EXECUTIVE PAY
Boardroom pay should be based on more robust measures of shareholder returns
When it comes to determining the pay of executives, remuneration committees need to look beyond total shareholder return and use a more objective measure, according to a new study by Kepler Associates, a firm of reward consultants.
Over two-thirds of CEOs in FTSE 100 companies currently have some or all of their long-term incentives linked to total shareholder return (TSR). Kepler Associates believes that this yardstick, which measures the appreciation in the value of an investment in a company's stock, typically over a three-year period, suffers from a number of fundamental weaknesses.
TSR is highly sensitive to the share price at the start of the measurement period, says Kepler Associates.
Relative value performance
Kepler Associates has developed an alternative indicator of corporate performance to which to tie incentive pay. Entitled relative value performance (RVP), it provides a level playing field to compare management performance objectively, reflecting return to shareholders, absolute £ value creation and relative performance.
Want to know more?
Kepler Associates is a measurement and reward consultancy which helps companies to more closely align the interests of shareholders and employees .
For more information, contact Peter Smith in London, tel: 020 7930 7730, email: psmith@kepler-associates.com.
Take a look at Kepler Associates web site, and see what you think . . . www.kepler-associates.com