Is the Pandemic Altering Executive Compensation, Corporate Ownership and Succession Plans?

Listen to Episode 29 on Apple Podcasts

Guest: Dawn Zier, Board Member for Spirit Airlines and Hain Celestial Group, Former President and CEO of Nutrisystem

Hosts: Dottie Schindlinger, Executive Director of the Diligent Institute, and Meghan Day, Senior Director of Board Member Experience for Diligent Corporation

In this episode:

1. Navigating COVID-19’s impact on incentives and compensation.With traditional performance metrics off track, Zier predicts a shift in what boards will measure and how frequently.
2. Rethinking competencies and compositionAll boards should be examining their “bench strength” in areas like restructuring, communication, and crisis management.
3. Evaluating and learning from the COVID-19 responseStart now, keep it quick, and celebrate the things that went well, Zier advises.

Summary:

As thepandemic enters its third month, the list of challenges for corporate boards grows ever longer – and “lessons learned” abound.

Executive compensation has gotten complicated. Succession planning – for more roles than just the CEO – has risen to the fore.Meanwhile, stock price volatilityis spurring a rise in activism, inspiringshareholder rights plans, and tempting hedge funds.

Watch out, warns board memberDawn Zier. “Thresholds can be crossed and someone could own 10% of your company before you’re even made aware through a public filing.” 

Zier, a board member for Spirit Airlines, brings insights from an industry hard hit by COVID-19, as well as perspectives from the board of Hain Celestial Group and her leadership of Nutrisystem. In this episode—marking the one-year anniversary of the Corporate Director podcast—she joins co-host Dottie Schindlinger and Meghan Day to talk about how boards are re-thinking metrics, post-mortems, leadership, and more in today’s“new normal.”

Navigating COVID-19’s impact on incentives and executive compensation

COVID-19 and its repercussions have thrown key performance metrics for 2020 “pretty off track,” in Schindlinger’s words. What does this mean for incentives and executive compensation?

“We’re going to have to be creative as to how to reward and keep the team motivated while still making sure there’s shareholder alignment,” Zier says.

Wider payout curves are one way to address this, she says.Furthermore, because it’s hard today to set long-term metrics and forecasts, she also predicts a move to quarterly or six-month—rather than annual—milestones, “because we just don’t know what the next few months will bring.”

There may be ashift in the things that are measured as well, she says. Zier anticipates an expanded focus beyond financial metrics to rebuilding and“other things that are not as dollar–oriented but that are needed to drive revenue going forward.”

“It’s going to be an interesting time for the compensation committee.”

– Dawn Zier, Board Member for Spirit Airlines and Hain Celestial Group, Former President and CEO of Nutrisystem

Rethinking competencies and board composition  

As COVID-19 shines a spotlight on corporate leadership, all companies should be examining their “bench strength,” Zier says. “You should always be scouting and having conversations with a potential list of people.”

She predicts a shift in what boards will be looking for as well. “I think we’re going to look for board members who have a different set of skills,” she says. “Restructuring expertise is going to be necessary as a result of the crisis.”

Acumen in digital transformation will be essential, particularly in sectors like retail, Zier notes. So will skill in areas like crisis management, communication, and nuts and bolts operation.

And now is a fortuitous time for evaluating such capabilities. A crisis like COVID-19 generates“some very different and meaningful insight”on how people perform under pressure and their ability to communicate, motivate, and maintain followership and goodwill, according to Zier.

“How do you navigate the current situation while not throwing out the entire strategy, or putting your entire strategy on hold? Those who are able to do that successfully are the type of leaders we’re going to need going forward.” 

– Dawn Zier, Board Member for Spirit Airlines and Hain Celestial Group, Former President and CEO of Nutrisystem

Evaluating and learning from the COVID-19 response 

A good postmortem is an integral part of crisis management. But COVID-19 is a complex, sweeping, multifaceted situation with no playbook. 

“What do you think it’s going to be the best way for boards to approach this, and when is the right time?” Schindlinger asks.

According to Zier, a post-mortem has to be conducted on multiple levels and should be done near in so companies don’t forget the key learnings.

First focus on employee input,“because culture is the foundation of everything.” Then assess each function in terms of what went well and what could have been done better.

Throughout, the process should not be laborious. “It should be something we do fairly quickly fairly, check the pros, check the cons, work through it, and document it,” Zier advises. “It shouldn’t be a six-month project because you have to get back to business.”

“I think we have to celebrate what we’ve done well and then take the opportunity to learn what we could have done better.”

– Dawn Zier, Board Member for Spirit Airlines and Hain Celestial Group, Former President and CEO of Nutrisystem

Also in this episode…

Schindlinger and Day reflect on the past year in board governance—both enduring topics like ESG and evolving developments, like new flexibility in the ways boards work. And the co-hosts and Zier share their COVID-19 era distractions, from podcast favorite “Bad Blood” to hiking, the activity that Zier says “drives clarity, perspective and creativity and allows me to be a better leader and advisor.”