What do pay structures and casual dinners have in common? They’re both a part of building a good working executive culture.
In that spirit, Challenger chair Peter Polson has flagged that the ASX-listed annuities maker is likely to recalibrate the incentives in chief executive Brian Benari’s pay deal.
“Brian’s base pay is now less than one-third of his total expected salary,” Polson said. “I think we have probably … erred too high on the side of linking pay to performance, and we probably need to address that. But we are proudly a performance-based organisation and I don’t resile from that.”
Polson explained why remuneration is a critical tool for boards in shaping a company’s executive culture.
“Remuneration is an issue that takes up a lot of time, but it is one of the most important levers a board has,” he said. “Unless remuneration incentives are consistent with the culture you are trying to drive, you will have a dysfunctional organisation.”
Benari said strong leadership from the chair and board was critical for helping him implement a good corporate culture.
“The tone comes from the top,” he said.
Polson said regular “culture audits” also helped.
“We don’t apologise for Challenger’s culture, we want to understand what it is.”
Polson and Benari made their comments during a fireside chat at the Investment Magazine Chair Forum in Healesville, Victoria, January 30-31, 2017, in which the pair shared their insights into what makes for a good working relationship between a chair and chief executive.
“I demand transparency, integrity, and trust,” Polson said. “I trust Brian and hopefully he trusts me.”
Being honest and upfront with each other to create a culture of ‘no surprises’ was at the heart of any good CEO-chair relationship, he said. “There are no surprises at Challenger. I don’t wake up worrying that I am going to read something in the newspaper,” he added.
That commitment to no surprises needs to flow both ways. For example, Polson keeps Benari in the loop when the board is in the process of recruiting a new director.
“Of course, it should never and would never be Brian’s decision whether or not to have someone on the board but, similarly, if he had sent up a flare that he could not work with a particular person, then I would never appoint them,” Polson said.
Likewise, Benari said he tries hard to keep the chair in the loop and make sure the whole board has clarity on what he’s trying to achieve.
“Just like we try to make sure the call centre has absolute clarity on what we are trying to do, we need to make sure the board does, too,” he said.
Like other chairs at the conference, Polson spoke highly of the benefits of the board getting together for an informal dinner the night before their meetings. This was a great chance for board members to get to know one another and socialise some of the ideas on the next day’s agenda in a more casual setting, he said.
“When you get into the meeting, the executives will go into all the details, so it is helpful to have set the scene first,” he explained.
Polson and Benari said they “absolutely” argued, but agreed robust disagreements could be constructive when handled in a respectful manner.