EXECUTIVE REMUNERATION - Vlerick Business School/media/corporate-marketing/our...© Vlerick Business...
Transcript of EXECUTIVE REMUNERATION - Vlerick Business School/media/corporate-marketing/our...© Vlerick Business...
EXECUTIVE REMUNERATION IN 2016
EXECUTIVE REMUNERATION RESEARCH CENTRE
© Vlerick Business School
EXECUTIVE REMUNERATION STUDY 2017WHAT IS NEW?
Scope
FTSE 250 added
Industry/sector added
Share ownership concentration added
Short-term incentives
Target and maximum added
Weight per KPI added
Pay ratio (CEO – average employee)
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1SAMPLE
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SAMPLENUMBER OF OBSERVATIONS
0
50
100
150
200
250
300
350
400
Belgium Netherlands Germany France UK Sweden
Num
ber
of
observ
ations
(CEO
rem
unera
tion)
2015 CEO 2016 CEO 2016 CFO
861 CEOs484 CFOs
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SAMPLESHARE OWNERSHIP DISPERSION
41%
61%
46%41%
82%
54%
BELGIUM NETHERLANDS GERMANY FRANCE UK SWEDEN
% of firms in which no shareholder has more than 25% of shares
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SAMPLEHOW LONG ARE CEOS IN THEIR CURRENT ROLE?
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4 4
6
4
3
BELGIUM NETHERLANDS GERMANY FRANCE UK SWEDEN
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SAMPLECEO PERSONAL CHARACTERISTICS
Gender
Male: 95%
Nationality:
Local CEO: 74%
Age
Median: 55 (Q25: 51; Q75: 59)
Tenure in current role in current firm
Median: 5 (Q25: 2; Q75: 9)
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2REMUNERATION LEVELS & STRUCTURE
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TOTAL CEO REMUNERATIONBELGIUM - MEDIAN
1.6
10.0
00
755.0
00
605.0
00
1.6
55.0
00
675.0
00
575.0
00
2.0
80.0
00
690.0
00
560.0
00
BEL 20 BEL MID BEL SMALL
2014 2015 2016
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TOTAL CEO REMUNERATIONNETHERLANDS - MEDIAN
3.3
60.0
00
1.0
20.0
00
625.0
00
2.9
65.0
00
1.1
05.0
00
645.0
00
2.9
40.0
00
1.0
80.0
00
785.0
00
AEX AMX ASCX
2014 2015 2016
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TOTAL CEO REMUNERATIONGERMANY - MEDIAN
4.7
90.0
00
2.0
10.0
00
980.0
00
3.9
60.0
00
2.0
75.0
00
1.0
90.0
00
5.5
55.0
00
2.7
65.0
00
1.4
35.0
00
DAX MDAX SDAX
2014 2015 2016
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TOTAL CEO REMUNERATIONFRANCE - MEDIAN
3.5
10.0
00
2.2
70.0
00
1.7
90.0
00
330000
4.1
80.0
00
2.1
95.0
00
1.9
65.0
00
355000
4.6
15.0
00
2.4
65.0
00
2.0
65.0
00
400000
CAC 40 CAC NEXT 20 CAC MID CAC SMALL
2014 2015 2016
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TOTAL CEO REMUNERATIONUK - MEDIAN
4.0
50.0
00
4.4
40.0
00
4.3
00.0
00
2.0
60.0
00
4.9
10.0
00
2.3
45.0
00
FTSE 100 FTSE 250
2014 2015 2016 2016 pre-Brexit
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TOTAL CEO REMUNERATIONSWEDEN - MEDIAN
1.7
40.0
00
1.5
10.0
00
OMXS60
2014 2015 2016
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CEO FIXED REMUNERATIONMEDIAN
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CEO FIXED REMUNERATIONMEDIAN
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CEO SHORT-TERM INCENTIVESMEDIAN
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CEO SHORT-TERM INCENTIVESMEDIAN
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CEO LONG-TERM INCENTIVESMEDIAN
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CEO LONG-TERM INCENTIVESMEDIAN
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TOTAL CEO REMUNERATIONIN TERMS OF FIRM SIZE – MARKET CAP
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CEO REMUNERATION STRUCTURE
62%
53%
36%
53%
34%
63%
25% 25%
34%
25% 26%
21%
13%
22%
30%
23%
39%
16%
0%
10%
20%
30%
40%
50%
60%
70%
Belgium Netherlands Germany France UK Sweden
Fixed STI LTI
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CEO REMUNERATION STRUCTURE
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CEO REMUNERATION STRUCTURE
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EVOLUTION CEO TOTAL REMUNERATION2014-2016 MATCHED SAMPLE
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%
15
%
59
%
DECREASE STABLE INCREASE
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EVOLUTION CEO TOTAL REMUNERATION2014-2016 MATCHED SAMPLE
0,8 0,9 1 1,1 1,2 1,3
FTSE 100
CAC Small
CAC Mid
CAC Next 20
CAC 40
SDAX
MDAX
DAX
AScX
AMX
AEX
Bel Small
Bel Mid
Bel 20
1,13
1,05
1,27
1,11
1,13
1,01
1,14
1,3
1
1,11
1,2
1,03
1,15
1,28
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3SHORT-TERM INCENTIVES
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DISCLOSURE ON KEY PERFORMANCE INDICATORS UNDERLYING SHORT-TERM INCENTIVES
Bel 20 Bel Mid Bel Small
Target bonus disclosed 47% 18% 11%
Maximum bonus disclosed 53% 57% 26%
Key performance indicators disclosed
75% 82% 74%
Weighting of key performance indicators disclosed
27% 17% 29%
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SHORT-TERM INCENTIVESOCCURRENCE - TARGET (% FIXED)
Yes
91%
No
9%
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SHORT-TERM INCENTIVESSPREAD TARGET-MAX BONUS
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SHORT-TERM INCENTIVESPAY-OUT: BONUS DEFERRAL
No deferral;
68%
Deferral in
shares; 26%
Deferral in
cash; 4%
Deferral in cash
and shares; 2%
• Typical design: 50% deferred, over 3 yearsl
• 90% no additional performance conditions
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SHORT-TERM INCENTIVESPAY OUT: BONUS DEFERRAL
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SHORT-TERM INCENTIVESKEY PERFORMANCE INDICATORS
KP
I u
sed
fo
r S
TI
20%
40%
60%
80%
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SHORT-TERM INCENTIVESKEY PERFORMANCE INDICATORS
0% 5% 10% 15% 20% 25% 30%
No non-financial KPIs
5-15%
16-25%
26-40%
41-50%
>50%
17%
7%
26%
28%16%
6%
% of firms
Weig
ht
of
non-f
inancia
l KPIs
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4LONG-TERM INCENTIVES
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LONG-TERM INCENTIVES GRANTED?
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LONG-TERM INCENTIVES GRANTED?EVOLUTION - BELGIUM
64%
52%
22%
70%
37%
25%
65%
47%
33%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Bel 20 Bel Mid Bel Small
2014 2015 2016
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LONG-TERM INCENTIVESNUMBER OF GRANTS (2014-2016)
Country No grant 1 grant 2 grants 3 grants
Belgium 31% 20% 16% 33%
Netherlands 5% 15% 18% 62%
Germany 3% 9% 24% 64%
France 36% 22% 15% 27%
UK 2% 0% 13% 85%
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LONG-TERM INCENTIVESNUMBER OF GRANTS (2014-2016) - BELGIUM
0
5
10
15
No grant
1 grant
2 grants
3 grants
14
9
7
15
NU
MBER O
F F
IRM
S
40
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LONG-TERM INCENTIVESWHAT DETERMINES THE NUMBER OF GRANTS?
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LONG-TERM INCENTIVESTYPOLOGY
LTI type B NL D F UK SE
Time-based options 28% 9% 2% 6% 1% 0%
Performance-based options 8% 10% 4% 4% 6% 8%
Nil cost options 0% 0% 0% 0% 38% 0%
Time-based shares 4% 1% 1% 1% 1% 0%
Performance-based shares 7% 49% 14% 37% 45% 36%
Free shares 0% 0% 1% 8% 0% 3%
Phantom time-based 1% 0% 5% 0% 0% 0%
Phantom performance-based 3% 1% 27% 3% 1% 3%
Stock appreciation rights time-based 0% 0% 3% 0% 0% 0%
Stock appreciation rights performance-based
0% 1% 3% 0% 0% 0%
Cash 4% 3% 42% 3% 0% 14%
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LONG-TERM INCENTIVESKPIS FOR VESTING
KP
I u
sed
fo
r L
TI
20%
40%
60%
80%
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SHAREHOLDING REQUIREMENT?
1%
18%
7%
2%
94%
14%
BELGIUM NETHERLANDS GERMANY FRANCE UK SWEDEN
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5PAY RATIO
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PAY RATIO CEO-CFO
1,55
1,66 1,67
FIXED
REMUNERATION
STI LTI
46
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PAY RATIO CEO-AVERAGE EMPLOYEE
47
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PAY RATIO CEO-AVERAGE EMPLOYEE
14
22
45
86
28
38
51
100
0
20
40
60
80
100
120
300-1000 mn. 1-3 bn. 3-10 bn. >10 bn.
CEO
pay r
atio
Market cap (in €)
ContinentalEurope (excl.Sweden)
UK
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WHAT DETERMINES PAY RATIO?
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6WHAT DRIVES CEO REMUNERATION?
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WHAT DRIVES TOTAL CEO REMUNERATION?
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WHAT DRIVES THE EVOLUTION IN TOTAL CEO REMUNERATION (2014-2016)?
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WHAT DRIVES THE EVOLUTION IN TOTAL CEO REMUNERATION (2014-2016)?
0,067
0,498
0,562
0
0,1
0,2
0,3
0,4
0,5
0,6
Fixed remuneration Short-term incentives Long-term incentives
Sta
ndard
ized b
eta
coeff
icie
nt
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7WHAT CHARACTERISES CEO REMUNERATION IN THE BEST PERFORMING FIRMS?
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SUSTAINED FINANCIAL PERFORMANCEWHAT? HOW?
Criterion
Return on Assets
Timeframe
2010-2016 (7y.)
Average per sector
41 sectors
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(HOW) IS SUSTAINED FINANCIAL PERFORMANCE RELATED TO CEO REMUNERATION? THE ANSWERS…
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8CEO RELATIVE PAYMENT
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PREDICTED CEO REMUNERATIONTHE CONCEPT
Market capitalisation
Profitability
Industry
Predicted CEO remuneration
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ACTUAL VERSUS PREDICTED CEO REMUNERATIONA COUNTRY ANALYSIS
0,89
0,83
1,17
0,88
1,31
0,64
0,4
0,5
0,6
0,7
0,8
0,9
1
1,1
1,2
1,3
1,4
Belgium Netherlands Germany France UK Sweden
59
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ACTUAL VERSUS PREDICTED CEO REMUNERATIONWHAT DRIVES CEO ‘OVERPAYMENT’?
60
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