Iain Beresford ACG MSc Corp Gov guest chapter, published earlier this month, ends with the challenge that purpose, whilst the board’s responsibility, the organisation’s why, too often ends up with marketing. That it gets approved in the boardroom and then treated as a positioning exercise rather than a governance constraint. That it becomes, in his words, a story to tell rather than a framework for decision-making. I agree and as someone who has chaired Remuneration Committees for over a decade I think I know at least part of why…
…the gap between what a board approves and what an organisation actually does is, in large part, a remuneration design problem. And that sits squarely in the RemCo’s remit.
What gets rewarded gets repeated
The RemCo’s primary function is to ensure that executive incentives are aligned with the long-term interests of the business and those of its shareholders. That’s the governance language. In practice, it means deciding what behaviour the business is prepared to pay for. And here’s the uncomfortable truth: in most listed (and private) companies, the behaviour the RemCo is paying for has almost nothing to do with brand.
Executive remuneration frameworks are built around what can be measured and audited, you know them, it’s the usual revenue, profit, total shareholder return, return on capital – and these are very necessary metrics. But, in my view, they’re not sufficient alone. When they’re the only things that attract a bonus or vest a share award, they become the only things that genuinely compete for leadership attention.
Brand health, the accumulated trust that makes customers choose you, employees stay with you, and pricing power possible, doesn’t appear in most incentive structures. It isn’t set as a target, reported against or rewarded.
So it doesn’t get managed with the same rigour as the things that are.
An honest admission
I’ll be honest about my own record here. At one company I’ve RemCo chaired, I’ve consistently called out a customer drift risk at board level, the concern that a shift in strategic focus was quietly moving us away from our core customer base. I raised it and it landed with Board colleagues, but I didn’t push for customer NPS, existing and lapsed customers, to be embedded in the RemCo targets alongside the financial measures.
I’m proud of the financial discipline we maintained. We didn’t pay out where executives fell short against strategy and financial metrics – that rigour matters; but the brand signal, the leading indicator that might have sounded the alarm earlier, that might have created a formal accountability structure around something I was already raising in the Board Room wasn’t in the framework. Yes it was in the conversation, but that’s not the same thing, and as a brand strategist, I didn’t fight hard enough for it to be, and that’s the gap I’m writing about.
As someone who thinks about this more than most, if I can look back and see where I fell short of my own standard, then I think it’s fair to say this isn’t a failure of individual intent. It’s a failure of the framework most RemCo chairs are working within, and the good news is the framework is fixable – if we want it to be.
What RemCo chairs should be asking
I’m not suggesting that brand health metrics should replace financial ones. The financial discipline matters and the RemCo’s credibility depends on it. Shareholders demand it and so should Boards. What I am suggesting is that the framework is incomplete without them. and that completing it is more straightforward than most RemCo chairs assume. I believe the questions worth asking, consistently, at RemCo level include:
- Are we measuring customer trust, not just satisfaction scores, but the leading indicators that tell us whether the brand promise is being kept? NPS trajectory, customer lifetime value, retention versus acquisition cost ratios. These are available in almost every business, and most RemCos never see them.
- Are we measuring employee trust? The engagement surveys sit with the people team. The RemCo approves the CEO’s long-term incentive plan without asking whether the culture the CEO is building is consistent with the brand the business is selling. Those two things are not separate.
- Are we measuring pricing power over time? The ability to hold or grow margin without losing volume is one of the clearest financial expressions of brand health. If it’s declining, something in the brand relationship with customers is eroding. That’s a governance signal, not just a commercial one.
And perhaps most importantly: are we linking any of this to pay?
The practical intervention
The RemCo doesn’t need to reinvent incentive design, it simply needs to expand the framework it already uses. In practice, this might look like a brand health scorecard: customer trust, employee engagement, pricing power weighted at 15-20% of the annual bonus. Not as a soft 10% “strategic measures” overall element, but as a measured, audited, reported metric that sits alongside the financial ones with equal weighting.
- It might look like a qualitative assessment of how the CEO has managed the brand dimension of major decisions made during the year – an acquisition, a technology deployment, a leadership change. Assessed by the board, reported in the remuneration report, visible to shareholders.
- It might look like a simple question added to the standard RemCo agenda: have any decisions made this year strengthened or weakened the trust our stakeholders have in us? And if the answer is the latter, is that reflected in how we’ve assessed performance?
None of this is radical. It is the application of governance rigour to an asset that has, for too long, been treated as ungovernable because it’s hard to measure, but in truth, it’s not – the CMO reports on this throughout the year, we just never tie reward to brand health.
Why the RemCo is the right place to start
Boards are large and their agendas are full. The strategy committee, the audit committee, the risk committee… each has its own jurisdiction. Brand tends to fall between all of them, which is how it ends up governed by nobody. The RemCo is different. It has a direct lever, the single most powerful signal a board sends about what it values, and it meets regularly enough to make a course correction before the compounding damage becomes visible in the financial numbers.
Iain asks whether governance needs to be reframed. I’d say yes, and the RemCo is the most practical place to start that reframing. Not with a new committee or a new report, but with a small number of well-chosen questions asked consistently, and a willingness to let the answers influence how performance is rewarded.
I didn’t push hard enough for that in one boardroom where I was raising the right questions. I’m writing this partly because I think other RemCo chairs might be in the same position – seeing the risk, naming it informally, but not yet demanding it sits in the framework.
That’s where the change needs to happen. And it’s entirely within the RemCo’s power to make it.