by CHRC | Jul 29, 2020 | Diversity, Equity, Inclusion, Executive Compensation
“All I Want Is What’s Coming to Me.” – Sally Brown, Peanuts
A few weeks ago, an article in The Economist touched the third rail of American capitalism: it stated that CEO pay in America was “out of whack.” It even justified its headline by starting off with a quote by the current patron saint of American Capitalism—Warren Buffett.
Of course The Economist backed up this blasphemous claim with several quantitative studies. This compensation consultant had to swallow extra hard because the article not only featured compensation consultants, but found compensation consultants from some of the largest firms that admitted to their culpability in the exorbitant rise of CEO pay.
But, after 25 years in compensation consulting, I knew these inequities of pay did not just happen. I knew of missing variables that influenced the regression line that these authors were desperately trying to draw.
We must go back in time. In one of my first labor economic courses, the professor drew a diagram on the board. The graph and the curves represented a person’s productivity curve intersecting with their compensation curve over time. This graph demonstrated a key concept in labor economics: the back loading of wages. Longevity with a firm was commonplace, and pensions were the reward for such service. Executives were rewarded on the way out with the gold watch, and a lifetime of some earnings held back and now delivered in the form of a defined benefit plan, aka a pension.
Then, almost 30 years ago, pensions began to disappear. The key retention tool for CEOs became Long-Term Incentives (LTIs). But “long term” was a relative term, and generally such incentives were only held back three to five years. Like a 401(k), these “long term” rewards were portable once exercised. The retention value was limited.
So not only was lifetime employment gone, so was the incentives for it. How would companies recruit and retain top executives? The competition for top talent became more intense, higher wages were demanded. The quarterly call for greater shareholder value shortened the execution runway for executives, further pressing wage demands higher. Do better; earn more. However, the data shows the correlation between pay and performance is weak, if non-existent.
Companies need to acknowledge that the long journey from the days of back-loaded wages to today’s “obscene” incentive packages for executives has had little influence on company performance. Perhaps that guy down the hall with the 30 year pin was the missing variable all along. Read More Here
by CHRC | Jul 22, 2020 | Compensation, Diversity, Equity, Inclusion
By Lisa Aggarwal
Have you watched the Hamilton movie? How many times? I’m on my third time already; getting the most out of my Disney + subscription this month, thank you! I cannot get enough of this masterpiece, which I consider the most important Broadway musical of my lifetime. Leslie Odom Jr. earning a Tony for his role as Aaron Burr was a no-brainer. His talent extends beyond the stage, however. He has also been a powerful voice for the theater community in earning their worth. When you think about it, the story of Alexander Hamilton is about money and the creation of our treasury system, one of the many “systems” that exist today.
In a Los Angeles Times article published in late June, Odom Jr. reflects on how the theater industry has historically been devoid of persons of color and how “Hamilton” is quite the exception. Also exceptional is the theater industry itself, which unlike film and TV, has not historically provided residual pay for enduring classics such as this one. He seeks to build generational wealth for himself and castmates by revising that antiquated pay system.
PayScale Inc., which analyzes compensation data, found in its Raise Anatomy Report in 2018 that of the 37 percent of people who have asked for a raise, white men were the most likely to receive one. Reasons vary, but there are steps that you can take to better prepare yourself.
Systemic issues are being brought to light in so many aspects of society, and I’m optimistic that equitable pay for women and persons of color will also be a priority. In the meantime, be sure to advocate for yourself and understand how your job is valued in the external marketplace. Do research on your role and understand how pay is determined. Internet resources are not foolproof but can be a good starting point. If you are changing jobs, negotiating your starting pay will establish your baseline for years to come. Many states, in an attempt to rectify historical pay discrimination/underpayment, have laws that prohibit an employer from asking for previous salary information. It is crucial to ask for what you believe your experience warrants in terms of pay. It really does start with you, because we don’t get what we don’t ask for. After all, Hamilton “got a lot farther by working a lot harder, by being a lot smarter, by being a self-starter.”
by CHRC | Jul 22, 2020 | Compensation
By Lisa Aggarwal
Have you watched the Hamilton movie? How many times? I’m on my third time already; getting the most out of my Disney + subscription this month, thank you! I cannot get enough of this masterpiece, which I consider the most important Broadway musical of my lifetime. Leslie Odom Jr. earning a Tony for his role as Aaron Burr was a no-brainer. His talent extends beyond the stage, however. He has also been a powerful voice for the theater community in earning their worth. When you think about it, the story of Alexander Hamilton is about money and the creation of our treasury system, one of the many “systems” that exist today.
In a Los Angeles Times article published in late June, Odom Jr. reflects on how the theater industry has historically been devoid of persons of color and how “Hamilton” is quite the exception. Also exceptional is the theater industry itself, which unlike film and TV, has not historically provided residual pay for enduring classics such as this one. He seeks to build generational wealth for himself and castmates by revising that antiquated pay system.
PayScale Inc., which analyzes compensation data, found in its Raise Anatomy Report in 2018 that of the 37 percent of people who have asked for a raise, white men were the most likely to receive one. Reasons vary, but there are steps that you can take to better prepare yourself.
Systemic issues are being brought to light in so many aspects of society, and I’m optimistic that equitable pay for women and persons of color will also be a priority. In the meantime, be sure to advocate for yourself and understand how your job is valued in the external marketplace. Do research on your role and understand how pay is determined. Internet resources are not foolproof but can be a good starting point. If you are changing jobs, negotiating your starting pay will establish your baseline for years to come. Many states, in an attempt to rectify historical pay discrimination/underpayment, have laws that prohibit an employer from asking for previous salary information. It is crucial to ask for what you believe your experience warrants in terms of pay. It really does start with you, because we don’t get what we don’t ask for. After all, Hamilton “got a lot farther by working a lot harder, by being a lot smarter, by being a self-starter.”
by CHRC | Jul 15, 2020 | Competencies, Executive Compensation, Human Capital
“If you do not change, you can become extinct!” – Spencer Johnson, Who Moved My Cheese?
Twenty years ago, I had a manager who said that my job in Human Resources would be replaced by a machine one day, but that would be a good thing. I failed to see how that was encouraging.
Over those twenty years, however, I have seen the benefits of technology in my line of work, in affording me the time to think more strategically by spending less time on tactical work. Technological innovation has brought immeasurable societal gain but has often been faced with the fear of self-preservation. If a machine can do my job faster, cheaper, AND better, what will become of ME?
We have all been asked to pivot in nearly all aspects of life lately by moving to online platforms. For example, I love my virtual workout classes that don’t involve a commute or listening to people grunt. COVID-19 has made it obvious that we rely on technology more than we ever have. The New York Times has reported that most middle-class jobs demand some technological proficiency. As of May, half of US workers were working remotely (previously 15%) and automation in many fields has steadily been on the rise.
Workers now need more advanced skills to survive, particularly in a time when unemployment numbers are steadily increasing. Even Congress has recognized how important this is and worked in a bipartisan fashion to draft the Skills Renewal Act, which would provide up to $4K in tax credits to newly unemployed workers seeking training in high-demand areas. Managerial and other strategic roles are always far harder to replace with technology. It’s a perfect time to “upskill” and get around to the training you have neglected, instead of binging the next Netflix series.
The best part about upskilling is that usually many of these skills, if not most, are portable—you can take them from job to job. Just like I take my free weights from my living room to the patio sometimes…sans grunting.
by CHRC | Jul 8, 2020 | Competencies, Human Capital, Skilled Labor
So last weekend, I was probably the only person I know who wasn’t ready with popcorn and our newly purchased Disney+ waiting anxiously for Hamilton to premiere. I don’t have every word memorized. Much to the dismay of my husband and daughter, I did at one point put on headphones to watch a Tik Tok during the viewing party (do I at least get points for knowing what Tik Tok is?). But for all of you Hamilton fans out there, I want you to know a few themes and a few lines have finally sunk in!
That’s why when I came across this article yesterday, I thought, how timely. As we struggle as a country with rising COVID-19 numbers, and some are quick to blame other countries, it’s important to be reminded of the hard work immigrants have put in during these trying times. Much like in Hamilton, Peter Tsai, the man who invented the N95 mask, is “Non-Stop” finding ways to use, and RE-use, them to their full potential and continue to work for the safety of others in his adopted land.
As we continue to find new ways to run businesses, care for our employees, and see our families during this pandemic, we can look to Peter as an example of how to take something we’ve already succeeded at—and know that we can always be improving it. When in doubt, remember, “Immigrants, we get the job done.” Read More Here
