The Advisors' Blog

In a memo published earlier this month, Willis Towers Watson analyzed pay versus performance year 2 trends. WTW reviewed the disclosures of ~530 sample organizations in the S&P 1500 and found that year 2 disclosures were consistent with year 1:

– The majority of organizations continued to use profit or income measures for their company-selected measure. This comes as no surprise, as a short list for determining the company-selected measure was to review the measures used in company executive incentive plans, which tend to rely heavily on profit or income measures, especially in annual incentive plans.

– In terms of the total shareholder return (TSR) comparator group, the market pointed to the use of an industry index, with 80% of organizations opting for that route.

– The locations of the PVP disclosure continues to be near the CEO pay ratio, and graphical descriptions of PVP were heavily favored over narrative descriptions.

Additionally, WTW analyzed the disclosures of individual companies to see if companies changed their PVP disclosure–and 31% of them did.

Of the types of revisions and changes WTW examined, alterations to disclosed pay or performance values were more common than revisions of PVP disclosure decisions. PVP disclosure decisions include determining the company selected measure or TSR comparator group.

In case you missed it, earlier this month, the NY Times engaged Equilar to help with a more specific PVP analysis of executive pay (specifically CEO pay) comparing “traditional pay” (Summary Compensation Table and CEO Pay Ratio disclosure) and new-ish “Compensation Actually Paid”. The article named names and summed up its findings as “So now we have two complete data sets using distinct and complementary analytical methods, both demonstrating what we’ve always known: It’s good to be the boss.” If naming names is of interest, the WSJ also analyzed 2023 exec comp data–but for CFOs.

— Meaghan Nelson