Book Reviews: Compensation & Benefits
Business-Driven Compensation Policies:Integrating Compensation Systems With Corporate Strategies, by Robert L. Heneman. AMACOM.
The book's objective is to present a process for merging corporate business strategies with compensation policies. The book covers base pay systems, performance measurement and rewards, and pay system administration. Some specific topics include: work analysis; work evaluation; market surveys; pay structures; and individual and team incentive compensation. Discussion of these topics is complemented with case studies. A good introduction to cash compensation. Recommended. 326 pp.
Compensating New Sales Roles : How to Design Rewards That Work in Today's Selling Environment, by Jerome A. Colletti and Mary S. Fiss, AMACOM.
Intended to take into account the development of transactional selling and other forms of the selling activity and sales roles, this book shows how to devise incentive compensation plans for new sales roles as well as traditional sales positions. It is also intended to be a guide in implementing new programs. Glossary. Includes example plan document and an audit checklist. This is an update of the 1999 edition. Highly recommended. 300 pp. 2001.
Compensating the Sales Force: A Practical Guide to Designing Winning Sales Compensation Plan, by David J. Cichelli. McGraw-Hill, Inc.
This is a comprehensive treatment of a complex subject. It includes chapters on the fundamentals, formula types, formula constructions, support programs, administration, implementation and communication, and program assessment. It also has a short 10-step approach to sales compensation design. Numerous illustrations are used to clarify major points. An appendix provides a number of illustrative plans. The book has both depth and breadth. Recommended. 218 pp. 2004.
Compensation Committee Handbook, by James F. Reda. John Wiley & Sons, Inc.
Written for compensation committee members and those who work with them, this text covers: information on the committee's responsibilities; ways to organize a committee; legal position of the committee; selection and training of members; a broad framework for accounting, tax, and securities rules; and the basics of compensation programs. It examines current issues on executive employment agreements, option repricing, reload stock options, pooling-of-interests accounting, and new accounting rules. It provides guidance, especially for small- to medium-sized companies. Includes detailed information on rules and regulations, comparison charts to monitor the progress against compensation strategies, an enormous glossary, and information and training resources geared to committee needs. This is a unique and exceptionally valuable reference for compensation subjects that require committee action. Very highly recommended. 358 pp. 2002.
Compensation in Organizations, by Sara L. Rynes and Barry Gerhart, eds. Jossey-Bass Inc.
This is a collection of essays that primarily address the effects of pay on people's attitudes and behaviors. The essays examine the most recent developments in compensation practice and serves up important findings concerning key issues. Much theory and research is summarized, or forms the basis for ideas. The book is divided into three parts. Part One tackles two key questions: "What are the determinants of compensation?" and "What are its consequences?" In contrast, Part two focuses on recently emerging areas of research such as pay strategy, pay risk, and the changing employment contract in determining pay and pay outcomes. Part three summarizes major themes presented in the first two parts and offers broad suggestions for future psychological research on pay. This book offers loads of insights and ideas, but no 'how-to' content. For those who want to be on the cutting edge of thinking and research, the book is excellent. Highly recommended. 418 pp. 2000.
The Complete Guide to Employee Stock Options: Everything That the Executive and Employee Need to Know About Equity Compensation Plans, by Frederick D. Lipman. Prima Publishing.
Describes the legal, operational and motivational aspects of developing a stock option program. It covers such topics as: the pros and cons of different option plans; designing an exit event option plan; who should receive a stock option and how often; analysis of a private company exit event option plan; developing an ownership culture; vesting; underwater options; option duration and exercising options; accounting for options; securities law issues; phantom stock; stock purchase plans. Several appendixes include complete examples of plans, agreements, IRS code, and more. Detailed, well-written and comprehensive. Highly recommended. 474 pp." 2001
The Complete Guide to Executive Compensation, by Bruce R. Ellig. McGraw-Hill, Inc.
This volume provides comprehensive information for understanding the issues involved in developing a sound executive compensation package that blends all elements, while taking into account government regulations, tax law, organization and executive needs, and the rewarding of performance. The author provides a framework for the subject and chapters devoted to: performance measurement and standards; current versus deferred compensation; the stakeholders; salary; benefits and perquisites; short-term and long-term incentives; design and communication considerations; and board of directors. Appendices cover selected: laws; internal revenue code sections; revenue rulings; SEC actions; and accounting interpretations. This is an exceptionally rich and accessible work. A list of about one-hundred definitions and formulas of financial measurements is just one feature that reveals the depth and quality of this book. Very highly recommended. 600 pp. 2001.
Entrepreneur's Guide to Equity Compensation, Debra Sherman, Editor. Foundation for Enterprise Development.
This excellent and clear explanation of approaches to equity plans provides a guide to creating an employee ownership strategy. Covers: stock grants; direct stock purchase programs; stock option plans; qualified employee stock purchase programs (ESPPs); employee stock ownership programs (ESOPs); 401(k) and other qualified retirement plans; nonqualified deferred compensation plans; stock appreciation rights and phantom plans; stock programs for American companies operating abroad; and the most suitable equity arrangement for various types of legal forms of companies. Explains the concept, pros and cons, and tax and cost implications. An outstanding reference, providing highly accessible explanations. Very highly recommended. 134 pp. 2002.
Executive Compensation, by Michael S. Sirkin and Lawrence K. Cagney. Law Journal Press.
This comprehensive work achieves its aim of being understandable to nonspecialists, as well as of great value to specialists. The book, for which updates are periodically released, provides an excellent introduction and covers: employment agreements; Section 126(m) deductibility of compensation; negative covenants; equity-based compensation; other cash incentive compensation; deferred compensation; funding mechanisms for nonqualified plans deferred compensation plans and arrangements; change of control arrangements; taxation of fringe benefits; compensation and benefits of non-employee directors; disclosure of executive compensation under proxy disclosure rules; executive compensation for tax exempt corporations; multinational executives; and using life insurance in executive compensation. This is a top-notch technical resource; very highly recommended. 2002.
Executive Compensation, by Yale D. Tauber and Donald R. Levy, BNA Books.
This one-volume in-depth reference covers: a perspective on executive compensation; negotiating employment contracts; annual incentive plan design; using equity; nonqualified deferred plans; life insurance; perquisites; mergers and acquisitions; tax exempt employers; special issues for start-up companies; settlement, arbitration and litigation; and much more. The work is detailed and very comprehensive. It includes a special section on parachute agreements, example forms, citations and table of cases, and a detailed subject index. Highly useful. for addressing major and technical issues. Our highest recommendation. 975 pp. 2002.
The Executive Handbook on Compensation: Linking Strategic Rewards to Business Performance, Charles H. Fay, ed., The Free Press.
An exceptionally comprehensive collection of over 50 essays by experts in the field. These are clustered into four sections: business strategy, human resources, and compensation; reward strategies; reward design and implementation; and pay systems. The vast range of topics includes: aligning HR and rewards with business strategy; new work processes; the new employment contract; competitive advantage through achieving pay and performance alignment; valuing work; valuing the individual; reward design and implementation; shaping rewards for commitment and motivation; measurement systems to support variable pay; long-term incentives for nonexecutives; valuation models for long-term plans; designing sales compensation; competitiveness of total remuneration; directors compensation; merit pay; team pay; expatriate pay; international executive pay; gainsharing; recognition; hot occupation pay; analyzing costs; pay and organizational change; and more. An exceptional collection of knowledge. Very highly recommended. 860 pp." 2001
The Great 401(k) Hoax: What You Need to Know to Protect Your Family and Your Future, by William Wolman and Anne Colamosca. Perseus Books.
Based on considerable research, this book argues that it is disastrous to let employers, Wall Street, or politicians guide you decisions about saving for retirement and urge everyone to take charge of the investment portfolio. The author's, Wolman (senior contributing editor to Business Week) and Colamosca (former staff writer for the magazine) recommend strategies for beating Wall Street at its own game. The book explains the similarities between the 1920's and 1990's in terms of the stock market as well as the broader economy, the culture and political trends, and reveals how the promise of the 401(k) was impossible to fulfill. A fascinating and important book. Recommended. 246 pp. 2002.
Harvard Business Review on Compensation, Harvard Business School Press.
Eight outstanding articles selected from past editions of the HBR. Includes articles on linking executive compensation with performance, why incentive compensation cannot work, pay and motivation, rethinking rewards, success with a simple approach to pay, and stock options. Each article begins with an executive summary. 208 pp. 2002.
Incentive Compensation Strategies for the New Millennium, by Rami Loya. IncenSoft.
Provides basic guidelines for creating an incentive plan, step-by-step instructions, sample plans, illustrations, and flowcharts. Clear and to-the-point. Recommended. 2000.
Managing Compensation (And Understanding It Too), by Donald L. Caruth and Gail D. Handlogten, Greenwood Press, Inc. (Quorum Books).
Intended as a textbook for managers, but without a typical textbook format, this is an excellent introduction to cash compensation and benefits. The authors cover the basics including job analysis, job evaluation, surveys, job pricing, benefits, incentive pay, performance appraisal, and the compensation of special groups such as sales people, top executives and expatriates. The writing is clear and to-the-point. There are solid, well-written chapters devoted to motivation and law. Provides a highly informative overview and avoids the excessive technicalities which often make compensation texts turgid. The book provides enough detail for serious readers and gives a balanced presentation of approaches. Highly recommended. 270 pp. 2001.
Pay People Right!: Breakthrough Reward Strategies to Create Great Companies, by Patricia K. Zingheim and Jay R. Schuster. Jossey-Bass Inc., Publishers.
Shows how to approach the issue of changing compensation based on a diagnosis of organizational needs and six underlying reward principles: (1) Gain employee understanding and support of change initiatives through communication, education, and involvement; (2) Align rewards with goals; (3) Extend people's line of sight so they can see the link between their efforts and bottom line results; (4) Use the various reward approaches, cash and noncash, in a way customized to needs; (5) Reward individual competencies, performance over time, and labor market value; and (6) Reward results with variable pay. The chapters cover: using total rewards; measuring and managing performance; base salary; pay structure based on market; short- and long-term incentive plans; recognition and celebration; team rewards; rewarding scarce talent; sales and executive compensation; global pay; and merger and acquisition pay. Provides an excellent global perspective on pay. Highly recommended. 304 pp. 2000.
The Power of Restricted Stock: The Definitive Guide to a Resurging Long-Term Incentive<, by Brent M. Longnecker and Christopher S. Crawford. WorldatWork.
This comprehensive guide explains what is meant by restricted stock awards (RSA); outlines the reasons for offering them; talks about their prevalence and the advantages and disadvantages to granting them; presents a case study of Microsoft; compares RSAs to other long-term incentives; and discusses: discounted stock options and nonqualified deferred compensation; investment issues; variations (restricted stock units, performance accelerated restricted stock, founder's stock, deferrals into restricted stock; technical considerations (tax, accounting, legal, ERISA); designing the RSA plan; special considerations (recordkeeping; reporting, communication, plan review and audit). Also includes: FAQs; sample forms, a glossary and references. This is an excellent technical reference. 243 pp. 2004.
Rewarding Excellence: Pay Strategies for the New Economy, by Edward E. Lawler. Jossey-Bass Inc., Publishers.
Examines how pay programs can be designed and managed to meet the needs of today's competitive markets through attracting, retaining, motivating, and developing people. Lawler argues that traditional reward systems are no longer viable and presents approaches to cash compensation that are consistent with the types of organizations that are emerging. Developing systems that pay for the competencies of the individual rather than the value of the job, and which reward performance and growth, rather than seniority, are some of the key themes. Also covers such subjects as performance management, use of stock and stock options, profit sharing plans, and other elements of total compensation. Interesting and insightful. Recommended. 327 pp. 2000.
Stock Options and the New Rules of Corporate Accountability: Measuring, Managing, and Rewarding Executive Performance, by Donald P. Delves, McGraw-Hill, Inc.
The author, a compensation consultant, discusses the pluses and minuses of using stock options and the sea change in stock option accounting. The book examines current issues facing board members and executives regarding stock option usage, and discusses performance-based options and the creation of a balanced incentives portfolio. Delves goes on to cite the failure of stock options and explores compensation approaches attuned to the Information Age. He explores valuing human capital and sharing the benefits and responsibilities of ownership with a broad base of employees. He sums up with a 9-step approach to a healthier organization, with the aim of restoring corporate integrity. A fascinating, valuable book. Highly recommended. 223 pp. 2003.
Stock Options and Other Equity-Based Compensation Arrangements, by Thomas J. St. Ville. Bureau of National Affairs, Inc. (800) 452-7773.
An in-depth, detailed outline and analysis of the tax, corporate, securities, and accounting aspects of establishing and maintaining an equity-based compensation plan. The types of plans analyzed include: stock option plans (nonqualified and ISOs), employee stock purchase plans, restricted stock plans, phantom equity arrangements, and performance shares or unit programs. Discusses tax considerations for both employer and employee, fiduciary duty concerns involving directors, shareholder approval requirements, and accounting treatment by corporations for stock option and other equity-based compensation plans. Extensive worksheets are provided regarding: plan documents and procedures, internal revenue code provisions, securities and exchange provisions, and stock exchange provisions. Bibliography and table of authorities. Highly recommended. 2000.
Stock Options, Corporate Performance, and Organizational Change
Consists of two research-based reports. The first, ""Broad-Based Stock Options and Company Performance: What the Research Tells Us,"" evaluates whether broad-based programs have any effect on organizational performance; the research revealed higher productivity levels and annual growth rates among those with such programs in comparison to their peers and public companies in general. The second report, ""Employee Involvement in Companies with Broad-Based Stock Option Programs,"" shows no significant difference in terms of employee involvement from companies without such programs. 90 pp. 2000.
Strategic Reward Management: Design, Implementation, and Evaluation, by Robert L. Heneman. Information Age Publishing.
The 26 articles comprising this work focus, broadly, on designing, implementing and evaluating reward systems, rather than administration. The main sections are: pay and the changing business context; pay in new business environments; strategic pay issues; from job evaluation to work evaluation; team pay; merit pay revisited; competency pay; pay system evaluation; and the future of strategic rewards. R.L. Heneman wrote or co-authored all the articles and each ends with extensive references. This is a scholarly work that will bring the reader up to speed on a very wide range of key topics and issues. The articles give many insights drawn from the vast literature on compensation and offer insights into current thinking. This is an important and content-rich contribution to the compensation field. Highly recommended. 520 pp. 2002.
Your Employee Stock Options, Alan Ungar and Mark T. Sakanashi, HarperCollins Publishers (HarperBusiness).
This is a user-friendly guide to deciding when to exercise your options, building a foundation for financial freedom, protecting against downside risk, and more. The book gives practical, easy to understand information and guidance to employees about how to make the most of stock options. It is loaded with solid content and makes a highly esoteric area accessible. It provides step-by-step guidelines and is extremely comprehensive, covering such areas as taxation and dealing with special circumstances such as divorce, disability and death. Includes a listing of other books and Websites. Excellent. Highly recommended. 300 pp. 2001.