December 23, 2019
Small-Caps Jumping on “Pay-for-Performance” Bandwagon
– Liz Dunshee
Even as some investors might be cooling on “pay-for-performance,” there’s been an uptick in performance awards at smaller companies. This blog from Willis Towers Watson has details about CEO pay practices in the S&P 1500. Here are a few takeaways:
– Performance awards are now 50% of the average long-term incentive program mix
– Small-cap companies experienced the most pronounced shift in granting CEO performance awards – increasing from 61% in 2017 to 67% in 2018 – while S&P 500 and S&P 400 companies held steady in 2018 at 88% and 79%, respectively
– The value of LTI earned — the combination of time-vesting awards vesting, stock options exercised and performance plan payouts — grew 13% at the median in 2018, but at a much lower rate than the previous year when the median earned grew 33%
– Looking specifically at performance awards, the average payout was 110% of target based on the underlying shares or units granted for performance periods completed in 2018. Strong market performance over the recently completed performance cycle led to substantial value gains because of stock price growth. Consequently, the average realized value from payouts for awards completed during 2018 was 157% of target