The number of employers reducing long-term incentive levels for executives has doubled so far in 2017, according to an analysis by Willis Towers Watson of the first 50 companies to report in 2017. Only 70% of this group put the remuneration policy to a vote, with three clear themes emerging as a result:
On pensions, 11 of the 35 companies that have put their executive pay policy to the vote so far this year proposed reducing pensions for executive directors (three proposed doing so for existing directors and eight for new recruits). A small number of companies are making the case for an overall increase in top pay, but these moves tend to be accompanied by new ‘shareholder friendly features’, the analysis suggests, for example, introducing or increasing stock holding periods or reducing pension contributions.
The report concludes:
‘In our view, we should expect continued conservativism as remuneration committees respond to the threat of significant votes against. But that doesn’t mean you can’t obtain shareholder support for less standard changes that support achievement of strategy – far from it, many shareholders seem more open to tailoring, but only with strong accompanying business rationale. And we’d be amazed if we don’t see restricted stock come through somewhere (but don’t expect a glut!).
It’s a tough environment – arguably tougher than ever before – but as always, the best you can do is try to align pay with strategy and performance. And perhaps try higher shareholding guidelines . . .’