New approach to valuing top pay


New approach to valuing top pay

Mercer Human Resource Consulting has devised a new approach to executive pay valuation that "will remove inconsistencies in the disclosure of executive pay, leading to greater transparency".

The new methodology has been developed in consultation with a group of individuals from major companies, institutional shareholders and the media.

Simon Patterson, worldwide partner at Mercer, said: "Different companies use a range of approaches when valuing pay and long-term incentives, and in setting performance conditions for their executives. A further complication is that most executives have several overlapping share-based awards that differ in value at any one time. The new methodology is an attempt to make sense of this confusing muddle of information released into the public domain."

The approach is intended for valuing main board directors' pay packages to enable consistent comparisons to be made across companies. It is also hoped that it will highlight where performance pay reflects tough targets.

"Our aim is to produce a fair and unambiguous methodology that can be applied to publicly available information," says Patterson.

What's next?

The next stage is to embark on a wider consultation with the business community. Mercer hopes to engage with such organisations as the ABI, NAPF, CBI, IASB and Stock Exchange and their members, as well as companies with which it is already in discussion. The ultimate aim would be to achieve an industry standard.

Want to know more?

Title: A Transparent Approach to Executive Pay Valuation, Mercer Human Resource Consulting.

Availability: To obtain a copy of the discussion document contact Simon Patterson, email:, or tel: 020 7423 5724.

Mercer Human Resource Consulting is "the largest consulting firm of its type in the UK, helping organisations create business value through their people". It employs over 3,500 staff in 17 office locations in the UK. To find out more visit

Posted 20 June 2003