This past month, Tom Rogers, Executive Chair of WinView and founder of CNBC, and Peter Gillin, Corporate Director of Wheaton Precious Metals and former CEO of Zemex Corporation, led a discussion of the challenges boards face when attracting and motivating a high-performance executive team. The feedback found that the dialogue was insightful, thought-provoking, and brought immediate value.
Key discussion takeaways included essential factors and considerations needed when developing effective incentive plans. The following is an excerpt from the Webinar: How to Attract and Motivate a High-Performance Executive Team.
David Boim: What are the key factors in developing incentive plans?
Tom Rogers: When determining incentive plans it’s important to have a plan, with the right combination of factors, that has a team pulling together, through consistent measures that are also highly aligned with the creation of shareholder value, but at the same time having very specific measures that relate to the performance of specific employees and what they are directly responsible for. This ensures that the accountability issue, that goes to individual performance, is not lost while you’re trying to incent a team and team performance that aligns with shareholder value. Getting that balance right (team pulling together, shareholder value and individual performance and accountability) is how you create a plan that does not have too many variables that all get lost and diluted. That is the science, the art, that I have found most important in structuring incentive plans.
Peter Gillin: Boards focus on the motivation and attraction of new executives, but a key element is also the retention of existing executives. Boards need to have a clear idea of what they want to pay for – in other words, what is the job and what are the important elements of that job for which the candidate will get compensated. And that, of course, involves the specific goals and objectives for the executives and the time horizons for accomplishing them. In any package of compensation, you must mix and match the incentives, obviously salary, plus short-term bonus (typically in cash) and then various other equity related instruments. In order to motivate people in the proper way you must offer a diverse portfolio. It’s also important to start early. Incentive plans require careful consideration, and so much of the planning is driven by specific goals, objectives, and an element of subjectivity. There needs to be time for the executives to provide input – of what they think they’ve accomplished or not. Bench-marking for senior executives is a very widespread practice, but it’s inherently inflationary and sometimes people lose sight of that fact. All in all, you determine what you want to pay for, how you’re going to pay for it and then you compare that to the rest of the world to see if it’s fair.
Boim: What about the considerations needed when building effective incentive plans?
Rogers: Well, I think that it is critical to maintain a focus on a team driving toward common goals and having those common goals embrace the enhancement of shareholder value. That combination, I think, is critical. The problem with getting totally focused on stock price and immediate shareholder value – usually reflected in terms of earnings cash, EBITDA performance, is that there are a number of things that are operationally and strategically critical to moving a business forward, which aren’t necessarily captured in those typical top metrics that are usually designed to say, hey, if you hit these metrics, the stock will respond.
Gillin: In my experience, the greatest single difficulty in formulating any of these plans, especially in the mining space, is the movement of commodity prices and whether that creates a financial windfall or financial penalty. Ideally you want to have your compensation system designed to operate exclusive of the performance of the company itself because the companies have absolutely no control over that. You cannot forget to factor in the alignment with the shareholders. They suffer when the commodity prices decline, and they are happy as clams when prices increase. What you want to avoid is generously awarding executives when things are bad – that doesn’t sit well with the shareholders. Usually, senior executives have substantial equity awards, and when you compensate them there is an expectation that they have done a first-class job – met all of their objectives and goals (in terms of production).
Boim: What would be the key takeaway from what we’ve covered today. If readers were to walk away with only one piece of information, what should it be?
Rogers: Don’t be afraid to pay really well and put plans in front of people that reward the hell out of success. That is more important than being overly constrained by concern for shareholder reactions.
Gillin: That’s hard. We’ve covered a lot of important information. Compensation is a very important element in this discussion, the main focus, and how companies work to determine it. It’s often the trigger for activism, and all of the other elements flow from it, together with stock price performance.
Watch the full Webinar – How to Attract and Motivate a High-Performance Executive Team:
About Tom Rogers (Panelist): Tom Rogers has operated at the nexus of media, technology and public policy for more than three decades. He is currently Executive Chairman of WinView, which operates at the intersection of TV sports, social media, gaming and mobility, and with 29 patents, is the leading player in the application of games in which viewers can engage while simultaneously watching live TV sports.
Tom also serves as Chairman of Captify, Ltd. and of Frankly, Inc. He is the former President and CEO of TiVo, Inc and the former Chairman and CEO of PRIMEDIA Inc. Previously, Rogers was the first President of NBC Cable and Executive Vice President of NBC, as well as NBC’s chief strategist. Rogers founded CNBC and established MSNBC. Prior to NBC, Rogers was Senior Counsel to the U.S. House of Representatives Telecommunications, Consumer Protection and Finance Subcommittee, where he was responsible for drafting a number of communications laws including the 1984 Cable Franchise Policy and Communications Act.
Tom is a graduate of Wesleyan University and Columbia Law School. Rogers was inducted into the Broadcasting & Cable Hall of Fame and the Cable Hall of Fame. He is also the winner of Emmy Awards for his contributions to the development of advanced television and advanced advertising. Tom has served for four years as President of the International Television Academy.
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About Peter Gillin (Panelist): Peter Gillin is a Corporate Director who currently serves on the Boards of several public companies, including: Turquoise Hill Resources Ltd., Sherritt International Corporation, Dundee Precious Metals Inc., TD Mutual Funds Corporate Class Ltd. and Wheaton Precious Metals Inc. He was a Director of HudBay Minerals, Inc., and was Vice Chair of N.M. Rothschild & Sons Canada Limited, an investment bank. Peter was President and CEO of Zemex Corporation and Chairman and CEO of Tahera Diamond Corporation.
Peter holds an HBA degree from the Richard Ivey School of Business at Western University and is a Chartered Financial Analyst. He is also a graduate of the Institute of Corporate Directors – Director Education Program at the University of Toronto Rotman School of Management and has earned the designation of ICD.D from the Institute of Corporate Directors.
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About David Boim (Host): David Boim is the Chief Operating Officer at Global Governance Advisors. He is a veteran Senior Executive with significant success in dynamically growing revenues for software companies. David specializes in integrating target mass marketing strategies with a portfolio management sales approach to drive company revenues, profits, and valuations.
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