The Fatal Flaw in Pay

for Performance

Group Members:
Siraj Ahmed
Tahir
Zain Ali
 Introduction
 Boards are designing compensation plan for CEO with
fatal flaw
 Consequences of missing integrity are terrible
 Compensation plan should be tied with integrity
 Reasons behind this are
 They may be uncertain about the meaning of integrity
 How to assess its integration into financial performance
Steps to bring integrity in compensation plan

 Step: 1
Define integrity with proper definition
Three elements:
(i) Adherence to formal rules
(ii) Adaptation of ethical standards
(iii) Employees Commitment to honesty , fairness ,
trustworthiness and reliability
Steps to bring integrity in compensation plan

 Step: 2
Has integrity permeated every aspect of the corporate
culture ?
Annual, anonymous employee survey across
Outside HR experts periodically conduct 360-degree
assessments
Steps to bring integrity in compensation plan

 Step: 2
Has the CEO met annual performance with-integrity
objectives set by the board? Effectively handling a
major miss or crisis—an environmental accident, a
bribery case, or a financial restatement
Hiring leaders in emerging markets such as China,
Russia, and India
Steps to bring integrity in compensation plan

Step: 2
How do business divisions rate comparatively? CEO looks how
the units rank against external peers?
CEO succession planning in evaluating candidates
Board should ask: Do they possess the knowledge, experience,
and skills to drive a robust performance with integrity culture
deep into the company’s global operations?
And thus help the company avoid debilitating risks and secure
the trust that is vital to doing business
List of questions to assess a CEO’s
performance-with-integrity practices
 Leadership
Does the CEO...
Communicate to the organization that integrity
must never be compromised to make the numbers?
Discipline generals, not just troops, for integrity
lapses?
Address difficult integrity issues regularly at staff
meetings?
List of questions to assess a CEO’s
performance-with-integrity practices
 Business processes
Does the CEO...
 Build a strong integrity infrastructure—processes for preventing,
detecting, and responding to lapses in all businesses and regions and
put A players in charge
 of it?
 Assess integrity needs realistically and provide adequate funding for
those activities?
 Respond promptly to early warnings on trends in legal, ethical, and
country risks?
List of questions to assess a CEO’s
performance-with-integrity practices
 Giving employees a voice
Does the CEO...
Encourage reporting of financial, legal, and ethical
concerns through a system that prevents
retaliation?
Ensure that concerns are investigated fairly and
promptly, that trends are tracked, and that remedial
action is taken if needed?