Feb 13, 2011


If the business is promising and set to grow then sooner rather than later investment will be sought from providers of venture capital. Such organizations typically take a very robust view of reward systems, requiring introduction of long-term share schemes and highly geared incentives to ensure that the top management group they have entrusted with their money really are fully committed to the business. Clear and wellconstructed contracts will be required and the high-risk/high-reward approach mentioned earlier will be what counts.

If the company decides to float it will have to ensure that its financial house is in order. Auditors, lawyers and others providing advice at this stage will again, as part of 'due diligence', go over the elements of executive reward policy and the structure of payroll costs with a fine tooth-comb. This is the time when 'beyond the fringe' benefits (company yacht, etc) come under scrutiny to potential institutional shareholders.

Such advisers may, or may not always, be mindful of the rationale for pay systems and the messages the individual elements can give. Sad to say, while some are very helpful and constructive, others may have a perspective that is sometimes narrow and confined to their specialism and its accomplishing prejudices - be it over-zealous cost control or a desire to pin down every last detail in fine print. This can come as a shock to a free-wheeling entrepreneurial organization. Faced with criticism about 'unorthodox' approaches to pay from such sources the important questions to ask are:
  • Is what we are doing illegal in any way (in terms of employment law)?
  • Are there tax implications we don't know about?
  • Is it uncompetitive for any reason?
  • What messages will the symbolic act of taking it away give?
  • Are you mistaking 'unorthodox' on our part for real creativity in finding rewards that match our developing culture?
  • What culture should we be aiming for as a larger/listed organization?
  • Where can we get advice about putting our house in order if necessary?


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