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Pay-for-Performance Analytics and Alignment

Pay-for-Performance Analytics and Alignment

With say on pay having prompted companies to discontinue most problematic executive pay practices, shareholders’ focus has increasingly turned to the alignment of executive pay programs — and outcomes — with company financial performance. Willis Towers Watson’s research confirms that pay-for-performance disconnects are the top concern today for both shareholders and proxy advisors.

For compensation committees and executive pay professionals, getting pay for performance right can be challenging, to say the least. While shareholder returns are a key focus for shareholders, other performance metrics are often more critical to driving business performance and ensuring sustainable growth. And calibrating performance goals is as much an art as a science, given global economic uncertainties and increasing market volatility.

To help companies ensure close pay-for-performance alignment, Willis Towers Watson has developed multi-dimensional analytics to provide deep insights from a range of inputs, including pay outcomes, securities analysts’ expectations and company performance results. Our methodology and tools have helped clients:

  • Recalibrate incentive plan goals and payouts to put more “stretch” into incentive programs
  • Design new incentive programs that balance total shareholder return targets with metrics more closely aligned to underlying business performance
  • Understand and address the sources of pay-for-performance disconnects in their current programs
  • Validate incentive plan metrics and goals to ensure appropriate pay outcomes at varying levels of performance.
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