It is expected that a large proportion of companies will disclose discretionary compensation actions in response to the pandemic. Several questions focused on best practices and consequences of using discretionary actions. Dr. Tharp said: “We encourage boards not to feel bound to strict formulas. Discretion should be clearly justified and explained. Awards should be anchored in performance that warrants recognition in the face of unanticipated events. Pay is a form of communication, so it is worthwhile to consider your public rationale for the reward.”
Dr. Tharp commented on several regulatory developments that are likely with the Biden administration:
- Human Capital Metrics Disclosures: Dr. Tharp reiterated that compensation reinforces what is important to the company. Keep in mind the communication aspect when considering numerical annual improvements in diversity as compared to metrics to measure long-term improvements in inclusivity.
- Dodd-Frank: Dr. Tharp indicated that finalizing the clawback rules and Section 956 (mitigating risk in incentives at systemic financial institutions) of Dodd-Frank are likely to be priorities and fairly “easy wins.”
Thank you to everyone who participated in our first AMA! The video will be available on our HRPA Online Community as soon as possible and written responses to questions will be up within a week.
