Review of WorldatWork Conference - 1 June 2009

The
outlook for executive compensation and healthcare reform; an increased
emphasis on employee engagement as part of total rewards; and creating
a global rewards strategy were just some of the issues examined at the
WorldatWork conference in Seattle.

By Anne Freedman and David Shadovitz

The Department of Labor will be more interested in enforcement, than dialogue.

Healthcare reform is
on the way in a "fast and furious" dash to the end of July, when a bill
is expected. The administration and Congress are seriously pondering
restrictions on executive compensation that will affect all companies
-- not just those who accept stimulus or bailout funds.

And more mandates,
rules and regulations affecting the human resource function --
including the very real possibility of paid sick leave being required
for all employees -- are in the offing as a multitude of bills swirl
around the Capitol, said Cara Woodson Welch, director of public policy
for WorldatWork, during the 2009 Total Rewards WorldatWork Conference
and Exhibition, held May 31 to June 3 at the Washington State
Convention and Trade Center in Seattle.

"This is a weird year," she said. "I don't know what will happen."

It's during
unsettling times like these, said WorldatWork President Anne C. Ruddy,
that HR's work "is the most critical to your organization."

And what HR should be
doing now, said Sara R. McAuley, executive vice president and CHRO of
Tygris Commercial Financial Group and board chair of WorldatWork, is
use today's downturn as a laboratory to redefine total rewards
strategies -- and prepare now for the recovery.

HR executives should
be trying to discover "how to turn today's challenges and threats into
opportunities," she said. "The learnings that come out of a downturn
can be invaluable ... ."

Such knowledge and
awareness, however, must be created within each individual
organization, said Steve Lundin, the conference' s opening keynote
speaker, whose book, FISH!, told the story of a group of fishmongers in
Seattle's Pike Place Market.

The fishmongers
decided to use fun, cheerful attitudes and playful customer service to
become world famous -- and increase profitability. The book was
published about 12 years ago and has since been translated into 34
languages.

Organizations can't
copy programs from other groups "because to copy it won't have the same
energy," Lundin said. "You have to discover it."

He also cautioned the audience to reconsider the definition of work/life balance.

"The trouble I have
with work/life balance [is the] mechanistic kind of images I get from
it," he said. "It's all life -- and we spend most of it at work ... and
that's life too. And that's life meant to be lived fully and that's
life meant to be lived vitally."

Executive Comp

Relishing his role as
blunt-spoken contrarian, Ira Kay, compensation practice leader for
Watson Wyatt, said during a session entitled Executive Comp in Uncertain Times
that there is "a lot of disinformation and misinformation out there
[about executive compensation] that is going to do real economic
damage."

The exec-comp model,
he said, "is under vicious and, in my opinion, under extremely unfair
attack. ... That doesn't mean that everything that [the administration,
Congress and media] are doing is wrong."

But, he said,
remedies and restrictions are being proposed that have no relationship
to some of the problems that caused the economic meltdown.

He sees "a tremendous
amount of regulation coming," but there has been no real evidence --
only assumptions and suppositions -- that the executive pay model
resulted in the economic meltdown.

He spoke of a recent
study that he completed -- but has not yet officially released -- that
evaluated executive pay architecture to determine the relationship
between risky behavior and compensation. The findings indicate that
much of the conventional wisdom is wrong, he said.

The study found that
some "risk mitigators" -- elements of a compensation design plan that
resulted in higher pay when risks are decreased -- were high annual
incentive leverage; higher level of options in the long-term incentive
mix; high proportion of variable pay in total direct compensation; and
a high proportion of long-term incentives in total direct compensation.

Some "risk
aggravators" -- elements that increased risk and resulted in higher pay
-- were the number of performance metrics used; the use of return-based
metrics; high accumulated executive pension value and excessive pay
"opportunity" relative to the industry.

In general, he
suggested HR leaders devise plans that "protect the core" of their
exec-comp plans "and be flexible on the irritants," such as excessive
severance, excessive pensions and perquisites. Retention bonuses should
also be shunned, he said.

"Don't make the
business case [for bonuses] on retention," he said. "Call it
recognition, aspiration, inspiration; call it hope."

Trends in Executive Comp

Restrictions on
executive-comp that apply to companies that accepted stimulus or
bailout money will probably apply to all companies in the near future,
said John D. England, managing principal at Towers Perrin, during a
session entitled Trends in Executive Compensation.

Those government rules and restrictions will be "training wheels" for the rest of corporate America, he said.

Executive pay may
also be restricted by the inclusion of more global companies as "peer
groups" when benchmarking comp, he said, noting that U.S. pay levels
are generally the highest in the world. The use of perquisites will
likely decline as well.

At the same time, he
noted that median pay of CEOs is down and there is a "new humble
approach about executive pay." Many companies are looking at total
shareholder return when granting bonuses -- even when TSR is not
officially a part of their bonus-program designs.

Eligibility for stock
options will tighten, England said, and companies will rely more on
restricted-stock units and performance shares -- with the performance
shares taking on increasing prominence as part of long-term incentive
programs.

There will also be
increased scrutiny of deferred-comp plans and SERPs, or supplemental
executive retirement plans; more pressure -- and possibly even
legislation -- to add clawbacks to comp policies; and continuing
advocacy by shareholder and

http://www.hreonline.com/HRE/story.jsp?storyId=217350878