This post was written by Jeff Smith, who is no longer with the company.

In a recent blog post for the Harvard Business Review, Lucy Marcus (founder and CEO of Marcus Venture Consulting) made several important points on the topic of CEO compensation:
– CEOs are the public face of their companies
– CEOs and other members of the C-suite deserve fair compensation for running companies
– Board directors have to demonstrate why they have taken certain decisions
– It is vital that directors have a finger on the pulse of the market and public perceptions
– Compensation packages, when exposed to the light of public scrutiny, evoke a range of negative reactions
– What compensation consultants advise may seem fair in the vacuum of the boardroom or on paper, but often times, it does not reflect other realities and pressures on the company from stakeholders such as investors, employees, and the community at large
– Stakeholders’ voices have increasing power because these conversations are not just happening behind closed doors or in specialized journals, but rather are on the front pages of newspapers around the world and across social media outlets such as Twitter

Marcus’ points must be kept front-of-mind when compensation committees consider pay packages. And, as importantly, they must consider how to communicate these decisions to shareholders and the broader audience of the company’s stakeholders.

It is said that by the time you hear the thunder, it is too late to build the ark. While building the ark may be the job of management, ensuring that there is a blueprint is the job of directors. Communication plans (and not just media plans) need to accompany every major decision of a board. Directors must understand who the stakeholders of a company are, understand how they are likely to react and ensure management is being proactive in its outreach.

Stakeholders determine what the company’s reputation is. Accordingly, making decisions without a communications plan is simply a recipe for diminished reputation at best, and an avoidable crisis at worst.

 

For additional thoughts on this topic, you can visit the transcipt of a recent live chat from the Financial Post featuring Hill+Knowlton Strategies SVP Jane Shapiro entitled Executive Compensation: Yesterday and Today.