The Advisors' Blog

ClearBridge recently released its survey of annual incentive plan practices based on disclosures in 2024 proxy statements filed by companies in the ClearBridge 300 (100 companies in the S&P SmallCap 600 Index, 100 companies in the S&P MidCap 400 Index and 100 companies in the S&P 500 Index). Here are some key findings from the report:

– 93% of companies use a formulaic annual incentive plan.

– Most companies used two to three performance measures in their annual incentive plans, with three being the most common across all market caps. This represents an increase in recent years mostly because of an increased use of a “scorecard” approach.

– In 2024, financial metrics represented 79% of weighting for CEOs, and non-financial metrics represented 21%.

– The most common threshold payout opportunity was 50% of target, but there is a growing trend among large-cap companies to use lower threshold payout opportunities (25% or less) to provide downside protection for below-target results.

– Maximum pay was most commonly set at 200% of target, with small- and mid-cap companies setting maximum opportunities at less than 200% more frequently than large-cap companies.

It’ll be particularly interesting to see how the use of non-financial measures continues to evolve from this report to the next report, which I believe will be on 2026 proxy disclosures.

– Meredith Ervine