The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Wed, 15 Sep 2021 13:16:22 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 Getting Back to the Long Term https://corpgov.law.harvard.edu/2021/09/07/getting-back-to-the-long-term/ https://corpgov.law.harvard.edu/2021/09/07/getting-back-to-the-long-term/#comments Tue, 07 Sep 2021 13:12:58 +0000 https://corpgov.law.harvard.edu/?p=140024?d=20210907091258EDT Posted by Blair Jones and Roger Brossy, Semler Brossy Consulting Group LLC, on Tuesday, September 7, 2021
Editor's Note: Blair Jones and Roger Brossy are Managing Directors at Semler Brossy Consulting Group LLC. This post is based on their Semler Brossy memorandum. Related research from the Program on Corporate Governance includes The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here); Don’t Let the Short-Termism Bogeyman Scare You by Lucian Bebchuk (discussed on the Forum here); and The Uneasy Case for Favoring Long-Term Shareholders by Jesse Fried (discussed on the Forum here).

With the coronavirus pandemic (we hope) tapering off this summer, boards are looking ahead to more normal compensation programs for 2022. They can pull back on the extraordinary measures and structures of 2020–21 and return to their long-term paths to strengthen or transform their organizations. Those paths were already a bit obscured by ongoing disruption in many industries, but then the pandemic pushed them decisively to the side. Companies can now get out of reactive mode and start to control their future again.

Still, it’s important for boards to resist the temptation to pick up where they left off in 2019. The pandemic and other developments have changed the landscape for corporate behavior and strategy. Executive compensation must adapt accordingly for companies to capture fresh opportunities and overcome new challenges.

Taking Stock

2020 was especially difficult for many boards. For their compensation programs, many resorted to new measures, goals, and performance periods, or used discretion. Others introduced special awards to promote retention or maintain motivation. Many of these approaches veered from the typical path but were deemed necessary to administer relevant and fair rewards amid the crises.

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