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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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Towers Watson

 

Press Release 2 June 2010

Understanding ‘The New Standards’ in Executive Compensation Equips Leaders With Blueprint for Designing Effective Pay Structures

 

New Book From Towers Watson Expert Highlights Methods for Linking Business Performance and Executive Incentive Pay

http://www.towerswatson.com/press/2009

 

NEW YORK, N.Y., June 2, 2010 — Companies are paying closer attention to executive compensation than ever before — in response to growing scrutiny from shareholders, the federal government and others. With stakeholders demanding closer alignment of pay and performance, boards and compensation committees are under intense pressure to ensure that their executive incentive plans are well designed and deliver appropriate rewards for achieving corporate objectives. According to a new book by Towers Watson (NYSE, NASDAQ: TW) consultant Richard N. Ericson, companies should recraft their incentive pay structures to respond to a dramatically changed set of standards and expectations.

 

In The New Standards: Methods for Linking Business Performance and Executive Incentive Pay, author Ericson equips compensation and finance leaders and professionals with a pragmatic blueprint. He shows how to create enduring incentive structures that can adapt to a wide range of business conditions and market events to provide the greatest business impact and maximum return on investment.

 

The book authoritatively discusses:

 

How to design senior management incentive plans that encourage long-term, high-quality business results

How basic principles of finance and valuation can be used to select performance metrics, establish performance targets and calibrate incentive payouts

Why companies should use incentive pay for senior management as a proactive business governance tool specifically designed to increase business performance

Ways to design and stress-test incentives to ensure that they do not encourage improper risk taking or undue risk aversion

“Every year, companies spend millions of dollars on executive incentives. All too often, however, these programs provide a weak link between pay and performance. Executives may be rewarded for bad decisions as they are for good ones,” said Ericson. “The key to this book is the fundamental examples and methods it provides. Based on timely market data, the book is highly relevant for the compensation, finance and board member audience. It provides essential advice and tools for linking proper financial goals with incentive pay.”

 

About the Author

Richard N. Ericson is an executive compensation consultant at Towers Watson, where he specializes in management and reward systems emphasizing principles of shareholder value creation. He has more than 25 years of experience in business valuation, performance standard setting and incentive design. He holds an M.B.A. in finance from the University of Chicago Graduate School of Business.

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Stuart Basefsky                   
Director, IWS News Bureau                
Institute for Workplace Studies 
Cornell/ILR School                        
16 E. 34th Street, 4th Floor             
New York, NY 10016                        
                                   
Telephone: (607) 255-2703                
Fax: (607) 255-9641                       
E-mail: smb6@cornell.edu                  
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