Alignment between executive compensation strategy and business strategy: a study of best practices

Autoria SCIMAGO INSTITUTIONS RANKINGS

RESUMO

Finalidade O objetivo principal desta pesquisa é identificar os mecanismos adotados pelos conselhos de administração e comitês de remuneração das empresas listadas no Novo Mercado da B3, a bolsa de valores oficial do Brasil, que relacione o alinhamento da estratégia de remuneração executiva, com a estratégia de negócio.

Metodologia Trata-se de uma pesquisa qualitativa aplicada e exploratória, baseada no método de entrevistas com especialistas. Os dados primários foram coletados por meio de entrevistas com conselheiros e/ou membros de comitês de assessoramento ao conselho. Para a análise de conteúdo utilizou-se a técnica de codificação em três níveis (aberta, axial e teórica), através do uso do software Atlas.TI.

Constatações Os resultados obtidos apontaram para uma complementação do modelo teórico proposto, através da incorporação de subcategorias de análise que emergiram dos dados empíricos coletados nas entrevistas com especialistas.

Originalidade A principal contribuição do presente estudo é apontar os elementos Facilitatorrs e principais Obstacles ao alinhamento entre estratégia de remuneração e estratégia de negócios, e propor um guia de boas práticas para conselhos de administração e comitês encarregados da remuneração dos executivos.

Remuneração executiva; Comitê de remuneração; Estratégia de remuneração; Governança corporativa; Alinhamento

General objective	To examine the practices of boards of directors and compensation committees of companies listed on Novo Mercado of B3 that aim to align executive compensation strategy with business strategy.
Specific Objectives	Describe the processes for discussing and approving executive compensation programs	Identify the best practices of boards of directors and compensation committees in aligning compensation strategy with business strategy	Examine how boards of directors and compensation committees have addressed potential agency problems
Categories of Analysis	Decision-Making Process	Strategic Alignment	Agency Conflicts
Main authors	OLIVA; ALBUQUERQUE, 2007 STEINBERG, 2003 BECKER; GEREK, 2016 ELLIG, 2022	LAHLOU, 2018 BECKER; GEREK, 2016 LARCKER; TAYAN, 2011 BALSAM; FERNANDO; TRIPATHY, 2011	SAITO; SILVEIRA, 2008 BARNEY; HESTERLY, 2006 TRICKER, 2020
Data Collection Technique	In-Depth Interviews with Experts	In-Depth Interviews with Experts	In-Depth Interviews with Experts
Perguntas	1) Based on your experience as a board/committee member, please describe the process of designing and approving the executive compensation strategy. 2) Overall, how do you evaluate the effectiveness of this process? 3) In your opinion, what changes in the process could make it more efficient?	4) What measures have the boards/committees adopted to ensure alignment between the compensation strategy and the strategic objectives of the business? 5) What other mechanisms do you think could be used to ensure this alignment?	6) What is typically the role of each stakeholder (chairman of the board, board members, independent directors, compensation committee, CEO, external consultants) in the process of designing and approving the compensation strategy? 7) In your experience, what type of influence does the CEO have on compensation decisions? How can boards/committees avoid potential agency conflicts (conflicts of interest between shareholders and management)?
Informantes-chave	Members of boards of directors and/or people committees	Members of boards of directors and/or people committees	Members of boards of directors and/or people committees

Code	Description	Categories of Analysis	Classification
External Consulting	Participation of external consultancy in the committee	Decision-Making Process	Facilitatorrs
Correlation Metrics and Strategy	Correlation between performance measures and the business plan	Strategic Alignment	Facilitatorrs
Culture	Compensation strategy contributes to shaping the culture	Strategic Alignment	Facilitatorrs
Committee Specialist	Presence of specialist/technical expert on the committee	Decision-Making Process	Facilitatorrs
Committee Independence	Presence of independent member on the committee	Decision-Making Process	Facilitatorrs
Mediating Role of the Committee	Mediating role of the committee to avoid agency conflicts/conflicts of interest between executives and shareholders	Agency Conflicts	Facilitatorrs
Quality of Indicators	Quality of metrics/indicators	Strategic Alignment	Facilitatorrs
Committee’s Repertoire	Technical expertise of committee members	Decision-Making Process	Facilitatorrs
Committee Size	Small compensation committee	Decision-Making Process	Facilitatorrs
Adoption of Pre-existing Models	Adopting models from other companies vs. creating a model that suits the specific reality	Strategic Alignment	Obstacles
Lack of Space on the Board	Limited space in the board for discussing compensation issues	Decision-Making Process	Obstacles
Disconnected HR Strategy	Human resources strategy disconnected from business strategy	Strategic Alignment	Obstacles
Lack of Clarity on the Committee’s Role	Lack of clarity regarding the committee’s role	Decision-Making Process	Obstacles
Lack of Strategic Thinking	Lack of long-term strategic thinking in companies	Strategic Alignment	Obstacles
Lack of Regulation	Lack of clear regulation for the committee’s role	Decision-Making Process	Obstacles
Lack of Board of Directors’ Expertise	Lack of technical expertise on compensation topics within the board of directors	Decision-Making Process	Obstacles
Program Philosophy	Lack of clarity about the compensation program philosophy	Decision-Making Process	Obstacles
Shareholder Interest vs. Strategy	Lack of alignment between shareholder interests and business strategy	Strategic Alignment	Obstacles
Transparency	External member does not have access to strategic information	Decision-Making Process	Obstacles

Code	Description	Frequency of Assignments	Number of Interviews
OBS - Lack of Expertise on the Board of Directors	Lack of technical expertise on remuneration issues in the board of directors	21	6
FAC- Degree of Specialization of the Committee	Degree of technical knowledge of committee members	12	6
FAC - Mediator Role of the Committee	Mediator role of the committee to avoid agency conflicts/conflicts of interest between executives and shareholders	11	6
FAC - External Consulting	Involvement of external consultants in the committee	7	6
FAC - Committee Independence	Presence of an independent member on the committee	12	5
FAC - Effectiveness of the Metrics System	Well-structured metrics system, consistent with the business plan, and encompassing long-term objectives	15	4
OBS - Lack of Clarity of Assumptions	Lack of clarity in the basic premises of the remuneration strategy, including the program philosophy and specific company characteristics	8	3
OBS – Lack of Space in the Board	Limited space in the board for discussing remuneration issues	5	3
OBS Shareholder Interests vs. Strategy	Lack of alignment between shareholder interests and business strategy	5	3
OBS - Lack of Transparency	External committee member does not have access to strategic information	3	3

Categories of Analysis	Subcategories of Analysis	Classification
Decision-Making Process	Lack of expertise on the board of directors	Obstacles
	Degree of specialization of the committee	Facilitator
	External consulting	Facilitator
	Lack of space in the board	Obstacles
	Lack of transparency	Obstacles
Strategic Alignment	Effectiveness of the metrics system	Facilitator
	Lack of clarity in the assumptions	Obstacles
	Shareholder interest vs. strategy	Obstacles
Agency Conflicts	Mediator role of the committee	Facilitator
Agency Conflicts	Committee independence	Facilitator

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Universidade Federal de Santa Maria Centro de Ciências Sociais e Humanas (CCSH), Avenida Roraima nº 1000, Prédio 74C, Sala 4210 - Cidade Universitária, CEP: 97105-900, Tel: +55 (55) 3220-9242 - Santa Maria - RS - Brazil
E-mail: rea@ufsm.br

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