November 19, 2020
Executive Compensation Policies: What’s “Standard” Now
– Liz Dunshee
This 27-page memo from ClearBridge Compensation Group looks at how executive compensation policies have evolved at 100 S&P 500 companies over the last decade. It covers clawback policies, stock ownership guidelines & holding requirements, anti-hedging & anti-pledging policies, peer group approaches, perquisites, and CEO pay ratio. Here are the findings on clawback policies:
▪ Clawbacks have become a near-universal practice; 98% of companies disclose having a clawback policy in 2020
▪ The most common events that trigger a clawback are fraud or willful misconduct (73%) and a financial restatement with an executive at fault (70%)
▪ Most commonly, clawbacks cover performance-based compensation such as cash bonuses (95%) and performance shares/units (97%)
▪ The most common time period for which compensation is covered by a clawback policy is 3 years in 2020 (53%), which reflects a shift from 2010, where the most common period was 1 year