Who is involved?
It is no surprise to observe that compensation committees are most frequently in charge of executive compensation matters at the board level. Globally, a clear majority (69 percent) of respondents say their compensation committee has primary oversight in this area.
A further 17 percent say the main board has primary oversight, while a handful point to the nominating and governance committee (5 percent) or finance committee (1 percent).
There are, however, variations in the focus on the compensation committee depending on company size or region. More than a quarter (26 percent) of respondents at small-cap firms say their main board is in charge of executive compensation matters, with 60 percent pointing to the compensation committee. By comparison, 90 percent of those at mid-cap companies say their compensation committee is in charge, while the corresponding figures for those at large caps (71 percent) and mega-caps (77 percent) fall in between.
Those at mega-caps are least likely to say the main board is in charge (8 percent) and the most likely to say the nominating and governance committee (12 percent) has primary oversight.
Regionally, respondents in North America (77 percent) are more likely than those in Europe (64 percent) to cite the compensation committee as having primary oversight.
When asked which parts of the board have some oversight of executive compensation, the most frequently cited globally are the main board (71 percent of respondents), compensation committee (25 percent) nominating and governance committee (14 percent) and audit committee (10 percent).
The main board is cited most frequently by those at mid-cap companies (89 percent), compared with 75 percent of those at mega-caps, 68 percent of those at large-cap firms and 63 percent of those at small caps. Thirteen percent of small caps say the finance committee plays a role, compared with just 3 percent of those at mid-caps and none of those at large or mega-cap companies.
Fifteen percent of those at mega-cap companies say the audit committee plays a role, considerably more than do those at large or mid-caps (both 6 percent) and small caps (11 percent).
Respondents in North America are more likely (78 percent) to see main board involvement in executive compensation than those in Europe (63 percent). At the same time, those in Europe are twice as likely (21 percent) to say the nominating and governance committee is involved as are those in North America (10 percent).
The process of determining executive compensation is complex and evolving. It also faces increasing scrutiny from investors and other stakeholders. This perhaps helps explain why three quarters of all respondents say their board uses an outside adviser or advisers in this area.
The use of outside help is particularly pronounced among those at mid-cap companies, 90 percent of whom say their board gets third-party advice. By comparison, only 68 percent of those at small caps say their board uses outside advice, a figure that rises to 80 percent among large caps and 85 percent among mega-caps.
Respondents in North America more frequently (84 percent) state that their board uses outside help than do those in Europe (70 percent).