October 14, 2020
State Street Q2 2020 Stewardship Report: Executive Compensation Engagements
– Lynn Jokela
State Street Global Advisors recently released its Q2 2020 stewardship report. In addition to providing insight into how the Covid-19 pandemic affected the asset manager’s 2020 engagements generally, it also provides insight into potential upcoming focus areas for engagements addressing executive compensation. Here’s an excerpt:
Use of discretion: SSGA expects compensation committees to be clear about the discretionary powers available to them and when committees use discretion to adjust payouts, they should ensure the outcomes will reflect company and executive performance and align with shareholders
Bonus plan complexity: SSGA says annual plans are becoming overly complex and making it difficult to understand how executives are being incentivized – SSGA encourages companies to simplify bonus plans and ensure they have a clear link to strategy.
Relative TSR: SSGA says relative TSR shouldn’t be used as the sole performance metric and it encourages companies to take a more holistic approach by using a blend of relative TSR and long-term operational metrics that align with a company’s strategy