It is time that companies finally decide how big a slice of company value executives deserve. A value sharing framework can provide some of those answers. Value sharing evaluates executive rewards in the context of company and shareholder performance. The analysis shows whether executive gains are too high or modest compared to shareholder gains. As such, this approach can help Compensation Committees define what is reasonable when it comes to compensation.

Value sharing can be evaluated from three perspectives:

1. The percentage of total value (i.e., earnings and shareholder return) created for shareholders that will be allocated to the top five executives;
2. Changes to that percentage given time and circumstances; and
3. A comparison of the value percentage across companies to confirm the sharing relationship is appropriate.

Value sharing examines alignment through the relationships among shareholder gains, executive rewards and company performance. Each component is measured as follows:

Value sharing may seem complex, but the thoroughness of the analysis provides a level of comfort and assurance that value is truly being delivered commensurate with the value created. In fact, value sharing encourages targeting a lower, not ever-higher, sharing rate—surely good news to publicize in a proxy statement.