KMP Report: More Work Needed to Link Pay and Performance

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Although Directors believe executive pay models have changed for the better following the introduction of the two strikes rule, they are less certain that the rule has helped foster pay for performance, according to an Egan Associates survey of professional Directors detailed in our latest KMP Report.

Only a fifth of survey respondents believed the two strikes rule had affirmed the alignment of executive pay with performance.

Around a third of the naysayers stated that this was because the two strikes vote had no correlation to an organisations’ performance or pay alignment. However, around the same number believed companies needed to be more transparent and disciplined in their target setting for annual and long term incentive plans.

Pay for performance survey question

US Directors are more satisfied with the performance of their country’s say on pay rules, with almost three quarters agreeing in a similar US survey that say on pay has affirmed the alignment of executive pay with performance.

The US survey also canvassed the opinions of institutional investors on the state of executive pay, finding that only 41% of investors believed say on pay had affirmed the alignment of executive pay and company performance.

Interestingly, in most cases Australian Directors’ views were more closely aligned to US investors’ views than US Directors’, potentially indicating that Australian Directors are more in touch with their investor base following improved stakeholder engagement.

For the full results of the Egan Associates survey, see our latest KMP report.

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