In this issue, 10Minutes on compensation, PwC looks at how new federal guidance refines the pay-for-performance model.
The new guidance comes from various quarters and applies to all public companies, not just banks and financial services institutions. Collectively, it aims to balance short-term performance objectives — and the risk-taking they engender — with long-term value creation and market stability. As a result of the new guidance, companies across all sectors will need to take a much broader view of performance and its relationship to risk. They may also have to disclose a good deal more about their risk-and-reward models. Those that approach the new requirements as an opportunity, rather than just a compliance exercise, can derive long-term benefits from the pay-for-performance model's evolution.