We have been getting some good press coverage for the report... this article is in the Daily Telegraph.
Friday 6 July 2012
Thursday 5 July 2012
Executive Compensation: Reward for success not failure
So for the last couple of months I have been working with Policy Exchange (a leading think tank in the UK) ... and we have been discussing how executive pay might be improved. The paper I have co-authored was published this week
The main consideration has been around how to reduce the potential for 'rewards for failure'
Our main recommendation is that companies embrace the existing shift towards having greater deferral of incentives
Once you have this structure set up it then becomes possible to introduce a set of “clawback” measures to try to end the potential for significant rewards for failure. Such clawback mechanisms would be an effective way of ensuring shareholders are able to reduce the outgoing pay of a poor performing director who had decided to resign.
To do this, remuneration committees should set downside conditions to incentive arrangements which, if breached, would then trigger the clawbacks. Clear limits in terms of, for example, poor total shareholder return performance or collapsing profits, would enable shareholders to see whether the company and its managements had failed in some way. Clawback could still be avoided if the shareholders decided, through a vote at the AGM, that it was not appropriate.
The report has been published to coincide with the government’s consultation into executive pay and shareholder rights.
For further details, our report page can be found here
And a pdf of the report can be downloaded for free here
The main consideration has been around how to reduce the potential for 'rewards for failure'
Our main recommendation is that companies embrace the existing shift towards having greater deferral of incentives
Once you have this structure set up it then becomes possible to introduce a set of “clawback” measures to try to end the potential for significant rewards for failure. Such clawback mechanisms would be an effective way of ensuring shareholders are able to reduce the outgoing pay of a poor performing director who had decided to resign.
To do this, remuneration committees should set downside conditions to incentive arrangements which, if breached, would then trigger the clawbacks. Clear limits in terms of, for example, poor total shareholder return performance or collapsing profits, would enable shareholders to see whether the company and its managements had failed in some way. Clawback could still be avoided if the shareholders decided, through a vote at the AGM, that it was not appropriate.
The report has been published to coincide with the government’s consultation into executive pay and shareholder rights.
For further details, our report page can be found here
And a pdf of the report can be downloaded for free here
Welcome!
Welcome to this new blog where I aim to discuss various topics related to executive pay and corporate governance...
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