MERCER WEBCAST EUROPEAN EXECUTIVE REMUNERATION … · MARKET ENVIRONMENT EUROPE 2014 2015...

H E A L T H W E A L T H C A R E E R

M E R C E R W E B C A S T

E U R O P E A N E X E C U T I V ER E M U N E R A T I O N T R E N D S

2 0 1 5 M E R G P U L S E S U R V E YH I G H L I G H T S

June 25th, 2015

© MERCER 2015 11June 26, 2015

T O D AY ’ S S P E A K E R S

Peter Boreham

Senior Executive Rewards Consultant –UK/EuropeLondon

+44 20 7178 [email protected]

QuestionsPlease type your questions in the Q&A section of thetoolbarand we will do our best to answer as many questions as wehave time for.

To submit a question while in full screen mode, use theQ&A button on the bottom right-hand side of your screen.

To submit a question while in half screen mode, use theQ&A panel on the bottom right-hand side of your screen.

FeedbackPlease take the time to fill out the feedback form at the endof this web briefing so we can continue to improve. Thefeedback form will pop-up in a new window when thesession ends.

www.mercer.com/webcastsView past recordings and sign up for upcoming webcasts

CLICK HERE TO ASKA QUESTION TO “ALLPANELISTS”

Caroline Peyre

Senior product manager for theMercer's Executive RemunerationGuides - EuropeParis

+33 1 55 21 38 [email protected]

© MERCER 2015 2

A G E N D AE U R O P E A N E X E C U T I V E R E M U N E R A T I O N T R E N D S2 0 1 5 M E R G P U L S E S U R V E Y H I G H L I G H T S

• Participant Profile

• Base Salary Reviews

• Short-term Incentive (STI) Programs

• Long-term Incentive (LTI) Programs

• Pay Mix and New Models

• Q&A

© MERCER 2015 3© MERCER 2015 3

2015 MERG PULSEHIGHLIGHTSPARTICIPANT PROFILE

© MERCER 2015 4

P A R T I C I P A N T P R O F I L E

Source: Mercer Executive Remuneration Pulse Survey June 2015

• 51 participants from 41 unique organisations have participated in the MercerExecutive Remuneration Guide Pulse Survey.

Organisation Type Industry

Consumer Goods,29%

Other Durable GoodsManufacturing, 14%

High Tech, 12%Services (Non-Financial), 10%

Other Non-DurableGoods Manufacturing,

10%

Energy, 8%

Life Sciences, 6%

Other Non-Manufacturing, 4%

Retail & Wholesale,4%

Insurance/Reinsurance, 2%

Banking/FinancialServices, 2%

69%

31%

Parent

Subsidiary


2015 MERG PULSEHIGHLIGHTSBASE SALARY REVIEWS

© MERCER 2015 6

B A S E S A L A R Y R E V I E W S2 0 1 2 - 2 0 1 5 S A L A R Y R E V I E W S – A C T U A L A N D F O R E C A S T E DS A L A R Y F R E E Z E S

6%

18%

7%

16%

8%8%6%

14%11%

19%

13%

10%7%

3% 3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Direct Reports to CEO (Level 2) Direct Report to Level 2 (Level 3) Direct Report to Level 3 (Level 4)

2012 2013 2014 2015 2016 forecast

Source: Mercer Executive Remuneration Pulse Surveys October 2012, May 2013, June 2014, June 2015

Per

cent

age

ofor

gani

satio

ns

© MERCER 2015 7

B A S E S A L A R Y R E V I E W SF A C T O R S D E T E R M I N I N G I N D I V I D U A L S A L A R Y I N C R E A S E S &A C T U A L S A L A R Y R E V I E W S A W A R D E D I N 2 0 1 5 ( R E P O R T E D B YO R G A N I S A T I O N S I M P L E M E N T I N G S A L A R Y I N C R E A S E S )

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Individual performance

Survey data/Market benchmark/Position insalary range

Organization performance

Inflation

Job level

Other

85%

76%

61%3,0% 3,0% 3,0%

2,6%

2,9%

2,7%

2,5%

2,8%

2,0%2,0%2,0%2,0% 2,0%2,0%2,0%2,20%

0,0%

1,0%

2,0%

3,0%

CEO Direct Reports to CEO(Level 2)

Direct Reports to Level 2(Level 3)

Direct Reports to Level 3(Level 4)

2013 2014 2015 2016 Forecast

Source: Mercer Executive Remuneration Pulse Surveys May 2013, June 2014, June 2015


2015 MERG PULSEHIGHLIGHTSSHORT-TERM INCENTIVE(STI) PROGRAMSS

© MERCER 2015 9

S H O R T - T E R M I N C E N T I V E P R O G R A M SP R I M A R Y D R I V E R S F O R M A K I N G C H A N G E S T O S T IP R O G R A M S


0% 10% 20% 30% 40% 50%

Align with guidelines from institutional shareholder /regulators or legal requirements

Align with corporate governance best practices / industry /peer group practices

Differentiate awards based on individual performance

Retain key / top talent

Reduce costs

Prepare for the uncertain business outlook in 2015

Other

Top Executives Other Executives

45%11%

36%44%

© MERCER 2015 10

S H O R T - T E R M I N C E N T I V E P R O G R A M SM E T H O D S T O D E T E R M I N E S T I A M O U N T F O R 2 0 1 5


Top Executives Other Executives

2014 2015 2014 2015Payments will be determined solely by results 86% 71% 88% 74%Discretion (upward) may be used to determine actual payout 5% 13% 4% 11%Discretion (downward) may be used to determine actual payout 3% 11% 3% 11%Uncertain 7% 5% 5% 5%

No. of organisations 76 38 75 38

Payments determined by results only remain prevalent but discretion isincreasingly used

© MERCER 2015 11

S H O R T - T E R M I N C E N T I V E P R O G R A M SC H A N G E S T O T H E W E I G H T I N G O F P E R F O R M A N C E M E A S U R E SI N S T I P R O G R A M S I N 2 0 1 5 V S . 2 0 1 4


Same trends for Top Executives and Other Executives.Predominance of increase of Financial measures at the Corporate level.

0% 20% 40% 60% 80% 100%

Corporate (financial)

Corporate (non-financial)

Business unit/division(financial)

Business unit/division(non-financial)

Individual

Top Executives

Increase No Change Decrease

0% 20% 40% 60% 80% 100%

Corporate (financial)

Corporate (non-financial)

Business unit/division(financial)

Business unit/division(non-financial)

Individual

Other Executives

Increase No Change Decrease

45%

10%

30%

30%

36%

60%

20%

20%70%

80%

70%

10%

18% 44%

22%

33%

25%

44%

44%

33%

33%44%

56%

63%

22%

11%

11%

13%

© MERCER 2015 12

S H O R T - T E R M I N C E N T I V E P R O G R A M SC H A N G E S T O T H E F O R M O R T I M I N G O F P A Y O U T SU N D E R S T I P R O G R A M S

Source: Mercer Executive Remuneration Pulse Survey June 2014, 2015

Have Made/Are Considering Making In 2014 In 2015

Awards will be fully paid in cash 69% 66%

Awards will be partially paid in cash 15% 6%

Portion of the award will mandatory be paid in shares or share units 11% 6%Executives can select to receive a portion of the award in shares orshare units 11% 3%

Use of mandatory deferral but the award will not be subject to theachievement of future performance goals 7% 9%

Use of mandatory deferral and the award will be subject to theachievement of future performance goals 3% 6%

Use of malus conditions (prior to vesting) 7% 6%

Use of clawback (after vesting) 8% 15%

Use of variable pay cap 20% 35%

Payouts for STI programs remain mostly paid in cash.

© MERCER 2015 13© MERCER 2015 13

2015 MERG PULSEHIGHLIGHTSLONG-TERM INCENTIVE(LTI) PROGRAMS

P R E S E N T A T I O N T I T L E H E R E

© MERCER 2015 14

L O N G - T E R M I N C E N T I V E P R O G R A M SP R I M A R Y D R I V E R S F O R M A K I N G C H A N G E S T O L T IP R O G R A M S

0% 10% 20% 30% 40% 50% 60% 70%

Retain key / top talent

Align with corporate governance best practices / industry /peer group practices

Differentiate awards based on individual performance

Align with guidelines from institutional shareholder /regulators or legal requirements

Reduce costs

Manage share usage / share reserve

Respond to recent market share volatility

Prepare for the uncertain business outlook in 2015

Top Executives Other ExecutivesSource: Mercer Executive Remuneration Pulse Survey June 2015

67%56%

52%52%

© MERCER 2015 15

L O N G - T E R M I N C E N T I V E P R O G R A M SA C T I O N S F O R T H E M E A S U R E S A N D G O A L - S E T T I N G I NT H E P E R F O R M A N C E S H A R E / U N I TO R C A S H - D E N O M I N A T E D L T I P R O G R A M S

Source: Mercer Executive Remuneration Pulse Survey June 2014, June 2015

Have Done/ Are Considering Doing In 2014 In 2015

Use 1- or 2-year performance goal(s) followed by time-based vesting to theend of the full performance cycle 15% 8%

Use a series of 1-year performance goals that are set each year, withpayouts at the conclusion of the full performance cycle 14% 9%

Use multi-year performance goal(s) that is (are) fixed for the duration of theperformance cycle 21% 37%

Use a mix of 1-year and multi-year performance goals 7% 9%Change measures used (e.g., add, subtract or refine) 32% 5%Extend performance cycle (e.g., increase from 3 to 4 years) 5% 9%Other 6% 6%

© MERCER 2015 16

L O N G - T E R M I N C E N T I V E P R O G R A M SC H A N G E S T O T H E W E I G H T I N G O F P E R F O R M A N C EM E A S U R E S I N P E R F O R M A N C E S H A R E / U N I TO R C A S H - D E N O M I N A T E D L T I P R O G R A M S I N 2 0 1 5


Increase No Change Decrease No. oforganisations

Weighting of relative performance 3% 93% 3% 29Weighting of absolute performance 4% 96% 0% 26Weighting of market-based measures 4% 96% 0% 26Weighting of financial measures 17% 83% 0% 29

© MERCER 2015 17

L O N G - T E R M I N C E N T I V E P R O G R A M SA C T I O N S T H A T H A V E B E E N / W I L L B E T A K E N B YO R G A N I S A T I O N S W I T H R E S P E C T T O L T I G R A N T S I N 2 0 1 5


Have Done/Are Considering DoingTop Executives

in 2014 In 2015

Differentiate grant sizes based on individual performance 28% 46%Use special retention grants 23% 33%Reduce participation in the LTI program 4% 20%Increase participation in the LTI program 22% 12%Other 7% 13%

Have Done/Are Considering DoingOther Executives

in 2014 In 2015

Differentiate grant sizes based on individual performance 36% 50%Use special retention grants 30% 31%Reduce participation in the LTI program 13% 31%Increase participation in the LTI program 26% 15%Other 11% 13%

© MERCER 2015 18© MERCER 2015 18

2015 MERG PULSEHIGHLIGHTSPAY MIX AND NEWMODELS

P R E S E N T A T I O N T I T L E H E R E

© MERCER 2015 19

N E W M O D E L S U S E D T O D E A L W I T H E X E C U T I V EC O M P E N S A T I O N I N L I G H T O F T H E D I F F I C U L TM A R K E T E N V I R O N M E N T

EUROPE 2014 2015

Strengthened the linkage between performance management andcompensation 34% 51%

No change related to difficult market environment 37% 26%Decreased payout for lower performance ratings 18% 20%Included more non-financial performance measures 12% 17%Increased payout for highest performance ratings 15% 14%Increased the difficulty/toughness of performance conditions 8% 14%Changed the expected distribution of performance ratings 11% 9%Introduced/strengthened malus/clawback conditions 5% 9%Increased the use of Human Capital Metrics in decision making 3% 9%Created a separate bonus pool for high performers 6% 6%Other 6% 6%Improved base salary management systems 17% 3%Introduced individual risk related factors in performancemanagement 2% 3%

Reduced the difficulty/toughness of performance conditions 8% 0%


© MERCER 2015 20

P A Y M I XC H A N G E S T O T H E M I X O F P A Y B E T W E E N B A S ES A L A R Y , A N N U A L B O N U S A N D L T I S S I N C E 2 0 1 2

4%

9% 9%

4%

11%

8%

3%2%

5%

2%

15%

8%

6%

3%4%

5%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Europe 2012 Europe 2013 Europe 2014 Europe 2015

Increase the weight of base salary Increase the weight of bonusIncrease the weight of LTI Increase the weight of benefits

20

Source: Mercer Executive Remuneration Pulse Surveys October 2012, May 2013, June 2014, June 2015

Per

cent

age

ofor

gani

satio

ns

© MERCER 2015 2121June 26, 2015

Q U E S T I O N S ?

Peter Boreham

Senior Executive Rewards Consultant –UK/EuropeLondon

+44 20 7178 [email protected]

QuestionsPlease type your questions in the Q&A section of thetoolbarand we will do our best to answer as many questions as wehave time for.

To submit a question while in full screen mode, use theQ&A button on the bottom right-hand side of your screen.

To submit a question while in half screen mode, use theQ&A panel on the bottom right-hand side of your screen.

FeedbackPlease take the time to fill out the feedback form at the endof this web briefing so we can continue to improve. Thefeedback form will pop-up in a new window when thesession ends.

www.mercer.com/webcastsView past recordings and sign up for upcoming webcasts

CLICK HERE TO ASKA QUESTION TO “ALLPANELISTS”

Caroline Peyre

Senior product manager for theMercer's Executive RemunerationGuides - EuropeParis

+33 1 55 21 38 [email protected]

MERCER WEBCAST EUROPEAN EXECUTIVE REMUNERATION … · MARKET ENVIRONMENT EUROPE 2014 2015...

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