Moderate Salary Growth, Tougher Performance Metrics For Execs In 2012.
Corporate executives can expect moderate salary increases and tougher performance hurdles in 2012, according to a survey from Pearl Meyer & Partners. The annual preview of executive pay shows companies are modifying incentive-based compensation in response to pressures to provide a better alignment between executive pay and performance. Key findings:
- A significant portion of the 190 survey participants said they are raising their annual performance targets for 2012 incentive programs.
- A total of 42 per cent expect to raise the performance bar next year. This continues a three-year trend that saw 49 per cent of participants set higher targets in 2011, and 41 per cent raise standards in 2010, according to Pearl Meyer & Partners.
- About one in five participants expect to change their performance measures for 2012, usually to incorporate a metric that is more closely tied to creation of shareholder value, found the survey.
- Stock options accounted for 42 per cent of all executive long-term incentives (LTI) for participating companies with less than US$100 million in revenue, and for more than 50 per cent of value for life sciences companies.
- Only 15 per cent of LTI value for companies with more than US$10 billion in revenue were found the survey.
- Performance shares accounted for 34 per cent of LTI value at the largest companies, but only six per cent for companies with revenues less than US$100 million.
- Companies that reported outperforming their peers in revenue growth, profitability and shareholder return generally expect to provide higher base salary increases, bonus payouts and LTI awards next year, found the survey.
- Two-thirds of those strong performers predicted an increase of three per cent or more in 2012 executive base salaries, while 55 per cent expect bonuses to exceed internal targets for 2011 performance and 31 per cent expect larger LTI awards in fiscal 2012.
- Only one-quarter of the poor performers projected a base salary increase above three per cent or an “above target” bonus payout, and only 18 per cent said LTI award values would increase, found the survey.
- Modest growth in executive salaries is expected in 2012, marking a continued break from the annual four per cent pay growth of most of the past two decades.
- A total of 59 per cent of participants projected a two to four per cent salary increase, and 10 per cent anticipate a salary freeze or decrease next year, found the survey.