Focuses on pay design and communication. It is time companies question perceived best practices such as the granting of performance shares or the use of relative performance evaluation. Simplification and better communication about pay-for-performance will create trust and allow managers to concentrate on what they should: create value.
So-called best practices can be misleading
throughout the year, not just for the AGM
Recruit, Reward, Report, Realise, Rethink
Our data allow a wealth of further analysis, and these are just a few of the key points. Feel free to contact us if there are other aspects of compensation you’d particularly like to talk about.
In short, this analysis shows that executive compensation has developed dynamically in Switzerland in the last 11 years. Important pre-conceptions – for example, that executive compensation in the financial services sector is always higher than in the other sectors – does not hold up against actual analysis of the data once the sample is extended outside the few largest companies that many other studies consider.
Of course, when assessing compensation, a key issue is not only the level of compensation, but also the structure of compensation, and how (variable) pay relates to the performance of the company. Insights 2017, part 2, covers this topic in more detail.
In sum, several channels contribute to an alignment of executive pay and performance: direct pay-for-performance (variable compensation; “bonuses”), greater job stability in response to stronger performance, and the wealth lever. Not all channels are operating at all times, but a board needs to have an overview of the mechanisms at its disposal. Based on the results presented in this part 2, ExCo Insights 2017, part 3 will discuss new methods of pay design and will offer an analysis of the demands of shareholders in the upcoming annual general meeting season.
Presents key figures for the level of compensation of CEOs, other executives, chairs and other board members at the largest 100 Swiss listed companies. It goes on to analyse the much-discussed differences between financial services (FS) and non-financial services (non-FS) companies – and unearths some surprising patterns.
Looks at pay-for-performance in Switzerland. Our study’s long timeframe and large sample yield some fascinating findings. For example it emerges that despite recent claims to the contrary, pay and performance actually do correlate at Swiss companies.
Looks at new methods of pay design and analyses the demands of shareholders in the upcoming annual general meeting season. Compensation is an important element of governance but should not be looked at in isolation. There are other building blocks. Therefore, we have developed the 5 Rs concept.
Pay design remains challenging. So-called best practices all too often turn out to be perhaps well-meant, but ultimately value-destroying – but a company cannot, realistically, deviate too much from the norms set by some institutional investors and some proxy advisors without risking negative shareholder meeting outcomes. However, this is what it means to lead: to find the value-generating actions, to execute them, and to communicate them convincingly and steadfastly even in the face of short-term resistance. We have made some proposals for “rethinks” of compensation design. Importantly, compensation needs to be seen in conjunction with other aspects of governance, including in particular board and executive selection and succession and value reporting. The 5 Rs (Recruit, Reward, Report, Realise, Rethink) help structure these tasks. We look forward to working with you on them.