When to discuss – and did Covid-19 change things?
Globally, January to March is the most common time when board discussions on executive compensation mainly take place, cited by 46 percent of respondents. That is followed by October-December (21 percent) and generally across the year (18 percent). Few say boards focus their discussions on either April to June (8 percent) or July to September (5 percent).
There are distinct variations in behavior based on company size. Only around a quarter (27 percent) of respondents at mega-caps say their board’s main discussions take place in the first three months of the calendar year. By comparison, 57 percent of those at large caps, 52 percent of those at mid-caps and 47 percent of those at small-cap firms say January to March is the main period.
Around four in 10 (42 percent) of respondents at mega-caps say their board’s discussions around executive compensation take place mainly across the year. That figure drops to just 3 percent among large caps and is still significantly lower at small caps (13 percent) and mid-cap companies (23 percent). On the flip side, significant numbers of those at small-cap companies (21 percent), mid-caps (29 percent) and large-cap firms (23 percent) cite October to December as the main period for these discussions, while only 8 percent of those at mega-caps say the same.
Respondents in North America (52 percent) more frequently than those in Europe (41 percent) say the main period for discussions is January to March. October to December is cited by 24 percent of those in North America and 11 percent of those in Europe. The emphasis on year-round discussion is more commonly cited by those in Europe (25 percent) than by those in North America (14 percent).
The experiences of the Covid-19 pandemic have given people pause for thought on many aspects of how they conduct their lives and businesses – including a renewed focus on a range of human capital management issues.
A significant number – 21 percent – of respondents globally say their board has revised its approach to executive compensation planning as a result of the pandemic. More than half (57 percent) say their board has not done so, though it is worth noting that more than a fifth (22 percent) of respondents do not know. The number who don’t know is particularly notable (44 percent) at mega-caps.
Respondents at large caps and mega-caps (20 percent each) are the least likely to report a change in approach due to the pandemic, but almost a third (32 percent) of those at mid-cap companies say there has been a change in approach.
More respondents from Europe (33 percent) than in North America (18 percent) report a change in approach due to the pandemic.
Among those boards that have made changes to their executive compensation planning due to Covid-19, the most frequently cited alterations globally are changes to long-term incentives (59 percent of respondents) followed by changes to short-term incentives (53 percent), adding ESG-based metrics (38 percent) and adding human capital management metrics and increasing engagement with investors around compensation (19 percent each).
