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December 12, 2011

Are you Modifying your Executive’s Incentive-Based Compensation Program?

If so, you are not alone.  According to an article from WorldatWork, corporate executives can expect moderate salary increases and tougher performance hurdles in 2012.  This information was gathered from a survey conducted by Pearl Meyer & Partners, a leading provider of compensation consulting services and survey data.

So what are the key components from the survey participants? 

  • Linking pay to performance is absolutely essential
  • Incorporate a metric that is more closely tied to creation of shareholder value
  • Stock options remain very popular among smaller companies and in certain sectors
  • Need to validate alignment of relative pay and performance was ranked as the top priority for compensation programs in 2012
  • Prepare for new SEC disclosure and governance requirements, including explanation to shareholders the link between CEO pay and company financial performance and compute the ratio of CEO pay to “median” employee pay

Executive salaries are expected to realize a relatively modest growth in 2012, marking a continued break from the annual 4% pay growth of most of the past two decades.  A total of 59% of participants projected a 2% to 4% salary increase, and 10% anticipate a salary freeze or decrease next year.

The survey is available for download on Pearl Meyer & Partners website.

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