'You work for us'.

• Author: Rock, Robert H.
• Position: Letter from the chairman

'FOR WHOM do you work?" asked the chair of a compensation committee on which I serve. He directed his question to the consultant who was kicking off a presentation on the CEO's SERP arrangement.

Seemingly puzzled by the question, the consultant responded--as they often do--with a question: "What do you mean?"

The director clarified, "Do you work for us or for them?" pointing to the CEO and his two top lieutenants.

The consultant shot back, "I work for both of you."

"Wrong answer," growled the comp chair. "You work for this committee, period!"

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Board committees--in particular, compensation committees--are increasingly demanding that outside consultants be accountable to them. Not very long ago, the CEO and his top HR executive hired the consultants, who in turn often felt beholden to management. Now comp committees are choosing the consultants and insisting upon their independence and objectivity. The chair of the comp committee is often the point person who brings consultants and their proposals before the committee for "bake offs." The comp committee negotiates and signs off on the consulting contracts, which often can be in six figures.

Whereas once the consultant's reports were prepared with management and presented for managers' review and approval, now the comp committee gets the reports first, and sometimes "for their eyes only." Furthermore, comp committees are regularly holding executive sessions with the comp consultants. Although management continues to be involved, the comp committee, in particular the comp committee chair, manages the...