The Advisors' Blog

Over the last year, we’ve blogged changes to executive pay programs in response to Covid-19.  For a peek at where things are headed in 2021, Meridian recently issued its “2021 Trends and Developments Survey” about executive pay programs. The survey is based on responses from over 300 companies and includes findings relating to payments and awards in 2020 and plan designs for 2021.  Here’s an excerpt about 2021 short-term and long-term incentive design:

Short-Term Incentives – 2021 Design

– Widening the goal range was the most common adjustment to 2021 short-term plan design (37%)

– One-half of participants set 2021 threshold goals for primary earnings-related measures higher than 2020 actual results, similar to prior year

– Most companies (57%) use multiple financial metrics in their annual plan; profit measures remain the most prevalent

– Increasing from 17% in 2020, just under 25% of companies included ESG metrics in 2021

Long-Term Incentives – 2021 Design

– Most companies (64%) are preserving current long-term performance metrics and vehicles used

– Consistent with prior year, 65% of companies use multiple metrics in long-term plans

– The use of performance awards has slightly decreased from the prior year (88% vs 95%)

– TSR remained the most prevalent long-term performance measure (consistent with 2020)

– Only 2% of companies included an ESG metric in their 2021 long-term plan design

– Lynn Jokela