Thousands of boards worldwide have retained Littleford & Associates to benchmark head/director compensation since 1983. We help to assess the market replacement costs for sitting heads, the likely package to attract new heads, and the retention and retirement options for long-serving and valued heads.
Many board chairs and search chairs who contact us ask about including performance related elements in either a contract for a new head or a renewal. Some of the factors to consider are the following:
Nevertheless, more than 50% of all of our client schools worldwide offer some sort of bonus option. In some cases, it is regular and expected and is just called a “bonus”, and in other cases, it is really tied to specific goals. More international than US schools also give resigning or retention bonuses, the latter serving as a “golden handcuffs” tool.
We assisted a Board compensation committee in creating a bonus plan that gives the Head a guaranteed deferred compensation payment plus she is eligible for an additional payment to the 457(f) plan contingent upon meeting certain goals. This concept potentially grows the Head’s retirement asset. This was one of the Committee’s main objectives.
Structuring bonus incentives has become more common practice. Boards and compensation committees should consider carefully how to structure such plans and take into account their tax implications.