The John M. Olin Center

Paper Abstract

1035. Leo E. Strine, Jr. & Kirby M. Smith, Toward Fair Gainsharing and a Quality Workplace for Employees: How a Reconceived Compensation Committee Might Help Make Corporations More Responsible Employers and Restore Faith in American Capitalism, 06/2020; forthcoming in The Business Lawyer (Winter 2020-2021).

Abstract: In this Essay, we focus on one practical way to move toward that worthy end: reconceiving the compensation committee. That is, a reconceived compensation committee would focus on the company’s entire workforce, not just senior management, and have the responsibility for overseeing management’s implementation of an effective system to compensate workers fairly, ensuring they receive a fair share when corporate productivity and profitability increases, and analyzing what allocation of compensation within the company’s workforce will provide the most motivation to encourage corporate success. To accomplish this, compensation committees would be expected to understand the nation’s, the industry’s, and the company’s traditional gainsharing practices among workers, stockholders, and top management and develop and implement a corporate strategy to ensure that gainsharing is  equitable. By doing so, compensation committees will also be able to more rationally set top executive compensation and establish metrics for top management and key personnel involved in gatekeeping functions that are tied to good EESG practices and not just to stock price. And the reconceived compensation committee should also be the committee charged with compliance and EESG responsibilities in the areas most important to workers, including not just worker pay and benefits, but also safety, racial and gender equality, sexual harassment and inclusion, and training and promotion policies. Not only that, the reconceived compensation committee should monitor company practices in its supply chain to ensure that the company’s adopted policies regarding fair treatment of workers extend to those workers who work for company contractors. By this evolutionary means that builds on the existing American corporate governance system, important strides can be taken toward making our capitalist system work better for the people most critical to its success: workers.

1035 PDF