Without effective mitigation, compensation risk can damage the future of the company and its leaders.ISSN: 0886-3687Reference: 40AE655

Keywords: Risk, Incentives, Reputation, Performance measurement