What’s your flavor? Companies get a taste of CEO pay for the proxy season

This article, originally published in Dutch in Mgmt. Scope, CGLytics examines CEO compensation issues going into the 2020 proxy season

This article by CGLytics CEO, Aniel Mahabier, first appeared in Dutch in Mgmt. Scope on 11th March 2020: https://managementscope.nl/opinie/bestuurdersbeloningen-bedrijfsprestaties

Executive compensation gains attention in the run-up to annual shareholder meetings. The key question is whether compensation plans are socially responsible and align with company performance relative to its peers.  In 2019, companies already got a taste of the increasing interest in CEO pay from shareholders. “That attention is only increasing,” says Aniel Mahabier, founder and CEO of CGLytics, the leading global provider of governance data and executive compensation tools. “Executives  and directors  who are not sufficiently prepared are facing reputational risks.”

As shareholders and other stakeholders prepare themselves for annual shareholder meetings, it’s the moment to speak out on these important issues. Shareholders will again make themselves heard this year. For several years now, engagement between shareholders and companies has been growing. Parties are more likely to vote and use their voting rights to steer business policy: the number of votes against remuneration policies are increasing proportionally at the meetings of the 5,900 listed companies we track. An increasing number of shareholders want compensation to reflect the company’s long-term performance and value creation (in other words, pay for performance and earnings per share).

Pay for performance

It is obvious that the compensation of executives should reflect the company’s performance, however data shows a different picture.

In a large number of the publicly listed companies, there is pay for performance misalignment. The CEO’s compensation is – consciously or unconsciously – not in line with the value create by the company over multiple years.

More than half of companies in the US S&P 500 Index lack a correlation between CEO compensation in 2019 and the development of the company’s earnings per share over the past three years.

In some instances, the CEO compensation is lower than expected based on CEO value creation. With a much larger proportion of companies, the value created by the CEO is much lower than you would expect based on the level of their compensation received. In many situations, at the general meeting of shareholders, companies proposed increasing executive pay, although the company’s performance declined.

Mismatch

This misalignment between CEO compensation and company performance is increasingly gaining the attention of shareholders, employees, governments and other stakeholders. The top 35 executives of companies in the S&P 500 collectively earn almost more than $3 billion, which contributes to the discussion. In Europe we see a similar picture. For a third of the listed companies in the Benelux, the CEO’s compensation does not align with the realized value creation. A similar picture is seen at a third of companies in Britain’s FTSE 350 Index.

Drivers of change

The focus on responsible compensation is in line with the focus in society on sustainable business growth.

Large investors – pension funds and insurers – are drivers of the change in compensation.  Passive investors, such as asset managers Vanguard and BlackRock, are also increasingly using their control to influence compensation proposals.  We see that they are trying to encourage a more socially responsible compensation policy in different ways. For example, by engaging  on compensation  policies and proposals with shareholders and other stakeholders before the general meeting of shareholders and underpinning this with data. We see signs that this is reducing the number of dissent votes against the proposed policy.

Shareholders do not hesitate to enforce change where necessary. For example, by voting against incentive proposals including equity plan proposals at the meeting. A large investor has stipulated that if more than 25% of shareholders speak out against a compensation proposal, they will in turn vote against the reappointment of the chairman of the compensation  committee. The same strategy is used if the compensation proposals provoke a substantial number of counter-voters in two consecutive years.

Reward regulators

All efforts to promote sustainable value creation are having an effect: short-term pay is making way for a long-term performance-based compensation structure. Several listed companies have either decreased, shifted or changed the variable compensation component of their executives’ pay plan into fixed compensation. The latter includes, more often, a combination of cash and shares of the company. Using shares as an incentive, there is a direct alignment between the pay of the CEO and the performance of the company.

The same development is also seen when looking at the compensation of directors (non-executive directors). Where it is common practice in the United States to reward directors with, among other things, shares of the company, this was not common, or even prohibited, in Europe for a long time. That has changed. For example, the new corporate governance code in Belgium offers the possibility to reward non-executives partly in shares. This creates a shared interest with shareholders.

Sustainable criteria

An important development is seen in the use of non-financial metrics for executive and CEO compensation.

Shareholders expect companies to include non-financial guidelines such as ESG criteria in their compensation system in addition to financial guidelines – such as earnings per share and Total Shareholder Return (TSR). These criteria show how the company takes into account various ESG  sustainability criteria: Environmental, Social (social policy) and Governance (good governance).

In many countries in Europe, listed companies are obliged to include such non-financial disclosure in their annual reports. It therefore seems logical to also link the compensation of the executives to the goals set by the company in the field of corporate social responsibility. The recent governance crisis at a major Swiss bank illustrates how the lack of good governance can affect the oversight and value creation of a company in the long term.

Although attention to the inclusion of non-financial metrics is increasing, the application is still limited in practice. Only 27% of FTSE 350 and ISEQ 20 companies have included some form of measurable ESG criteria in incentive plans. And even in these companies, the proportional share of compensation determined by ESG performance is small. This deserves attention: if the sustainable objectives are not included in executive compensation, there is a risk that the compensation policy will lose connection to the business strategy.

Risk factors

A responsible compensation plan based on financial and non-financial metrics is more important than ever. An increasing number of directors, regulators, compensation committees and investors are therefore scrutinizing CEO compensation and use CGLytics data and pay for performance benchmarking tools to review compensation proposals and policies. Directors are using this information to prepare their engagement with active shareholders, proxy advisors like Glass Lewis and other stakeholders. Investors are looking for red flags, undiscovered risk factors that threaten the quality of governance in the company. Having access to similar information and tools ahead of the proxy season, is allowing compensation committees to respond in a timely manner to pitfalls in the existing compensation plan and proposal to avoid potential reputational and activism risk.

Would you like to gain instant insights into more than 5,900 globally listed companies’ board composition, diversity, expertise and skills?

Or access the same CEO pay for performance insights used by Glass Lewis in their proxy papers?

Click here to request a demo to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, currently utilized by world-leading institutional investors, activist investors and advisors.

About the Author

Aniel Mahabier: CEO of CGLytics

Aniel Mahabier  is CEO and founder of CGLytics, the leading global provider of governance data and executive compensation tools. Mahabier interviews and writes for Management Scope about the remuneration of directors and corporate governance analytics.

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CEO Pay Continues to Increase, but Performance Often Lags

Shareholders, including large institutional investors, are continuing the growing momentum to link executive pay to company performance.

Shareholders, including large institutional investors, are continuing the growing momentum to link executive pay to company performance.

The UK Investment Association, which represents more than £7 trillion ($9 trillion) in assets, responded to investor dissent of FTSE350 companies not acting on executive pay concerns by issuing a new version of executive pay guidelines for disclosures in 2019. With a statement claiming, “companies need to demonstrate the link between pay and company performance. If they don’t, they should brace themselves for more shareholder revolts”. It is clear from this statement that executive pay and pay regimes are still hot topics.

In the US, the Council of Institutional Investors (CII) have also commented in the past on the “excessive complexity in U.S. executive pay plans, and questions on the effectiveness of approaches to pay-for performance.”

There are indeed vast disparities between compensation at select companies within the S&P500 index and their Total Shareholder Return (TSR).  CGLytics, as part of its S&P 500 CEO/Executive Compensation review, has developed an extremely granular view of CEO pay in comparison with performance for the index, helping to focus the debate on the issue.  The review examines different aspects of CEO pay among the constituents of the S&P 500index, including fixed v. variable compensation mix, overview of Pay vs. TSR, and a pay for performance review on a one- and three-year basis.

Realized Pay Correlates with Growth

CEOs received an average of $14,748,284 in Total Granted Compensation (TGC) and $19,276,476 in Total Realized Compensation (TRC) in 2018, the report shows.  Yet the average TSR for S&P 500 companies in 2018 was -6 percent. While this is an improvement from 2008, in which average TSR was -39 percent (average granted pay was $9,563,165 and average realized pay was $10,318,656), it is not a result that is likely to satisfy shareholders.

Indeed, the report indicates a trend that supports the need for performance-related incentives: Granted pay steadily increases from year to year while realized pay tends to coincide with absolute growth.

 

That need is further supported by the comparison of CEO pay with TSR. Naturally a zero-percent margin or zero disparity between a CEO’s realized pay and the company’s TSR is considered perfect alignment.

Historic number of shareholders oppose boards on executive pay

Companies such as Michael Kors Holdings Limited, NVIDIA Corporation, Constellation Brands, Inc., Goldman Sachs Group, and Capital One Financial Corporation all had CEOs rank in the top of their sectors for Total Realized Compensation in 2018. Yet, each of these companies also had a 2018 TSR in the bottom 20 percent of their industry.

Not surprisingly, this leads to shareholders questioning the pay practices of the board, and, in fact, opposition from shareholders for executive compensation issues is at an all-time high. In total, about six percent of director nominees have received less than 80 percent support, and 0.3 percent have not secured majority support. Eight percent of Say on Pay votes have secured less than 70 percent support, and two percent have not achieved majority support.

These numbers may seem small, but they are actually historic in significance compared with previous years’ levels of opposition for related AGM items. It is clear that large passive investors have become more hesitant to approve large one-time retention awards, unrestricted equity to executives, and executive incentive grant with no performance criteria.

To learn more about the Say on Pay landscape of the S&P 500 index, click here to download the full report.

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In Spain, the Comision Nacional de Mercado de Valores (CNMV), has put a series of changes to the corporate governance code of public companies under consultation. This is widely regarded as one of the most relevant proposed amendments relating to gender diversity in boardrooms.

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“At Randstad we are looking at the remuneration policy on a continual basis and it’s an important topic. Prior to the AGM we want to fully understand how all our stakeholders look at our remuneration policy. “

Glass Lewis New Peer Group Methodology for Say on Pay

Due to Glass Lewis now using CGLytics data to power their Say on Pay recommendations and adapting their methodology to peer-based approach, what is the impact on companies’ pay for performance gradings?

Glass Lewis and CGLytics recently held a webinar to explain Glass Lewis’ new peer group methodology, taking effect from January 1 this year.

The new model implemented by Glass Lewis changes the way peer groups are determined for the Say on Pay recommendations in their proxy papers. During the webinar Glass Lewis’ Julian Hamud, Senior Director of Executive Compensation Research, explains:

“The new partnership with CGLytics has given the opportunity to provide better research for our clients. We are moving from a market-based approach to a proven peer-approach, which will improve our say on pay and compensation analysis.”

Hamud goes on to explain in detail the problems they encountered with the previous model including rigidity with no ability for manual adjustments to the peer algorithm when unique context of a company is justified, and large industry favoritism.

The impact on pay for performance grades and recommendations is also highlighted with a case study detailed by Aaron Bertinetti, Senior Vice President, Research and Engagement, Glass Lewis.

Using the example of Franklin Resources Annual General Meeting (AGM) being held on February 12, 2020,  Bertinetti shows the difference in pay for performance grades awarded using both the old and new Glass Lewis model and peer methodology. This example reveals an improved Grade C, whereas using the previous peer groups and model it would result in a Grade D.

Due to the change of Glass Lewis now using CGLytics data to power their Say on Pay recommendations, and adapting their methodology to peer-based approach, companies need to understand:

  • • How the Glass Lewis peer groups are now constructed,
  • • Why you and your company should care, and
  • • The benefits of the new peer group methodology.

 

To learn more, click here to watch the webinar by Glass Lewis and CGLytics.

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Gender diversity in Spanish boardrooms

In Spain, the Comision Nacional de Mercado de Valores (CNMV), has put a series of changes to the corporate governance code of public companies under consultation. This is widely regarded as one of the most relevant proposed amendments relating to gender diversity in boardrooms.

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The new proposal is moving from a “mere” recommendation to a “direct” recommendation of a minimum of a 40% presence of females in boardrooms, significantly up from the current 30%. Besides, the CNMV also acknowledges that the current recommendation hasn’t been given enough attention by Spanish corporates. To address the issue, the new proposal recommends to include executive selection policies and processes in order to promote diversity of knowledge, experience and gender.

Considering these substantial and at the same time exciting changes, I decided to take a look at the current state of gender diversity in Spanish boardrooms, selecting both the IBEX35 and the remainder constituents of the IGBM. The result of the analysis is as follows:

Within the IBEX35, only 3 constituents already meet the new recommendation of the CNMV. Much worse is that only 43% meet the current threshold that has been introduced in 2015, and 20% have less than 20% of females on their board.

Within the rest of constituents of the IGBM (82 corporates), the situation is mixed:

  • • 2 corporates have already achieved real gender parity
  • • 3 corporates meet or exceed the new threshold of 40%
  • • 18 corporates are already above or meet the current recommendation
  • • 59 corporates are below or significantly below the current recommended 30%. Within this group, there are 11 companies which have no females at all in their boardrooms. Following Larry Fink’s latest letter, it is likely that these companies will be facing tougher environments and questioning from investors and stakeholders in the future, as well as higher financing costs.
chart2
Source: CGLytics Data and Analytics

Considering that the current recommendation was set by the CNMV in 2015, it is clear to see that companies will have a challenging future ahead if they want to meet the new recommendation for gender diversity, either via succession planning or boardroom expansions.

In view of the above, how can CGLytics support public corporates’ growing demand for board diversity and effective succession planning, at the required pace?

Whilst at the same time guarantee they achieve a well-balanced board, paramount to maintaining good corporate governance for long-term success?

CGLytics’ Nominations & Governance solution is the answer. Basically, Nominations is a strategic tool through which nomination committees and HR teams are empowered to maintain a pulse on how the board composition of their organisations measures up against peers, investors’ requirements and market standards.

Using Nominations & Governance, nomination committees and HR teams can benchmark the skillset of their boards versus peers and competitors, prepare for investors’ pressure related to board composition, identify the right skills needed now and in the future to best serve the board’s ability to make the right decisions and build a talent pipeline, getting instant access to 125.000+ (including over 20.000 females) global executive profiles of key decision-makers from listed companies, including comprehensive biographies containing employment, compensation, education and extracurricular activities, to search, find, engage and network with the best-quality prospects for boardroom recruitment and succession planning.

Please get in touch should you want to know more.

Would you like to gain instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills?

Or access the same CEO pay for performance insights used by Glass Lewis in their proxy papers?

Request a demo to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, currently utilized by world-leading institutional investors, activist investors and advisors.

Request a Demo

About the Author

Francisco Lopez, Regional Sales Director

Francisco Lopez is a senior sales professional with two decades of successful experience in delivering growth to organizations and building long-lasting, profitable and sustainable relationships with clients and stakeholders worldwide. Francisco has developed his career in the market intelligence, information services and technologies industries, having fulfilled senior business development positions at blue-chip organizations such as Nielsen and GfK. Prior to joining CGLytics, Francisco was the global head of the Industrials sector at a global supplier of SaaS solutions for third-party risk & performance management. Francisco holds a Master’s degree in Business Administration from the Complutense University of Madrid.

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Randstad make data-based decisions going into the AGM season

“At Randstad we are looking at the remuneration policy on a continual basis and it’s an important topic. Prior to the AGM we want to fully understand how all our stakeholders look at our remuneration policy. “

Randstad N.V. is a leading global HR services company. The company, which is headquartered in Diemen, Netherlands, provides work for more than 670,000 people
around the world each day.

With anything less than 80% of approval from shareholders on remuneration policies now deemed as negative by stakeholders (compared to 50% five years ago), and justification requirements increasing (inpart due to implementation of the Shareholders’ Right Directive II in Europe), companies’ remuneration policies are coming
under greater scrutiny.

Going into the next proxy season, Randstad wants to know which KPIs are being used by other companies to form their own opinion and they also want to compare executive remuneration against peers’ and understand how they will be perceived by proxy advisors like ISS and Glass Lewis.

Read the full story here and find out why Ranstad now goes into their AGMS with greater confidence and how they are able to make data-based decisions rather than assumptions.

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Thiam Tidjane exits Credit Suisse

On February 7, 2020, Credit Suisse Group AG announced that CEO Tidjane Thiam has resigned. The announcement came amid allegations that Credit Suisse spied on former board members, a scandal that led to the departure of Pierre-Olivier Bouée, its Chief Operating Officer in October 2019.

On February 7, 2020, Credit Suisse Group AG announced that CEO Tidjane Thiam has resigned, effective Feb. 14, 2020. The company appointed Thomas Gottstein, Head of Unit Credit Suisse (Schweiz) AG, as his successor and their current Head of Institutional Relations, Andre Helfelstein as Gottstein’s replacement.

The announcement came amid allegations that Credit Suisse spied on former board members, a scandal that led to the departure of Pierre-Olivier Bouée, its Chief Operating Officer in October 2019.

Background and timeline

In March 2015, Credit Suisse recruited Cote d’Ivoire native Tidjane Thiam from Prudential plc. He replaced Brady Dougan as the company’s Chief Executive. The market responded favorably to the news and the company’s share price increased significantly.

From the strategy Thiam had, it was evident that he wanted to refocus the bank on wealth management. In October 2015, Thiam promoted Iqbal Khan to the management board in charge of International Wealth Management. Khan had a steady rise in the company giving him the reputation as the “crown prince” to succeed Thiam in the near future.

The company nevertheless had a share price slide in November 2017 which led the CEO to take charge and begin a restructuring initiative. Following this initiative, the company’s share price rose again, approaching an almost two-year high.

 

The relationship decline

However, in January 2019, Thiam and Khan, who had become residential neighbors, got into an altercation at a party held in Thiam’s home. Though this was not public knowledge, the altercation led to Khan complaining to the company’s board which led to a fall out between the two men.

In February that same year, Khan was passed over in a restructuring/reorganization in the company that saw two of his colleagues promoted.  In a very interesting move, Khan resigned from Credit Suisse to join rival UBS in July 2019, with a start date in October 1, 2019. Two months later, Zurich prosecutors launched criminal investigation after Khan complained that he was being threatened by unidentified people.

Speculations were that Credit Suisse had decided to keep tabs on Khan after he agreed to join UBS, hoping to prevent him from poaching private bankers. Within days, Credit Suisse’s board began their own inquiry into the surveillance. Thiam and Urs Rohner, Chairman of the Board, vowed that the “truth will emerge.”

Outspoken U.S. investor David Herro, one of Credit Suisse’s biggest shareholders, says it would be “damaging” to expel any senior manager over the potential shadowing of Khan. Former Credit Suisse and UBS chief Oswald Gruebel took the opposite stance, stating that Thiam should be fired if the reports were confirmed.

By the end of the month the scandal claimed that another victim, a contractor for Credit Suisse, had committed suicide.

 

Credit Suisse ousts Chief Operating Officer and right-hand man of Thiam

In October 2019, right about the time the police were investigating the death of the contractor, Credit Suisse absolved Thiam and ousted Chief Operating Officer Pierre-Olivier Bouée, who had been his chief lieutenant at three companies for more than a decade. The bank in its statement said that Bouée had acted alone in ordering the surveillance of Khan and had informed neither Thiam nor the board of his intentions. Rohner apologized to Khan and his family and reaffirmed that Thiam had the board’s backing.

The bank that month announced mixed third-quarter earnings. The lender’s financial statements and presentations were overshadowed by questions about the scandal. In his first public comments on TV, CEO, Thiam reiterated that he didn’t order the undercover work and called it “inappropriate” and “disproportionate.” Interestingly, of his longtime colleague Bouée he added, “I’m not sure you can describe him as a friend… He is somebody I respect. I value him as a professional.”

 

Second spying accusation emerges in December 2019

In December 2019, another spying attempt was revealed. This time, the company’s former Chief Human Resources Officer Peter Goerke, was the target. Again, former COO Bouée was blamed for the incident. The financial institution swiftly declared that he was fired for cause. Bouée was painted by Credit Suisse as a rogue operative who kept all executives and directors in the dark about his actions.

Chairman Rohner however began to take a different stance saying that this new case has changed the situation, as a pattern had started to emerge.

Around the same time, Credit Suisse was trying to fend off a third accusation that had arisen. This time, it was related to a U.S. employee who had left the corporation years earlier. In a case dating from 2017, Colleen Graham, a former senior compliance executive in the U.S., alleged in a court filing that the bank had her followed.

Credit Suisse said it had investigated Graham’s claims “and found them to be entirely baseless,” and said the U.S. Department of Labor also dismissed her claims. However, it came to light that the company’s lawyer, it turns out, still met with Graham as recently as the first week in February 2020 to discuss her claims.

 

Regulators step in

In January 2020, Swiss regulators begun looking into the matter. The regulators hired an independent auditor. The investigations revealed that in 2018, Thiam asked Khan to collect “dirty material” on Claudio De Sanctis, a top private banker who left for Deutsche Bank that same year. Thiam took to social media site Instagram to reject the findings calling it “entirely false and defamatory”.

On February 10, 2020, it emerged that Switzerland’s markets regulator will continue its investigation into corporate governance issues despite the resignation of Thiam. A spokesman for the Swiss Financial Market Supervisory Authority, or FINMA, said the regulator is continuing its probe into the bank to “clarify matters related to supervision,” according to the report.

 

Power struggle between Tidjane Thiam and Urs Rohner emerges

Though Credit Suisse’s chairman and CEO always projected a united front, signs of a possible rift and cracks were first seen around 2015.

During that year, there was a huge trading loss which prompted Thiam to publicly complain that he was caught unaware by his traders. Interestingly, the chairman Rohner took the position that Thiam should have seen it coming. The rift deepened after the spying scandal which saw the exit of then COO, which the bank struggled to contain.

Openly, the chairman was on the defensive. Confidentially, he was lining up backing from other investors, including Qatar’s sovereign wealth fund and the world’s largest asset manager, BlackRock, Inc. Rohner was also counting on the board’s support in his defensive posturing. It was also reported that he was lining up a team of possible successors to Thiam.

However, reports have suggested that the ousting of Thiam was not unanimously supported by all.

Specifically, David Herro (Harris Associates’ deputy chairman), Silchester International Investors (which owns around 8.42% of Credit Suisse) and Eminence Capital warned the board of directors that if there was a choice to be made, Rohner should be the one to go. The power struggle at the time appear to be tilting in favor of the CEO. But as mentioned before, the Chair was rallying support from other shareholders.

 

New CEO steps into a likely difficult situation

From the look of the situation, incoming CEO, Gosstein is most likely stepping into quite a difficult situation currently at the bank. On Friday February 7, 2020, the company’s share price dropped by around 5% when the changes were announced suggesting that investors were not happy with the directional change.

Reports suggest that he will need to both heal internal wounds at the bank following the high-profile power struggle and figure out how to reverse its more than 50% share price decline over the past five years.

Again, there is another school of thought that believes that the investors which were loyal to Thiam are not likely to disappear into the background. David Herro, Harris Associates, is quoted to have told Bloomberg TV on February 7, 2020 that while he believes Gottstein is “talented,” the bank still has “a chairman who is less capable and talented and a board who seems to just mimic, just follows blindly whatever

Utilizing CGLytics’ risk rating tool, we find that Credit Suisse’s Board effectiveness is scored 73 points, earning the financial company a rank on the 42nd percentile in the Switzerland’s largest cap index(SMI) which may not be considered a good ranking.

Understanding the board’s skills and expertise

Using CGLytics’ board expertise and skills matrix online application, we are able to gain insights into Credit Suisse current expertise and possibly what the new matrix will look like when the changes are effected.

Utilizing the process as outlined above, we find that the while board chairman Urs Rohner has Executive, Leadership, Non-Executive, Industry, International and Governance expertise, he lacks Financial and Technology expertise which is quite critical to his role and for a scandal of this nature.

Per CGLytics’ methodology, outgoing CEO Thiam also lacks Technology expertise which means for all the other remaining expertise in our classification are owing to his executive roles at Aviva and Prudential as well as his Non-Executive experience from his role at Fox Corporation, which also ended in May 2019.

Incoming CEO Thomas Gottstein, from CGLytics’ expertise classification, does not yet have any Non-Executive, Governance, International and Technology expertise.

Current Board Expertise and Skills of Credit Suisse

creditsuiessboardexpertise
Source: CGLytics Data and Analytics

Data from CGLytics suggests that expertise of the current board of Credit Suisse are concentrated in Leadership, International, Industry/Sector and Executive. A significant number of their directors also seems to have Non-Executive expertise. Interestingly, Governance and Technology does not seem to be the area of greatest emphasis.

Board expertise and skills of Credit Suisse after February 14

While performing a scenario analysis, we see that from February 14, 2020, when the anticipated change takes effect, the board’s strongest skills stills remain concentrated in Leadership, International, Industry/Sector and Executive expertise.

creditsuiessboardexpertise2

From CGLytics’ data, it reveals that since Thiam took over in 2015, the company’s revenue and share price fell steadily from 2015 to 2017. However, both indicators improved in 2018 and is expected to rise again when the closing books of 2019 are announced.

Specifically, from 2014 to 2018, revenue has dropped by 21% and share price has more than halved in the same period.  Revenue is however expected to rise by 3% and the 2019 closing share price also depicts a rise of 21% within the same period.

Credit Suisse revenue vs share price development

shareprice
Source: CGLytics Data and Analytics

Final pay day for Thiam

According to Swiss media reports, following his departure from Credit Suisse, Thiam may walk off with an amount of CHF 20M to CHF 30M. Based on the CEO’s granted pay of CHF 12.65M in 2018, as well as the deferred payments currently totaling about CHF 11.8M, CGLytics’ data indicates that Thiam stands to walk away from his position as CEO with approximately CHF 24M.

Would you like to gain instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills?

Or access the same CEO pay for performance insights used by Glass Lewis in their proxy papers?

Request a demo to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, currently utilized by world-leading institutional investors, activist investors and advisors.

Request a Demo

About the Author

Edna Twumwaa Frimpong: Lead EU Research Analyst

Edna holds a degree in LLM Finance and Law Programme from the Duisenberg School of Finance. In addition she completed her Bachelor’s Degree in Administration in Accra, Ghana. She gained work experience during her internships as a research analyst at Sustainalytics and as a finance and business development intern at Carnomise SAS.

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In the recent report published by PwC, using CGLytics data and analytics, the critical trends from the 2019 proxy season for Belgium and Luxembourg listed companies surrounding executive compensation were revealed.

Concern over Wesfarmers’ executive pay?

Wesfarmers, which owns some of Australia’s most recognizable brands, sees concerns from shareholders and proxy advisors regarding its CEO and executive pay during the last proxy season

About the author

Edna Frimpong: Lead EU Research Analyst

Edna holds a degree in LLM Finance and Law Programme from the Duisenberg School of Finance. In addition she completed her Bachelor’s Degree in Administration in Accra, Ghana. She gained work experience during her internships as a research analyst at Sustainalytics and as a finance and business development intern at Carnomise SAS.

Westpac: the issues, regulators and lessons to be learnt

It has been revealed that several banks have been involved in fraudulent and criminal conduct, one of them being Westpac Banking Corporation.

Since the Royal Commission was established to inquire and report on misconduct in the banking, superannuation and financial services industry in Australia (on December 2017 )[1], it has been revealed that several banks have been involved in fraudulent and criminal conduct, one of them being Westpac Banking Corporation.

One of the more egregious acts of misconduct, according to the Royal Commission, was Westpac filling out loan forms and documents on behalf of its clients. Westpac was quick to acknowledge that it was normal practice for staff to help clients fill out documents on their behalf. However, after further investigation, there was evidence to suggest that the bank falsely witnessed documents and marked documents without client approval and acknowledgement[2].

 

The case of Ms. Flanagan

A specific case for this issue was that of an elderly pensioner, Ms. Carolyn Flanagan. Ms. Flanagan became a guarantor for a business loan taken out by her daughter. Westpac, despite having knowledge of Ms. Flanagan’s numerous medical conditions such as being legally blind, deafness, depression and a previous battle with cancer, allowed her to become a guarantor of AUD 165,000 business loan while claiming her home as collateral. Unfortunately, her daughter’s business failed two years after the loan was taken out in 2010. Westpac sought to evict the pensioner to recoup funds, but allowed Ms. Flanagan to live in her home until her passing. However, if she decided to sell the property, even for the purpose of funding her aged care and medical bills, she would have been liable to pay AUD 170,000 from the sale, plus three per cent per annum accruing.

Westpac’s general manager has admitted that the bank had incorrectly filled out Ms. Flanagan’s daughter’s loan. The marked document suggested that Ms. Flanagan sought independent legal and financial advice regarding the business loan, when in fact, she had not. Westpac admits its staff had wrongly assumed that Ms. Flanagan would be seeing a lawyer after the meeting. The bank lacked due diligence in checking for the elderly’s sources of income, placing the loan at greater risk. Furthermore, a Westpac employee admitted to signing the loan documents as a witness even before Ms. Flanagan signed the document.

 

Westpac CEO apologizes and releases statement

After the scandal was released, Westpac Group’s CEO Brian Hartzer released a public apology and a guarantee that the bank will learn from its mistakes[3]. The introduction of low rate credit cards, lower transaction fees, amendment of remuneration structures and other initiatives are some of the measures taken by Westpac to remedy its misconduct[4].

 

Shareholders show distrust via remuneration report

Unfortunately, these initiatives were not enough to win back the trust and satisfaction of Westpac shareholders. During the 2018 Annual General Meeting (AGM), 64.16 per cent of shareholders voted against the adoption of the remuneration report[5]. This resulted in a first strike for the company. According to the Corporations Act 2001, a company will be given a first strike when 25 per cent or more vote “no” on the remuneration report. The company must be able to review and reform its remuneration structures before the next AGM[6]. The following AGM determines whether a company gets a second strike. This is when 25 per cent or more shareholders vote against its remuneration report for the second time. During the next AGM, shareholders will establish whether directors need to stand for re-election. If 50 per cent or more shareholders vote to pass a “spill” resolution, a “spill” meeting will be held within 90 days[7].

Despite the 25 per cent cut of short-term cash awards to executives, shareholders still showed concern of executives receiving large amounts of bonuses following the scandals revealed by the Royal Commission. Westpac Chairman Mr. Lindsay Maxsted pointed out that such misconduct was not limited only to Westpac, and he continued to defend via the decrease in short-term awards for executives. He further urged shareholders not to focus on the issues released by the Commission as this does not reflect the overall culture of the company[8]. Westpac has allotted AUD 281 million for customer compensation and litigation costs[9][10]. After the no-confidence vote on the company’s remuneration report, Mr. Maxsted said that the bank will be reviewing the remuneration structure and taking shareholder feedback very seriously[11].

 

Westpac’s Pay for Performance alignment compared to country and industry peers

CGLytics’ Pay for Performance analysis (using its Pay for Performance modeling application) shown below, has compared Westpac’s CEO total realized pay with the industry peer group’s three-year Total Shareholder Return (TSR). The CEO’s pay is in the 45th percentile compared to the three-year TSR being ranked in the 20th percentile which shows that the CEO’s pay is aligned to the TSR performance following the 25 per cent decrease in short-term cash awards.

Wesfarmers Limited's CEO Pay for Performance

Source: CGLytics Data and Analytics

Westpac’s assessment of culture, governance and accountability

After the 2018 AGM, the Australian Regulation Prudential Authority (APRA) requested that Westpac undergo an assessment of its culture, governance and accountability (CGA)[12]. The bank’s CGA self-assessment report stated that the company needs improvement of understanding non-financial risks. Westpac admitted that the bank’s management of non-financial risks was “generally less mature” than its management of financial risks[13]. The bank’s recommendations are focused around five streams, namely: governance, risk and compliance, customers, remuneration and accountability and culture. The CGA report was released in the hopes of avoiding a second strike during the 2019 AGM.

Towards the end of November 2019, Austrac, an Australian Government regulator for financial crimes, discussed legal actions against Westpac following an estimated AUD 23 million legal breaches worth over AUD 11 billion[14]. Among these breaches, the most detrimental is the one regarding transactions involved in child exploitation in the Philippines.

Austrac claims that Westpac failed to meet anti-money laundering and counter terror finance (AML-CTL) laws by allowing some 3,000 transactions, all valued less than AUD 500,000, made by twelve Westpac customers. Austrac stated that Westpac should have flagged these transactions, as they were consistent with child exploitation practices[15]. Such practices include: customers remitting small amounts of money to the Philippines and Southeast Asia despite having no familial or business connections in those countries, customers remitting money to a suspected “child exploitation arranger” in the Philippines, and customers with known prior child exploitation charges remitting money to the Philippines.

Westpac was accused of not conducting due diligence despite having knowledge of the aforementioned practices. Only 18 months after the transactions had occurred did Westpac take any action.

Westpac responds to scandal with changes to their board

After the release of this new scandal, shareholders of Westpac have been aggressive in wanting to terminate CEO Brian Hartzer[16]. However, the Board of Directors have expressed that there is no evidence that Mr. Hartzer was aware of these criminal transactions. As a result, Westpac again promised to cut down bonuses of its senior executives and promised to create a financial crime committee[17]. Despite these efforts, pressure and criticism from shareholders pushed CEO Mr. Brian Hartzer, Non-Executive Director and Chair of the Board Risk Committee Mr. Ewen Crouch, and Chairman Mr. Lindsay Maxsted to step down from the board and company[18].

After the awaited 2019 AGM on December 12, 2019, results were released that 35.90 per cent of shareholders voted against the adoption of the remuneration report, earning them a strike two. However, 91.26 per cent of shareholders voted no on the conditional spill resolution[19]. All directors except Mr. Ewen Crouch, who had withdrawn his re-election, passed the re-election and election on their positions[20]. Mr. Maxsted stated that the Board will be decreasing 20 per cent in executive pay, and deduct short-term awards to zero.

 

Westpac’s board skills matrix and expertise

Looking into Westpac’s board expertise and skills, one may want to deduce if the Board had the right skills set to manage the affairs of the Board. According to CGLytics’ Board Expertise application, Westpac has a significant number of directors that have experience in advisory which is timely and relevant during this turbulent time. Westpac has claimed that the Board is competent in finance, including financial risks. However, the Board lacks expertise in risk management, specifically in non-financial risk to account for risks such as reputational damage, for the next AGMs. Another expertise that is crucial in this time is legal, where compliance and governance is much needed to enforce regulatory frameworks provided by Austrac, APRA and other regulators [21].

Westpacs board's expertise and skills

westpac_board
Source: CGLytics Data and Analytics

Westpac has responded by appointing a new Chairman, Mr. John McFarlane, who has over 40 years of experience in banking and is expected by shareholders to quickly settle current issues as well as appoint a new Chief Executive Officer[22]. Another step that Westpac has taken following the scandals is to appoint Accountability Review Advisory Panel members. The following members of the panel are: Mr. Colin Carter, Dr. Kerry Schott and Dr. Zygmunt Switkwoski[23]. The panel’s objective is to give recommendations on risk governance and accountability in response to Austrac.

Are you prepared for the 2020 proxy season? The CGLytics platform provides users with a wealth of governance insights. From executive remuneration, board composition and risk indicators, CGLytics empowers Companies, Boards, Investors and Third-parties to be one step ahead.

CGLytics executive pay data is trusted worldwide by leading independent proxy advisor Glass Lewis for research analysis used in their proxy papers. Access the same data in the CGLytics application.

Would you like to gain instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills?

Or access the same CEO pay for performance insights used by Glass Lewis in their proxy papers?

Request a demo to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, currently utilized by world-leading institutional investors, activist investors and advisors.

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References

[1] https://www.theguardian.com/australia-news/2018/apr/20/banking-royal-commission-all-you-need-to-know-so-far

[2] https://www.theguardian.com/australia-news/2018/apr/20/banking-royal-commission-all-you-need-to-know-so-far

[3] https://www.westpac.com.au/about-westpac/media/media-releases/2018/28-september/

[4] https://www.westpac.com.au/about-westpac/media/media-releases/2018/28-january/

[5] https://thewest.com.au/business/banking/westpac-chiefs-brace-for-fiery-perth-agm-following-banking-royal-commission-revelations-ng-b881048164z

[6] https://aicd.companydirectors.com.au/resources/all-sectors/director-remuneration

[7] https://www.smh.com.au/business/companies/what-is-the-two-strikes-rule-20121008-278us.html

[8] https://www.afr.com/companies/financial-services/westpac-gets-a-first-strike-at-agm-20181212-h190vn

[9] https://www.westpac.com.au/news/making-news/2018/12/strike-sends-a-strong-message/

[10] https://www.theguardian.com/australia-news/2018/dec/12/disgruntled-westpac-shareholders-vote-down-executive-pay-over-bonuses

[11] https://www.sharecafe.com.au/2018/12/13/58152/

[12] https://www.smh.com.au/business/banking-and-finance/westpac-risks-second-strike-on-executive-pay-20190624-p520ns.html

[13]https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/media/Westpac_Self-Assessment_Report_.pdf

[14] https://www.theguardian.com/australia-news/2019/nov/21/what-is-westpac-accused-of-and-how-is-this-related-to-child-exploitation-explainer

[15] https://www.theguardian.com/australia-news/2019/nov/21/legal-breaches-allowed-westpac-customers-to-pay-for-child-sex-undetected-austrac-alleges

[16] https://www.news.com.au/finance/business/banking/calls-for-blood-over-westpac-money-laundering-and-child-exploitation-scandal/news-story/8f85b5a35cf033b08ab40d74c369f72b

[17] https://www.theguardian.com/australia-news/2019/nov/28/more-directors-may-leave-westpac-as-investigation-seeks-board-accountability

[18] https://www.abc.net.au/news/2019-12-12/westpac-chairman-agm-protest-vote/11792010

[19]https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/WBC_AGM_2019_Results.pdf

[20] https://www.abc.net.au/news/2019-12-12/westpac-chairman-agm-protest-vote/11792010

[21]https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/media/Westpac_Self-Assessment_Report_.pdf

[22] https://www.westpac.com.au/news/making-news/2020/01/sufficiently-battle-hardened-westpac-names-new-chair/

[23] https://www.westpac.com.au/about-westpac/media/media-releases/2019/20-december/

About the Author

Alex Co: APAC Research Analyst

Alex graduated from the S P Jain School of Global Management in Sydney with a degree in finance and entrepreneurship. She previously worked in the compliance division at a large financial institution and gained her experience as a research analyst.

Latest Industry News, Views & Information

Reflection on 2019 Executive Pay: Belgium and Luxembourg

In the recent report published by PwC, using CGLytics data and analytics, the critical trends from the 2019 proxy season for Belgium and Luxembourg listed companies surrounding executive compensation were revealed.

Concern over Wesfarmers’ executive pay?

Wesfarmers, which owns some of Australia’s most recognizable brands, sees concerns from shareholders and proxy advisors regarding its CEO and executive pay during the last proxy season

The DOs and DON’Ts when rethinking incentive plans

Why have 75% of first-time say-on-pay votes failed in 2019? A large number of negative votes can be attributed to incentives. Companies need to rethink their incentive plans and make sure metrics truly benchmark performance.

Reflection on 2019 Executive Pay: Belgium and Luxembourg

In the recent report published by PwC, using CGLytics data and analytics, the critical trends from the 2019 proxy season for Belgium and Luxembourg listed companies surrounding executive compensation were revealed.

In the recent report published by PwC, using CGLytics data and analytics, the critical trends from the 2019 proxy season for Belgium and Luxembourg listed companies surrounding executive compensation were revealed.

Analysis of votes on remuneration items shows an increasing focus on making sure companies have sustainable value creation and a growing expectation of increased disclosure of financial and non-financial information. Shareholders have become more active over the past few years and the average CEO total realised compensation seems to show a decreasing trend and is adapting slowly to the evolution of the total shareholder return.

Belgian companies see more revolt on remuneration items

Belgium listed companies were seen to be more active compared to shareholders of Luxembourg listed companies. The data of the Selected Index of 49 companies indicates that Belgian listed companies were more affected by shareholder revolt on remuneration items than Luxembourg companies.

Shareholder Rights Directive 

Luxembourg successfully implementing SRD II, however Belgium failed to transpose the revised Shareholders Rights Directive to national law by the 10 June 2019 cutoff. Draft law implementing SRD II is being discussed in the Belgian Chamber of Representatives

The new Belgian Corporate Governance Code

The report sheds light on the new Belgian 2020 Corporate Governance Code (‘CGC’) compared to the 2009 CGC, which includes positive steps such as: 

  • • A cap being placed on short-term variable remuneration awarded to executive management; and 
  • • The principle that non-executive board members should receive part of their remuneration in the form of shares in the company.
  • • Particular attention to be paid to diversity, talent development and succession planning

 

Compensation design: Ratio of fixed versus variable remuneration

The report reveals that there is an increasing focus on long-term sustainable value creation.

The proportion of short-term incentives (STI) decreased from 2013 and continued to stagnate over the past few years. Next year’s analysis will tell whether the recent regulatory developments (the introduction of a cap on STI in the 2020 Belgian Corporate Governance Code) will impact the proportion of pay components.

 

To learn more about:

  • • The implementation of the revised Shareholder Rights Directive (SRD II) into Belgian and Luxembourg law,
  • • Evolution of votes on remuneration items,
  • • Shareholder revolt seen in 2019,
  • • Detailed insights into the CEO compensation mix (Base Salary, STIs, LTIs), and
  • • CEO Pay for Performance alignment of the Selected Index

 

Download the report here

Latest Industry News, Views & Information

Concern over Wesfarmers’ executive pay?

Wesfarmers, which owns some of Australia’s most recognizable brands, sees concerns from shareholders and proxy advisors regarding its CEO and executive pay during the last proxy season

The DOs and DON’Ts when rethinking incentive plans

Why have 75% of first-time say-on-pay votes failed in 2019? A large number of negative votes can be attributed to incentives. Companies need to rethink their incentive plans and make sure metrics truly benchmark performance.

Sims Metal Management: Tracking Pay for Performance Over Time

A key element in an assessment of remuneration outcomes is the payout track record and payout variability over several years. Sophisticated remuneration structures should result in pay outcomes which vary in line with performance.

Concern over Wesfarmers’ executive pay?

Wesfarmers, which owns some of Australia’s most recognizable brands, sees concerns from shareholders and proxy advisors regarding its CEO and executive pay during the last proxy season

Wesfarmers, one of the biggest conglomerates in Australia, saw concern from its shareholders with a negative response during the recent 2019 Annual General Meeting (AGM) that was held last November 14, 2019.

Although all resolutions were passed, there was a large number of shareholders that voted against the adoption of the remuneration report, resulting in a 21.45 percent disapproval. One of the biggest causes of the pessimistic response from shareholders was due to proxy advisor ISS advising investors to go against the remuneration report because of an “excessive” compensation plan.

Although Wesfarmers’ demerger from Coles supermarket resulted in a 360 percent increase in after-tax profit to AUD 5.5 billion, the company will neither give incentive nor penalize its executives [1].

Shareholders were concerned over the pay for both Chief Executive Officer (CEO) Robert Scott and Independent Chairman Michael Chaney [2]. Mr. Scott has received over AUD 4 million in total realized pay and Mr. Chaney has received AUD 780,000 in total compensation, which ISS claims is higher than its industry peers.

CGLytics Pay for Performance Analysis

According to our CGLytics analysis, Wesfarmers has a higher CEO total realized pay over three years than its three-year increase in total shareholder return (TSR), when compared against its country and industry peers.

This misalignment of the CEO pay compared to company performance may have been the cause of the company almost undergoing a first-strike. A first-strike occurs when 25 percent of shareholders vote against the adoption of the remuneration report and the company would need to either amend or justify its remuneration policies before the next AGM [3].

Wesfarmers Limited's CEO Pay for Performance

wesfarmers CEO pay
Source: CGLytics Data and Analytics

Not only was there concern over the CEO pay for Wesfarmers, but the ambiguous changes in awards policies [4]. This was also seen as an issue for other proxy firms such as Glass Lewis and the Australian Shareholders’ Association (ASA).

What is the KEEPP bonus scheme?

The 2016 and 2017 Key Executive Equity Performance Plan (KEEPP) bonus had been cancelled following the demerger of Coles supermarket, but a bonus will be rewarded with the same principles as KEEPP, however with different performance conditions.

The 2017 KEEPP Allocation for the CEO and the Chief Financial Officer (CFO) had the following performance metrics: 50 percent weighting on Wesfarmers relative to the TSR of the ASX 100 Index, 20 percent weighting on absolute Return on Equity (ROE) and 30 percent weighting on strategic measures.

Because of the demerger in 2018, the company has removed the performance condition on absolute ROE as it may have an impact on the targets of executives. The 2018 KEEPP allocation for the CEO and CFO is as follows: 60 percent weighting on the Wesfarmers’ relative TSR against the S&P/ASX100 Index, 20 percent weighting on Wesfarmers’ portfolio management and investment outcomes and 20 percent weighting on strategic measures. However, the company was not able to be fully transparent and clear in its disclosure of strategic measures and investment outcomes, only stating the improvement of data analytics and better progress in gender balance.

Wesfarmers underpays due to complications in payroll

After the release of the 2019 AGM results, another scandal arose when it came to light that Wesfarmers had underpaid up to 6,000 current and former employees of its industrial division, resulting in AUD 15 million or more in underpayments [5]. The company stated that its cause was due to a defect in a payroll system. The company plans to expedite the sending of payments into the banks of underpaid current and former employees before the end of 2019, but is hindered by the complication of its payroll system [6][7].

Linking director pay to competency and expertise

Companies not only link executive pay to performance, but more often than not, companies also link director pay to competency and expertise [8]. With the current events that Wesfarmers has experienced, it is suggested that the company would benefit from a board that can guide it towards its strategic direction, mitigate risk and oversee company performance.

According to our analysis (performend using the CGLytics application), Wesfarmers’ board has strengths in the areas of ‘advisory’ and ‘finance’. Wesfarmers recent acquisition of the Catch Group in 2019 (an e-commerce company that runs Catch.com.au, Mumgo, Grocery Run and Brands Exclusive), should see greater skills and expertise added in the area of ‘technology’, which is currently very low. ‘Governance’ experience, to spot and mitigate risks, is also worth looking at to ensure issues are resolved smoothly in the future.

Wesfarmers board's expertise and skills

Wesfarmers skills and expertise
Source: CGLytics Data and Analytics

Would you like to gain instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills?

Or access the same CEO pay for performance insights used by Glass Lewis in their proxy papers?

Request a demo to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, currently utilized by world-leading institutional investors, activist investors and advisors.

Request a Demo

Latest Industry News, Views & Information

The DOs and DON’Ts when rethinking incentive plans

Why have 75% of first-time say-on-pay votes failed in 2019? A large number of negative votes can be attributed to incentives. Companies need to rethink their incentive plans and make sure metrics truly benchmark performance.

Sims Metal Management: Tracking Pay for Performance Over Time

A key element in an assessment of remuneration outcomes is the payout track record and payout variability over several years. Sophisticated remuneration structures should result in pay outcomes which vary in line with performance.

Remuneration policy: Directors reward attracts more and more attention

A well-founded remuneration policy is no longer optional. The new European Shareholder Rights Directive demands transparency around remuneration of directors.

The DOs and DON’Ts when rethinking incentive plans

Why have 75% of first-time say-on-pay votes failed in 2019? A large number of negative votes can be attributed to incentives. Companies need to rethink their incentive plans and make sure metrics truly benchmark performance.

Seventy-five percent of first-time say-on-pay (SoP) votes failed in 2019, and a large number of these negative votes focused on incentives.

There is an increasing need for companies to fully rethink their incentive plans, as the CGlytics whitepaper “How to take the testing of equity-based compensation plans into your own hands” points out.

“It is imperative that companies design their equity pay plans to ensure they receive shareholder approval first time, every time. In order to meet investor expectations, companies need to understand how they, and the proxy advisors they rely on, evaluate equity plans and make voting decisions.”

Marc Ullman, a partner with Meridian Compensation Partners explains what to do and what not to do in rethinking incentive plans.

First of all, companies need to fully rethink their compensation plans, and not to just tweak them. Making just a few cosmetic changes will not suffice to ensure that incentives are effective. At least every two years, a real restructuring is needed.

Often shareholder pushback will incite a rethink, but even with shareholder support, benchmarking for effectiveness is critical as priorities change and the business climate evolves. The plan must reflect the new realities the business faces.

Or the incentive plan may simply become too complicated to be useful, as continually including more metrics and other add-ons makes application confusing. This often happens as businesses try to simply tweak the plan instead of really rethinking it.

 

Here are the do’s and don’ts to achieve as near optimal alignment between pay and performance as possible:

– If you need a full-scale rethink, don’t settle for a mere tweak. Make sure that what you do matters, don’t nibble around the edges. Make sure the metrics truly benchmark performance.

– But don’t overdo it. Pick out the key metrics and focus on that; don’t try to transform the whole structure unless you really feel that you have to.

– As the rethinking process is underway, take note of the solid rationale that stems from the business model. This will be something to communicate at the end of the process, and one that can be used for grounding the basis of your thinking.

– Make sure you include all the right people: Finance, HR, Corporate leadership, corporate leadership and the business unit. Everyone should buy in to the metrics and the targets that are being set.

– Make sure your plan pays something in year one. After a big rollout you need to make sure that design provides results. Otherwise it could hurt your credibility.

– Take advantage of feedback from shareholder outreach. More and more companies are actively talking to shareholders, and their points of view should at least be considered as the design is taking shape. Consider investor relations and investor perspective and proxy advisors like ISS and Glass Lewis.

– Communicate internally and externally. You have multiple audiences internally.

 

Predict Shareholder Approval with Glass Lewis’ Equity Compensation Model

 

The Glass Lewis Equity Compensation Model (ECM) allows you to instantly test and review your incentives plan using the same key criteria and scoring system as leading proxy advisor Glass Lewis. The ECM supports testing of 4,300+ publicly-traded U.S. firms including the Russell 3000 and exclusively available via CGLytics.

With the ECM you can confidently engage, knowing the strengths and weaknesses of your current and future equity plans. Ensure you get the votes to legally grant equity compensation to your executives, board members and staff.

Click here to learn more about the ECM application or request a no-obligation demonstration.

Latest Industry News, Views & Information

Sims Metal Management: Tracking Pay for Performance Over Time

A key element in an assessment of remuneration outcomes is the payout track record and payout variability over several years. Sophisticated remuneration structures should result in pay outcomes which vary in line with performance.

Remuneration policy: Directors reward attracts more and more attention

A well-founded remuneration policy is no longer optional. The new European Shareholder Rights Directive demands transparency around remuneration of directors.

Blue Sky Downfall – What went wrong?

While no company wants to find itself in a state of voluntary administration, it is a stark reality faced by the Australian-based fund manager Blue Sky Alternative Investments Limited. The company is currently undergoing administration, following years of challenging circumstances starting as early as 2017.