November 13, 2012

Companies Found to Still Focus on Pay-for-Performance

financial graphA recent Towers Watson survey found that despite most public companies receiving substantial support from shareholders for their executive compensation programs, nearly half have already made, or will make, program changes to solidify the link between performance and pay. The survey also found that about 60 percent of companies conduct analyses of their pay-for-performance programs to emphasize the link. Of the 253 companies polled, 45 percent have changed, or are going to change, their executive pay programs to further embed the connection.

“While companies have generally received strong shareholder support during the first two years of say-on-pay voting, most are far from complacent as we head into year number three,” said Andy Goldstein, leader of Towers Watson’s executive compensation consulting practice for the central U.S. “Even companies that received overwhelming shareholder support in 2012 are considering fine-tuning how they pay executives, and we’re seeing the most activity among those receiving less than 90 percent say-on-pay support. That’s a very high standard.”

Nine out of ten companies were found to use pay-for-performance executive compensation programs, and about 45 percent of companies performing analyses said their disclosure of the results boosted shareholder support for their pay programs.

“With companies under growing pressure from shareholders to strengthen the governance of their executive compensation programs, our survey results clearly underscore the complexity of designing, analyzing and disclosing pay for performance. Companies are adopting a wide range of approaches and performance measures as they continue to refine their programs. The bottom line is that each company is different, and there is no single approach that is right for all companies,” said Goldstein.

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Joshua Bjerke, from Savannah, Georgia, focuses on articles involving the labor force, economy, and HR topics including new technology and workplace news. Joshua has a B.A. in Political Science with a Minor in International Studies and is currently pursuing his M.A. in International Security.