I really like a Twitter trend #ShoterHR. The idea is to write HR policy in 140 characters or less. Below are some of the best examples together with a number of my own contributions.

This exercise also has a serious point. It would be a major step forward if HR policy could be written in clear and easy to understand English.

Here is a mixture of the funny and the serious.

Death benefit; You die, we pay.

Don’t sack pregnant women, ever. @ http://twitter.com/ljanstis

Deferred bonus: no bread today, maybe jam tomorrow.

Restrictive covenants: Don’t nick our clients, staff or supplies. Or, our price list. http://twitter.com/daniel_barnett

Fire prevention policy: Don’t light fires in the office.

Health and safety: Oh for goodness sake, just be careful won’t you! http://twitter.com/DamsonHR

Retirement age policy: Holding back the years.

Mobile phone policy: Switch it off, http://twitter.com/imhrplus

Personal hygiene policy: No no to BO

Equal Opportunities Policy: Treat everyone fairly and the same, Always. http://twitter.com/JacksonT0ny

Drug abuse policy: no sniffing, no injecting,

Relationships at work policy: Don’t screw the crew. @davidmorganllb

Employee Share scheme: Buy our discounted shares. We prosper, you prosper.

Dress code: you are not clubbing, gardening or at the beach. NB. For lawyers, or going to a funeral. http://twitter.com/rarfarr

IT Support policy: Turn it off, then turn it on.

H R Policy: Be sensible (To replace all policies). @HR_Gem

HR Job descriptions:
HR Manager: Gandhi + Jedi Master
Reward Manager: Gandalf + Dr Who
Training Manager; Peter Pan + Seb Coe

Compromise Agreement: It’s not that we don’t like you, but here is some money, now go away. (Adapted from @dds180)
Clear Desk Policy: Nothing on top after working hours.

Sabbatical leave policy: we will not pay for your mid-life crisis. Enjoy Goa, See you in six months. @beth_Marie

Cycle to work policy: On yer Bike. @davidmorganllb

Industrial Action: Worker unpaid inaction.

I have tried to credit the originator – but it is not always clear who originally wrote these. If you know better let me know. Those not attributed are mine.

If you have better #shorterhr please add in the comments.


What are Pension Funds’ Greatest Challenges in 2013?

Excellent blog on Pension Fund challenges in 2013

Robert Gardner

Pensions has always been a tricky business. But perhaps never more so than in 2013. The regulation changes of the early 2000’s rewrote the rulebook for those running pension funds, and a survey of the key challenges of that time would have produced, it seems logical to assume, a set of concerns about changing regulations, accounting issues that accompany them, and governance. Today, the landscape has changed. Pension funds, on the whole, got to grips with those systemic changes in pension infrastructure only to be faced, in 2008 onwards, with the greatest seismic economic shift of our lifetimes. It wasn’t just that markets plummeted and equities didn’t turn out to be the knight in shining armour pension funds had hoped and planned they would be; it was that the very foundations of modern economic markets changed. Everything we thought we knew about risk, return and the relationship between the two…

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Supporting the UK Reserve forces – a CSR win-win

The UK reserve forces (formally the TA), play a key role in supporting the country in times of emergency.  If you employ a reservist they will be getting leadership, professional and technical skills training to exacting military standards that easily transfer into increased performance in the workplace.  Furthermore at a time of unprecedented and unwarranted attacks on business by politicians and the media; supporting UK Reserves is a high profile and media friendly way of showing your organisation’s unquestionable CRS credentials.   Internally, supporting reservists show a commitment to your workforce both for personal development and commitment to a wider society as part of the corporate mission.  A win win for both the employer and the employee.  For further details see http://www.sabre.mod.uk/ or contact Mark Richard, SaBRE Campaign Director at gl-m.richards@gl.rfca.mod.ukImage

2013 – a crowd pleasing year?

In December “A box of Birds” by Charles Fernyhough was published.  I was particularly interested as I was one of about three hundred people who had “crowd funded” the publication of this book.  Fernyhough got his book published and I got a signed first edition.  I was speculating if this new economic model could be extended to Reward?  Executive remuneration is supposed to be crowd decided by shareholders via the Remuneration Committee.  It is a model that does not currently seem to work as well as it could; although this has far more to do with the increasing number of stakeholders, such as shareholder advocacy groups and politicians who all feel they should be part of the crowd sourced decision making.  It may be a way forward, but there will be a lot of pain before the model works in a way that is less combative and better at producing “good” outcomes.

The growth of social media, social networks and crowd sourcing are all going to impact on reward, often in an indirect way.  Not being part of strong, extensive, international social networks will leave us marginalised bit players in 2013.  Reward professionals need to be leading the way as opinion formers in our sphere and the best way to do that is through the propagation of good practice through social media conduits.  Combinations of existing and new technology are going to take us by surprise in 2013; we must work hard to be in the vanguard of change rather than following up in the rear echelon.

Many of the other issues facing us in 2013 are spawned by the poor economy both in the UK and worldwide.    The platoons of economists tend to skirmish over the fate of inflation in 2013; but if I was a betting man I would be look for odds on an outbreak of inflation.  This gives special challenges to reward, given low growth and even lower budgets how can we marshal our pay resources to give the biggest bang for our buck? This is at a time when real living standards have been in retreat for the better part of five years, if not longer.  Non-cash rewards and recognition activity continue to grow in importance in such a milieu.  However, addressing the core issue of falling living standards is more than just an economic question; failure risks further collateral damage to our social cohesion.

In 2013 the differences between rich and poor will again be greater and more visible.  We have already seen the outward manifestation of the damage to social capital by way of riots on our streets, greatly reduced political legitimacy by way of very low turnouts, for example in the election for police commissioners and greater apathy if not hostility towards politicians; seeing Osborn being booed at the Olympics is a demonstration of the depth of ill feeling.    I still remember studying sociology in the 1980’s – Emilie Durkheim talked of anomie, a social condition characterized by instability, the breakdown of social norms, institutional disorganization, and a divorce between socially valid goals and available means for achieving them.  We in Reward must look to reflect societal concerns as we scan the battlefield for threats if we are to add value to the current debates.

Issues around high pay and executive reward will continue to drive our and the business media agenda this year.  We are seeing attempts to make reward as much about how results are achieved as what those results are.  However, arguably not only is it too little too late (at least for investment banking pay) but it does not address the issue of “fairness” in pay; be it from the viewpoint of the shareholder, who provides the capital, or the employee who provides the effort.  Least of all it does not address the media sniping and politics of envy.  Increased transparency will be a loud demand on executive pay in 2013; although as US reporting has shown more does not mean better.  Executive pay is too complex and subject to too many variables to be reduced to one or two easy numbers.  (Vince Cable, please take note).  One of my New Year wishes is that we could find a way to define what really is meant by “fair” pay.

Another challenge facing us due to the economy is that of the apparent changes in employment structures.  I, like many others, am seeking a full-time permanent role.  But, organisations responses to the current depressed labour market are, understandably, to regroup by using more temporary and contract roles.  Pay levels in the market have been depressed.  With, on average, seventeen people in the UK chasing every vacancy, new roles are being advertised with lower levels of starting pay.  Bath University has produced some excellent work on organisational engagement and I find it interesting to ponder how companies encourage engagement while downsizing their permanent employees   and employing far more casual labour in the fight for cost advantage.  The Bath study showed a strong correlation between commitment levels and long term organisational economic success.  This competitive advantage is in retreat when faced with the economics of 2013

I do hope that 2013 will be better than I expect, many of the issues discussed above can be seen as opportunities and challenges where innovative practice and creative solutions in UK and global reward will allow us to bring light to the darkness of incipient anomie.  I wish all of you a happy and prosperous 2013.

Complexities of reward

My wife and I like to work together to solve the Telegraph quick crossword on my ipad, we are not good enough yet to attempt the cryptic crossword. We like crosswords as they test our knowledge but also because you can go off down the wrong path very easily and not realise it until that last clue where you know the answer but it does not fit in the grid because of an earlier wrong answer.
Reward is like this in many ways. It is moving from being the quick puzzle to being a very cryptic crossword where mistakes can be made and not discovered until a long way in to the process or product design. It has become apparent to me that Reward is at a crossroads, in the middle of a maze. There are now so many stakeholders involved, employees, management, compensation committees, regulators shareholder advocacy groups, trade unions and politicians it is difficult to know which way to turn. They all have different viewpoints, different agendas different understandings and different needs.
There is a lack of common ground, common language and common definitions. What, after all is high pay or low pay for that matter? Are we looking at absolute or relative levels of pay? Are we comparing with some mystery average or mean? As a result what looks fair and reasonable to a Compensation Committee looks like highway robbery to a trade union. The area is fought with paradox. We can see these paradoxes at work in the controversy over BBC pay for talent. Because the BBC is funded by licence payers there is the application of a different standard for, say Jeremy Clarkson, than there would be if he worked for a privately funded broadcaster. Yet the labour market in which he operates is exactly the same. Is he supposed to be happy to earn less because he works for the BBC? Would we be happy to be paid less because we work in the public sector, and judging by the latest earning statistics for those in the public sector vs. the private sector the answer to that is a clear no.
What we and others are paid is very important; yet there is no overarching theory on pay and reward. There are attempts such as the excellent tournament theory or expectation theory for example. Labour market economists will talk about supply and demand – but that is not the entire story. Behavioural economics are increasing playing a part in pay theory. Yet, like Steven Hawkins attempt at a grand unifying theory we are really nowhere near achieving a consensus on what is fair pay.
So reward specialist have the issue of not only undertaking complex work on pensions, share options, taxation, total reward, flexible benefits, accounting standards, compensation disclosure rules and the like but we have to be able to justify our recommendations before the court of public opinion, political scrutiny and regulatory microscopes. Often with the benefit of 20 20 hindsight.
There are two concerns around the complexity. The first is that there are very few individuals who can move between the technically complex and the “public relations” facets of current reward activities. Second, only the larger companies have the resources and time to fully fulfil the requirements, demands and disclosures needed by the stakeholders, Reward normally sits in HR, yet it has strong interfaces with Finance, investor relation, Risk and Compliance, to name but a few.
Perhaps a new breed of expert will appear phoenix like from the current ashes of the shareholder spring; but somehow I think we will just muddle along as always, relying on expensive consultancies

Banking Standards Inquiry

I had coffee with a former investment banking colleague last week. She complained to me that she had lost a lucrative deal because by the time she had got the compliance department to agree to the deal another bank had beaten her to the sale. I thought about this discussion when I read the CIPD’s excellent submission to the Parliamentary Commission on Banking Standards.
The CIPD submission makes a cogent argument that culture change is a necessity and standards of behaviour are key in tacking the current perceived malaise in banking across the globe. The problem from my viewpoint is that the nature of financial systems makes culture change in banking almost impossible. The reality of what happens “on the ground” makes change very difficult and a very long term project.
The arguments supporting this thesis are first that the entire financial services structure is built on the profit imperative. Investors giving money to fund managers expect above average returns. The fund managers and shareholders expect above average returns to reward their investment. That puts pressure on Boards to make above average profit; this pressure is then passed down the line to the coal face where revenue earning staff are under great pressure to produce profits both to keep their jobs and to make a bonus. It is difficult to see a situation where fund managers and shareholders say “don’t make me so much money” the obvious result of reducing risk.
The second argument, which is also reflected in the CIPD submission, is the issue of the labour market. High earning revenue makers such as traders as not a common species. The best beasts in the financial services jungle require high levels of self-belief, education, skills and intuition. Those with this skill set are far ahead of the herd in achievement of revenue generation and thus ruthlessly hunted by banks seeking to boost profits. The way this hunting is carried out is by financial incentive supported by a “self-reinforcing monolithic working culture”. Status is measured first by employer and second by earnings. So working for Goldman Sacs is seen as being of higher status than working for UBS for example. But money is the big differentiator; – bigger bonuses = higher status.
Proof for the above assertions can be seen just by reading the newspapers. Despite years of the banking crisis we are almost weekly hit by stories of alleged wrongdoing from the top of organisations – the recent disclosures around alleged LIBOR fixing; to the alleged wrongdoings of individual traders. It could be argued that due to the factors above, nothing very much has really changed in the culture and behaviours of those who lead, manage and work at the coal face of our financial services.
The CIPD submission to the Banking Standards Inquiry is an excellent document that highlights the key issues. The unfortunate truth is that diagnosing the ills is unlikely to lead to any early cure. An impression not aided by the body holding the inquiry being portrayed by the media as lacking the very culture and behaviour that it seeks to impose (if that were possible) on the banking sector. Pots and kettles anyone?

Corporate pay disclosure: The breakfast cereal debate

I was in my local Sainsbury’s doing some food shopping.  Conscious of health advice I thought I would look at the label on my breakfast cereal.  The label listed the contents as:

  • Wholegrain Wheat
  • Malted Barley Extract
  • Sugar
  • Salt
  • Niacin
  • Iron
  • Riboflavin
  • Thiamine
  • Folic Acid

Included in the informative label were the “typical average value per serving” and the “Guideline Daily Amount”.  All excellent information – but what did it actually mean?  Should I be comparing my chosen cereal with others to ensure good value with the right level of vitamins and minerals?  Should I perhaps compare my breakfast cereal with porridge, similar, but not quite the same?

A similar issue occurs over disclosure in corporate pay.  Compensation Committees and shareholders are bombarded with guidelines on what should be their “exposé” on executive pay.  In the US there is a corporate filing called the Compensation Analysis and Discussion (CD&A) which is a mandatory pay disclosure requirement.  If we look at the recent filing by Apple Inc. at http://files.shareholder.com/downloads/AAPL/1719223512x0x531628/b6ec469d-aff8-4eef-9077-1defc2258f6b/2012_Proxy.pdf we see the following disclosures for senior executives;

  • Base salaries
  • Annual performance based cash bonuses
    • Performance criteria
    • Performance Goals
    • Pay out structure
    • Long term equity awards
      • Stock awards
      • Option awards
      • Changes in pension value
      • Estimated future pay outs under non-equity awards
      • Estimated future pay outs under Equity incentive awards
      • Other stock and option awards
      • Fair value of stock and option awards (and good luck with your Black-Scholes calculations).

And while Apple Inc. does not use the following for their executives they could also report on:

  • Employment agreements;
  • Severance arrangements;
  • Cash payments in connection with a change in control of the Company;
  • Tax reimbursements;
  • Supplemental executive retirement benefits.
  • Change of control benefits
  • Prerequisites

I could go on….. (For a fuller discussion on disclosure regulations see http://crossborder.practicallaw.com/4-101-7960 )

Like my breakfast cereal contents, it is all exciting stuff – but what does it mean?

Who cares?

The disclosure requirements in the US and the UK were conceived to help stakeholders judge if pay is “fair” and not “excessive” (No definition of “fair” or “excessive”, like an elephant, you are supposed to know it when you see it).  The Association of British Insures guidelines (http://www.ivis.co.uk/ExecutiveRemuneration.aspx) state that ABI members seek to ensure that: “remuneration practices and policies of companies they invest in are aligned with shareholder interests and promote sustainable value creation.”  No one would argue with those good intentions.

How many institutional shareholders – who hold the majority of shares in the US and the UK, have the time or expertise to undertake the analysis that I would have to make with my breakfast cereal?   Is the remuneration good value for shareholders?  How does it compare with other similar (or dissimilar) organizations?  Multiply that by 140, the average numbers of stocks held by US mutual funds, and you have a complete supermarket of breakfast cereal content to deconstruct.

Increasingly institutional shareholders are leaving it to shareholder advocacy groups such as Institutional Shareholder Services (ISS) in the USA and the ABI in the UK to flag up deviations from what they consider best practice.

Unintended consequences

The reliance on these groups leads to a number of unintended consequences:

  • A “tick-box” mentality to disclosure
  • Compensation Committees being frightened into designing their pay plans to fit the guidelines rather than be fit for purpose for their organisation for fear of a shareholder advocacy group recommending a “no” vote on their “say on pay” vote or similar.
  • Executives not wanting to be promoted to senior executive positions because of the disclosure and the restrictions on the nature of their pay structure.
  • Greater homogeneity between organisational compensation approaches and levels of remuneration.
  • Senior executives seeing their pay becoming much more contingent on factors outside their control – such as share price movement (for absolute and relative TSR measures for example); what behaviours will this generate?
  • Conflict of interests by advocacy groups who also offer corporate services
  • Compensation advisors becoming more expensive, as risk adverse as Compensation Committees and giving similar advice as all their competitors to maintain compliance.
  • Even greater labour market distortions at executive level.
  • A mismatch between the time horizons of the remuneration structure and the different return horizon of investors.
  • Shareholders being placed in the position of micromanaging reward policy.
  • Investors (and particularly political pressure groups) using a no vote on remuneration to “punish” company directors on or draw attention to, issues unrelated to reward.

Actual consequences – to date

The US has one of the most stringent pay disclosure regimes, yet it has the highest executive pay in the world and, arguably, the greatest inequality between employees.

The excellent KPMG guide to Directors remuneration  www.kpmg.com/uk/en/issuesandinsights/articlespublications/pages/kpmgs-guide-to-directors-remuneration-2011.aspx  points out that there has been a fall of 18.6% between 2010 and 2011 in the number of remuneration report shareholder resolutions with a greater than 20% oppose vote in the UK FTSE All share.  Thus, it is unclear if greater pay disclosure is a panacea against corporate excess or simply a kneejerk political response to public concerns – much fury signifying nothing.


I go on buying my breakfast cereal because I like it; I guess institutional shareholders are going to do much the same thing with the companies they choose to take as investments – regardless of the remuneration disclosures.