Long-term incentives increase by five per cent: Report
Median reported pay for top Canadian CEOs remained flat between 2017 and 2018, according to analysis by Mercer based on the top 60 listed companies on the TSX in 2018 (the TSX60).
While total reported pay for all TSX60 companies stayed flat, some incumbent CEOs saw their total direct compensation (TDC) rise by an average of six per cent.
Long-term incentives increased by five per cent, and base salaries increased by two per cent. Short-term Incentives remained static.
In determining executive incentive plans, organizations are increasingly using a holistic view when measuring performance, said Mercer.
Half of the TSX60 use three or more metrics when determining bonus payouts under the short-term incentive plan (STIP), with one-third making changes to the plan to better measure performance in today’s business landscape.
Although profitability and earnings metrics are still the most prevalent metrics — with earnings metrics having a weighting of just over 50 per cent of the total bonus — companies are increasingly leveraging environmental, social and governance (ESG) metrics as part of executive compensation plans, thanks to growing pressure from shareholders and other stakeholders, said Mercer.
Most TSX60 companies still use a combination of two vehicles — typically stock options and performance share units — with an increase in the weighting of performance share units, it said.
“No matter what sector your company is in, getting executive compensation right is critical to ensuring the person in the driver’s seat is performing at their best,” says Luc Lapalme, principal at Mercer.