If the business unit is a cash cow, it had better not run dry. If the unit represents products or services that can achieve a dominant position in a given market segment, the unit must achieve market share growth. It is important to have direct linkage between business strategy execution and executive remuneration. If margins need improving, executives should be rewarded for accomplishing that goal. If improved customer service is key, then reward executives for that improvement.
Executive programs can set the tone for the rest of the organization.
This alignment is especially important because companies must spell out the rationale for their programs in detail in proxy statements. At a minimum, executive programs should not operate in a manner contrary to the goals for the rest of the organization. If teamwork is emphasized, team results should be incorporated in the executive incentive design. If customer orientation is being stressed, customers could be asked to help assess the executives' performance. If employees are being asked to share in higher medical costs, executives should not receive 100 percent medical reimbursement.