Resource Library Resilience

Many companies are facing significant challenges developing and implementing compensation programs for 2023 owing to market volatility and continued macroeconomic uncertainty. Retaining your best talent may require adjusting for market volatility.

Economic headwinds and volatile markets have significantly affected fiscal year 2022 (FY22) incentive plan outcomes in the retail sector. This uncertainty has led retailers to evaluate both minor adjustments to and wholesale redesigns of FY23 incentive plans.  

As companies finish the 2022 compensation season and prepare for 2023, we highlight top-of-mind topics for compensation committee members, questions to ask, and related resources.

We have observed several different approaches to manage "burn rates" and preserve share authorizations.

With volatility and rising interest rates, will some performance-based equity awards be worth the greater cost?

When the market faces changes, many boards start considering adjustments to their long-term compensation programs - but sticking to the existing program generally creates more wealth for executives.

In these times of volatile national and global markets, caused by Covid and more recently by Russia’s invasion of Ukraine, companies have tried to delay goal setting while waiting for more certainty. However, these efforts are often futile as the year wears on and certainty continues to be in the future. 

By minimizing discretion, directors give consistent direction to management. They avoid what might be perceived as forgiving poor results and forestall potential criticism from proxy advisory firms. 

While the Covid-19 crisis has caused a significant increase in board workload, the increased responsibilities relating to environmental, social and governance (ESG) matters will continue.

In setting or adjusting executive compensation for 2020, boards employed a variety of reactions and solutions. All of these were well intended, and some look to hold up well over time. Other compensation arrangements, by contrast, will look incongruous given what we know now.

The coronavirus pandemic has profoundly shaken the retail sector. Rapid changes in consumer behavior, supply chain disturbances, and government-mandated store closures contributed to a difficult 2020.

Setting goals for incentive compensation has long been one of the compensation committee’s biggest responsibilities, made especially difficult by the Covid-19 pandemic.

Thinking longer-term is difficult when the world turns upside down. Executive pay is no exception. Our focus narrows to the items in front of us and getting past current obstacles. Eventually we focus on getting "back on track" when the existential risk passes or we get used to it, and the new "normal" gets shaped by these prior experiences.