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Your executives represent one of your company’s greatest investments, both in compensation and corporate reputation. Yet, they also present a significant risk in terms of lack of time to focus on the business, attrition, and regulatory and reputational issues.
Additionally, financial and tax landscapes have become increasingly complicated and the need for companies to mitigate risk has never been greater. With this in mind, the return on investment of a high-impact executive financial counseling program aligned to shareholder interests becomes readily apparent.
Shareholders expect companies to effectively manage risk on behalf of the firm—this includes business, reputational, tax compliance and regulatory risk. And yet, around the country, companies are continually failing to adequately respond to these risks. For example, the SEC reports that 42% of their standalone enforcement actions are related to issuer reporting/ audit and accounting, and securities offerings.1
There are three important reasons why companies should consider offering a program that helps their executives navigate life’s financial complexities:
However, offering a financial counseling program alone won’t move the needle. Our experience with hundreds of executive counseling programs across the country revealed that program design and implementation are also critical factors in the success of any benefit program.
When making the investment in any executive benefit program, your company and the provider have a shared interest in its success. Success may be defined in many ways ranging from an increase in overall benefit participation rates to meeting company-specific objectives.
Several critical factors can influence the outcome of any executive program. These may include:
Properly positioning an executive benefit program to the board and employee population is critical. To the executives, this means effectively and clearly communicating the program benefits are in alignment with shareholder interests and strategic in nature. For your board, stress the benefits of providing time to the executive so they can focus on growing the business, as well as risk mitigation for the company. Again, this is more than just a “perk” for the executive.
Providing access to executives is another critical factor. Providers often have well-thought-out engagement plans. To build credibility, provide direct access to your executives. Doing so can foster the opportunity for a personal, candid and confidential conversation. This access helps your executives better understand the benefit and get the most out of a program. Lastly, providers can take the lead on communications and engagement to ease the burden on your Human Resources team.
Finally, establish a strong partnership between your provider and your company. Give your provider the opportunity to reinforce the purpose and value of the program. For your Human Resources team in the implementation of the program, this means fostering an active and collaborative dialogue with the provider, including ongoing feedback and opportunities to partner in messaging to the executive team. In an open architecture arrangement, or a program with a multitude of choices, the benefits of a strong single provider are diluted and quality control is impeded.
For the participating executive, avoiding too many choices of providers and making it easy for them to participate is a best practice. For example, you may see better participation for company-paid programs versus reimbursement structures simply by removing the administrative barrier. Additionally, a strong partnership approach helps scale your benefit team to execute the plan—especially during times of change.
When a program is communicated and executed well, in close partnership with your Human Resources team, you should see results. One survey Ayco conducted with two corporate companies offering executive financial counseling showed marked improvement in personal financial and organizational risk mitigation.
All findings are based on executives who were offered and engaged in Ayco's executive financial counseling service for at least one year (see Figure 1).2
There are a number of different factors that can also impact program success, including the size of a company, industry and a company’s culture. The example above is meant to be illustrative of benefit plan usage and results may vary. Other corporate programs may not show the same results. However, the success of any executive financial counseling program is a direct result of thoughtful planning, robust implementation and access to the executives.
Is your tax and financial benefit delivering? Do your executives recognize the value of their benefit plans? Ask your current or potential provider to help you design an effective plan that’s beneficial to your executives, your company and your board.
1U.S. Securities and Exchange Commission Division of Enforcement Annual Report 2017, ©2017 U.S. Securities and Exchange Commission.
2Percentage point increases. Analysis includes the combined data of 75 clients from two companies where Ayco services were provided for at least one year. Where a service offering was not applicable to a client, that client was not included in the analysis and less than 75 clients were utilized.
For disclosures relating to this article, please click here.
Insights from Ayco InnerCircle 2021
By Brandon Ross