The retention of solid, productive employees at the executive level can hinge on the employment package offered. However, ethical pay can become sticky without a carefully developed policy. Keep reading to learn about the trends and ethical considerations surrounding today’s executive compensation. And learn how an ethics hotline can support your fair compensation efforts.

Performance-based pay

Clear compensation guidelines for performance-based pay can help set employee benchmarks. These guidelines might include specific financial or sales goals, participation in sustainability initiatives, or in support of other community-centered programs. Meeting these guidelines keeps everyone in alignment with the organization’s objectives.

Long-term incentives

Besides salary or bonus incentives, companies may offer investment options such as company stock options with vesting requirements. Long-term incentive programs ensure employee retention and keep the focus on growth projections and profits.

Restitution provisions

If performance metrics are not reflected as true and accurate, the organization must have a policy for restitutions. These mechanisms can obviously vary and include everything from periodic account audits and monthly reports, to direct peer feedback. A clear, concise policy is always the first step to assist executives in their performance activities.

Stakeholder considerations

Consider broadening the scope of compensation beyond stakeholders. This expansion could include concerns of employees, customers, communities, and the environment. An ethics hotline can implement a communication method and compile data. Information can be gathered confidentially to avoid conflicts of interest or bias.

Diversity and inclusion metrics

Diversity and inclusion can also be woven into the executive compensation policy. These policy dynamics can incentivize executives to pursue and maintain a fair, equitable workplace. It also prioritizes any company-endorsed DEI policies among the executive team.

Transparency in compensation practices

The organization’s ethics policy should include an official and full disclosure of compensation practices and pay details. This inclusion helps to illustrate a commitment to transparency. It’s also how companies like yours can demonstrate a continuous pursuit of maintaining employee trust and accountability.

Excessive pay gaps

Strong companies that experience longevity credit their leadership for maintaining that strength. However, care must be taken to avoid wage disparity and skewed compensation based on standing in the company. Recruiting practices should be mindful of offering salaries that exorbitantly exceed the average of other employee salaries.

Short-term focus

The executive compensation framework should center on long-term gains rather than the short-term. Organizations should avoid compensation tiers that could damage long-term sustainability. A description of this framework can be incorporated into the organization’s ethics policy.

Conflicts of interest

To avoid conflicts of interest, those involved in calculating and creating executive compensation should be independent of the organization or far removed from the employment area for which the salary is calculated.

Corporate governance practices

Implementing a robust corporate governance mechanism prevents executives from overreaching or abusing their authority or position. The organization’s ethics policy can additionally include language to help executives understand their position. Language in governance will also support expectations and boundaries your company might define.

Public perception

Public perception of an organization’s ethical conduct, especially executive compensation, can also be a top priority. Cultivating consumer brand recognition, respect, and trust can be adversely impacted by the organization’s compensation program. Care must be taken to follow fair wage practices and present fully transparent business practices.

Let Ethical Advocate help your organization in 2025

Ethical Advocate offers a full line of products to help organizations like yours to create a fair, equitable executive compensation package, ethics policy, and reporting mechanisms, like an ethics hotline. Skilled advisers are standing by to help you create an ethics plan! Visit our website to set up your no-obligation consult today.