Make sense of executive incentives with the GRG Variable Remuneration Guide
The alignment of executive performance and rewards is perhaps the most significant remuneration governance issue of our time. Knowing what the market landscape looks like is a critical first step towards reviewing your own at-risk reward and incentive practices in-context, or identifying common alternatives.
The GRG Variable Remuneration Guide offers a comprehensive analysis of the Australian executive incentive landscape. The guide shares key information on short term, long term and hybrid incentive plans; providing information on incentive variables like length of measurement period, typical vesting scales and award deferral practices. It will help you understand how successful ASX 300 companies align executive pay for performance.
Why are variable remuneration plans so important?
The introduction of shareholder voting on Remuneration Reports at AGMs created the risk of a “strike” – 25% or more of the cast votes against adopting the Remuneration Report. The most common cause of such strikes is a failure of the variable structure, either in design or because outcomes don’t match the expectations of stakeholders. Beyond attraction, retention and motivation, there is more pressure than ever for variable remuneration plans to reward the right outcomes, in the right way, rather than just being a “bonus”.
GRG Variable Remuneration Guides cover both short- and long-term incentives
Market trends and guidelines based on market data, analysis and statistics on the variable remuneration practices of the ASX 300 are broken down into:
Short Term Variable Remuneration/Short Term Incentives
- Types and prevalence of short term plan designs
- Form of STVR payment including Deferral (prevalence, periods, instruments & conditions)
- Popularity of various Key performance indicators (KPIs)
- Analysis of metric weightings
- The use of performance gates
- Modifiers/multipliers applied to scale outcomes up and down
- Policy and treatment in the case of takeover/change of control
- Service conditions and treatment at terminations of employment
- The role of board discretion
- Malus/clawback
Long Term Variable Remuneration/Long Term Incentives
- Comparing the usage of different LTVR Equity Instruments and what their relative features are
- Analysis of grant frequency, measurement periods and service testing
- Data on valuation of equity for remuneration purposes
- Observations regarding dominant approaches to determining the number of rights to be granted
- Breakdown of performance metrics into groups, analysis of prevalence, and data on what precise measures are being used
- Analysis of performance scales applicable to the main types of metrics
- Number of tranches and weighting of tranches being used
- The use of performance gates
- Terms and treatment in the case of takeover/change of control
- Approach to service testing and termination of employment terms
- Exercise and disposal restriction periods in Excess of Performance Assessment Periods
- The use of dividend Equivalent Payments to support long term holding
- The role of board discretion
- Malus/clawback
Related considerations
- Executive and Non-Executive Director Holding Policies
- Equity-Based Remuneration for Non-Executive Directors
Licensing
Our Guides are released in digital form, tailored for and licensed to each purchasing organisation, and delivered promptly within one business day. Internal distribution within your organisation is unlimited, but each publication is digitally secured with licensee identification to ensure that it is not used outside the organisation without the purchase of additional licences.
