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Why should a company utilize an executive compensation consultant?

‘Engaged by a board of directors and working with management to maximize shareholder wealth, NFPCC provides independent executive compensation recommendations without bias.’ says Chris Crawford

 Chris Crawford, Executive Director of NFP Compensation Consulting (one of HBJ’s Best Place to Work winners) shares some of the reasons companies utilize an executive compensation consultant.

Why utilize an executive compensation consultant:

  •  Independent Recommendations & Advice – Engaged by a board of directors and working with management to maximize shareholder wealth, NFPCC provides independent executive compensation recommendations without bias. 
  • Good Governance – With the increasing pressures of the SEC, IRS and institutional shareholder groups on executive compensation, an independent consultant can provide real value to the process and governance of executive compensation. The SEC has indicated it plans to double the number of proxy audits specifically targeting executive compensation.
  • Keep your Board of Directors in Place – Riskmetrics (formerly ISS) is increasingly recommending votes against board of directors and compensation committee members for executive compensation reasons.  NFPCC can help a company navigate the difficulties of this 800 lbs. gorilla that has a one sided view of the world.
  • Best Practices – NFPCC works with approximately 50 energy companies over 150 public and private companies. As such, we are on the front edge of what works best to attract, retain and motivate key talent, especially in the volatile energy market.
  • Greatest Bang for the Buck – Efficiently utilizing capital is a priority of public companies. NFPCC knows which elements of compensation provide the greatest perceived and realized value to participants while minimizing taxable income to the participant, cash outflow from the company, charge to earnings and share usage.
  • Working through difficult issues – Oftentimes, companies need the flexibility to do the right thing with compensation when it optically doesn’t seem right. For example, a company in bankruptcy/turnaround may need to provide retention payments to key employees for fear of losing the most important asset in a turnaround – their people.  However, to the general public, retention payments in bankruptcy look like “pay for failure”.  An independent consultant can provide the board and management the coverage for making these payments.  There are numerous other difficult issues that NFPCC has worked with companies to provide the board and management the necessary umbrella coverage and right answers.
  • Litigation Prevention – As the litigation support experts against Enron’s egregious bonus payouts, NFPCC understands where compensation landmines exist.  Studies have linked many controversial pay practices, such as option backdating, to the absence of independent consultants and absence of independent directors of the board.
  • Cost – The annual cost we charge a client is saved by multiples of the charge via plan design utilizing the most efficient currency possible. 
  • Say on Pay Legislation – Almost all proposed financial reform legislation currently in the House and Senate propose shareholder say on pay.  As such, independent executive compensation consulting will be at a premium to ensure executive compensation passes shareholder votes.
  • Navigation Through Muddy Waters – Tension is naturally growing in organizations over executive compensation matters.  NFPCC can provide an independent voice of reason to the board and management to navigate difficult discussions.
  • Expertise – Most organizations don’t have the expertise to develop best practice executive compensation programs. Executive compensation is what we are.  
  • Time – Many organizations don’t have time to spend on executive compensation planning and design. At NFPCC, it’s our full time job.
  • We’re Close – Located in Houston Texas, we can provide the personal touch and time necessary to work as a Partner with a capital P.
  • No Long Term Commitment – We are paid by the project. If we don’t perform, you don’t hire us.
  • Partnership – We listen and assess your needs in order to customize a plan for you. Just because somebody else does it, doesn’t equate to “it is right for you.”
  • Alignment with Shareholders – NFPCC aids committees in setting pay in a manner that aligns more closely with the interest of shareholders.
  • Independent Services – NFPCC also does not have additional services to sell to the Company, so we are not pursuing anything other than to develop recommendations in the best interest of management and board to equip companies with the best possible tools to attract, retain and motivate top talent.

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