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Remuneration Consultants: Benchmarking and its effect on pay

Research output: Contribution to journalArticle

  • Ernestine Gheyoh Ndzi
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Original languageEnglish
Number of pages12
Pages (from-to)637-648
JournalInternational Journal of Law and Management
Journal publication date9 Nov 2015
Volume56
Issue6
DOIs
Publication statusPublished - 9 Nov 2015

Abstract

Purpose

– The purpose of this paper is to investigate the factors that remuneration consultants consider when selecting comparator groups for executive remuneration benchmarking. It explores how the different factors influence the level of pay and whether the factors encourage pay-for-performance. Furthermore, it investigates whether the factors used form part of the reasons why remuneration consultants have been criticised to be correlated with high executive pay.

Design/methodology/approach

– This paper analysis the data obtained from interviewing remuneration consultants from prominent consultancy firms that operate in the UK and the USA.

Findings

– This paper demonstrates that there is no uniformity in the factors used by remuneration consultants when selecting comparator groups for executive remuneration benchmarking. The paper shows that company performance is not a major factor considered justifying why executive pay is not linked to company performance. The paper further demonstrates that the factors that remuneration consultants consider in selecting comparator groups for executive remuneration benchmarking justify high pay and affirm that remuneration consultants are associated with high pay.

Originality/value

– This paper demonstrates the effect that lack of best practice on benchmarking is partly responsible for the high executive pay levels and the weak link between pay and performance. This paper will inform companies on what to demand from remuneration consultants when hiring their services. Second, it will provide the shareholders with vital information that they need to vote on remuneration reports in the annual general meeting. Finally, it informs policy makers on the grey areas of practice that require best practice.

Notes

Ernestine Ndzi, (2015) "Remuneration consultants: benchmarking and its effect on pay", International Journal of Law and Management, Vol. 57(6): 637-648, https://doi.org/10.1108/IJLMA-02-2015-0009

ID: 11198717