| Drop in US CEO direct compensation |
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| Friday, 16 May 2008 | |
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Page 2 of 2 Oppermann points out that the problem is that some companies will have disconnects, where awards based on 2007 performance are reported in 2008, a time of depressed share prices and perhaps poor Q1 earnings. “Companies will have a difficult time getting their pay-for-performance story heard,” he adds. Surprisingly, Mercer's analysis showed that there has not been the pullback in company-funded perquisites such as personal aircraft use, club dues and personal financial advice that some might have expected, perhaps because these constitute a small percentage of total direct compensation. Among the 350 companies whose proxies Mercer analysed, 87 percent of the companies provided at least one type of perquisite, and the median value of these was $81,000. Shareholder activism Diane Doubleday, global leader of Mercer's executive remuneration services, says that shareholders, who are experiencing deteriorating returns, are becoming more activist than ever and want to see compensation outcomes linked to sustained financial and share price results. She explains that boards of directors, who believe that there is always a market for top talent, are anxious to retain their own talent to provide the leadership, vision and execution needed to meet the challenges of a volatile business cycle. “Looking ahead, shareholder optics will continue to exert a major influence on board decisions. Compensation is more frequently being targeted to the 50th rather than the 75th percentile,” Doubleday adds. She sees more rigor in establishing peer groups, and increased use of clawback, anti-hedging and other policies to protect shareholders. “If the economic outlook continues to be uncertain, there is likely to be debate at many companies about whether they need to adjust, reduce, or even eliminate performance-based equity until the economy stabilises. This will continue to be a lively debate in the coming year,” Doubleday concludes. Related articles
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