Thursday, May 11, 2006

Role of HR

How important is the role of HR in compensation reviews?

HR is an integral part of compensation committees because it is usually the strongest link to the organization,” rather than outside consultants, for example, writes Evren Esen, lead author of the 2006 HR Practices in Executive-Level Compensation Survey Report. The report looks at compensation practices for top executives who report directly to the CEO, president or owner.

Corporations have come under increased scrutiny in recent years following high-profile scandals that have included Enron Corp., WorldCom and Tyco, which have led to a push for greater financial transparency and more stringent accountability.

Compensation for executives today is more aligned with performance, according to 42 percent of HR professionals—the only real dramatic way that organizations have changed how they operate under recent corporate governance measures such as the Sarbanes-Oxley Act, the report found.

That’s where HR has a role to play, Esen writes.

“As performance measures become more tied to compensation for executives, HR’s role will continue to be significant and HR will be called upon to integrate the different layers of executive-level compensation—legal compliance, consistency in pay philosophy, benefits and perks, and the design of performance indicators and objectives relevant to the overall success of the organization.”

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