Companies are reviewing performance pay in light of shareholder feedback
Property developer Stockland has just announced that executive bonuses for 2012 will be cut following a comprehensive review of its executive remuneration policies. Specifically, the short term incentive (STI) bonus payable to senior executives has been significantly reduced from 200 percent to 125 percent, with at least one third of any bonus awarded in shares. The review was undertaken to better align executive remuneration with shareholder interests and to ensure the company’s remuneration policy remains best practice.
The above event illustrates the consequences of increased shareholder and market scrutiny of executive remuneration. As we highlighted in the February 2012 EA Newsletter, this increased scrutiny will engender increased focus on two key issues,
- increases to the level of fixed remuneration and
- the link or alignment between incentive pay and improved performance including shareholder returns
In general, companies are increasingly focussing on shareholder communications and giving greater consideration to their views on executive remuneration. This has resulted in more companies restructuring their executive remuneration policies to appease shareholders. Such developments can only assist with better alignment of board and shareholder perspectives.