Introduction

Governance professionals report on how their boards are involved in executive compensation planning, investor interest in the space and the potential influence of ESG and Covid-19

Introduction

Governance professionals report on how their boards are involved in executive compensation planning, investor interest in the space and the potential influence of ESG and Covid-19

Oversight of executive compensation features on boards’ list of key duties. Board members must take into account a mix of fixed and variable compensation – and its form – for senior managers while looking at both short and long-term performance and how peers are making similar decisions.Boards need the right processes for assigning responsibility and gathering input on both industry practices and what investors are looking for. Some investors are showing greater interest in both executive compensation plan outcomes and how those plans work, including how they relate to ESG criteria. As part of this increased scrutiny, there are signs some investors may be less inclined to support compensation plans when exercising their voting power.In this special report, we present results from a survey conducted among governance professionals such as general counsel, corporate secretaries and their teams. Their responses help create a picture of which members of the board are involved in compensation oversight, the extent to which outside advisers are used, the impact of Covid-19, investors’ questions in the space, director engagement and linking executive compensation to ESG.Key findings

Sixty percent of respondents at small-cap companies say the compensation committee has primary oversight of executive compensation. By comparison, 90 percent of those at mid-cap companies say their compensation committee is in charge.

Globally, 75 percent of respondents say their board uses an outside adviser or advisers on executive compensation matters.

Only around a quarter (27 percent) of respondents at mega-caps say their board’s main discussions on compensation take place in the first three months of the calendar year.

A significant number – 21 percent – of respondents globally say their board has revised its approach to executive compensation planning as a result of the Covid-19 pandemic.

Globally, more than half (56 percent) of respondents report that investors have asked questions around executive compensation at least occasionally over the past 12 months.

Sixty percent of respondents in Europe say their board links executive compensation to ESG metrics, compared with 37 percent of those in North America.

Survey demographics
This report is based on the findings from an online survey conducted between December 2021 and February 2022. A total of 153 respondents took part.