If your company isn't using total shareholder returns, or TSR, as a peg for executive pay, you're now in the minority.
Meridian Compensation Partners has found that the trend toward setting standards for performance based pay is to include TSR as a key factor. In just three years, the percent of companies surveyed reporting that they deployed TSR as a key factor rose from 44 percent to 58 percent.
Meridian surveyed about 140 companies with median revenue of $4 billion for its annual Trends and Developments in Executive Compensation Survey.
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The survey revealed that many employers set higher standards for executive performance in 2012, based upon their experience the previous year. A majority of responding employers said they had raised performance targets by more than 5 percent.
These heightened expectations left some execs with out-turned pockets. Just under two-thirds of companies reported that annual incentive payouts for 2012 performance exceeded the pay-for-performance goals that were set, a 7 percent drop from year-earlier results, when 68 percent of respondents said their high earners exceeded their goals.
The survey showed that companies believe their shareholders are in alignment with their pay-for-performance formulae; 93 percent said they were confident that they would receive the shareholder approval necessary to implement their strategies.
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
