A Towers news release said 49% of the 251 companies surveyed expect to increase funding for annual bonuses for executives this year, while 33% either have made or plan to make larger long-term incentive grants (dollarwise) this year versus last year.
However, 53% of the companies increasing bonus funding are projecting relatively modest increases of 20% or less, while 69% of the companies making larger long-term incentive grants said the dollar value of their grants will increase by 20% or less.
“For many companies, the economic recovery brings improved financial performance and greater flexibility to pay larger annual bonuses and long-term incentives grants,” said Doug Friske, head of executive compensation consulting at Towers Watson, in the news release. “However, the survey findings also reflect the unevenness of the recovery and underscore the fact that many companies continue to struggle to regain momentum in a challenging environment.”
Fine Tuning Exec Pay
The survey found that companies plan to fine tune their executive pay programs, and particularly their incentive plans, in the wake of continuing pressure to better align their programs with business performance.
Nearly two-thirds of respondents (66%) reported making some change to their annual incentive programs this year, while 54% made or expect to make revisions to their long-term incentive plans. The most common revisions were to change performance metrics or increase performance goals. Additionally, the most common shift among performance metrics was to place greater emphasis on profit measures and revenue growth.
The Towers Watson survey also confirms that companies are paying much more attention to executive retention issues during the economic recovery. Only one in 10 companies reported that executive retention is not an issue for their company.
At the same time, and despite shareholder pressure, relatively few companies are making significant changes to other executive pay elements that could heighten retention risk, including employment agreements, golden parachutes, supplemental executive retirement plans and other nonperformance-based compensation.
Similarly, 37% have eliminated or reduced executive perquisites in the past two years, continuing an ongoing trend of companies rationalizing all forms of compensation not directly linked to performance. Furthermore, nearly two-thirds (63%) of companies that slashed perks in the past two years did not replace the lost value to executives, reflecting overall negative sentiment toward perquisites and the pressure to reduce costs during a time of weakened profits.
The poll was conducted online in June 2010 and is based on responses from 251 U.S. companies representing a cross section of industries.
The report is here.