LAKE FOREST, Ill.--(BUSINESS WIRE)--Meridian Compensation Partners, a leading executive compensation and corporate governance consulting firm, has found that relative Total Shareholder Return (TSR) continues to be the most common metric in executive long-term incentive plans, however, it is often balanced with one or more internal financial metrics. “Combining an external market-based metric with an internal measure closely aligns incentive plans with shareholder interests, yet also focuses executives on objectives most critical to a company’s long-term success” observed Jeff Keckley, a consultant at Meridian. “Relative TSR is favored, in part because it eliminates the need for multiyear goal setting. Since TSR is influenced by external factors, we see companies supplement TSR with internal performance metrics, which executives feel they can impact more directly”.
These findings were released as part of Meridian’s 2015 Corporate Governance & Incentive Design Survey. Meridian reviewed pay practices of 250 large U.S. companies with median revenues of $16.1 billion and found the following:
- Earnings-based measures (e.g. EPS, Operating Income, EBITDA) remain the most prevalent type of metric used in annual incentive plans, with over three-fourths (77%) of companies including at least one earnings-based measure in their annual incentive plan.
- Long-term performance-based vehicles (e.g., performance shares/units) are used at 93% of companies surveyed and continue to comprise more than one-half of the total long-term incentive opportunity granted to the CEO (56%) and the other NEOs (53%).
- TSR is the most common metric used in long-term performance awards (58%) and the prevalence of companies granting TSR remains higher than the overall prevalence of companies using at least one earnings-based metric (e.g., EPS, Operating Income, EBITDA) (48%).
- Majority voting standards for director elections and de-classified board structures continue to be predominant practices, with prevalence of 93% and 82%, respectively.
Along with annual incentive and long-term incentive design practices, the Meridian Survey covers additional topics in the areas of corporate governance practices, proxy disclosures and company policies.
For your copy of Meridian’s 2015 Corporate Governance & Incentive Design Survey, please contact Jeff Keckley at jkeckley@meridiancp.com.
About Meridian Compensation Partners
Meridian Compensation Partners, LLC is a fully independent executive compensation firm providing trusted counsel to Boards and Management at hundreds of large companies. We consult exclusively on executive and Board compensation matters, including program design, compensation levels and related corporate governance practices. Our consultants throughout the U.S. and in Canada have decades of experience in pay solutions that are responsive to shareholders, reflect good governance principles and align pay with performance. Visit us at www.meridiancp.com.
