Corporates gear up for 2018 executive pay reviews – Willis Towers Watson

Willis Towers Watson has produced a ‘cheat-sheet’ for companies about to embark on the 2018 executive pay review exercise, covering base pay, bonuses and the pay mix. It points out that base salary grew at its lowest rate since 2009-10 this year and actual bonuses paid fell closer to target levels in 2017, rather than being above target as they were in the previous year.

Many companies pushed executive bonus deferral down to levels below the main board and performance share plans remain the most common long-term incentive vehicle, according to Willis Towers Watson. Pay mix remains stable, with long-term incentives making up an average 41% of CEO pay and between 5% and 6% of total remuneration at lower executive levels, ‘all of which suggests we may be heading towards another conservative year in 2018’, it adds.

In a separate article on executive remuneration and corporate governance, the consultant presents findings from research involving 12 institutional investors and governance bodies, suggesting that most expect companies to continue with the pay restraint seen in 2017.

Stakeholders are also increasingly focusing on the disclosure of individual bonus metrics and ‘adjusted’ financial metrics, and are likely to ask more questions around why ‘adjusted’ financials are used in incentive plans rather than reported performance, the article predicts. It sets out tips for a productive discussion with shareholders and their proxies, including the need to articulate the business case for any change in policy.