Nadia Haddad· Director of Rewards, MEA, Qasr Holdings
Asked in Executive Compensation ·
I support the committee of a mid-cap listed industrial in the UK. Our relative TSR group started at 18 companies three years ago. Two have been taken private and two more are now so small that they barely trade, so in practice we are ranking against 14.
The plan vests 25% at median and in full at upper quartile. With 14 names, one company moving a place changes the outcome by several points of vesting, which the chair finds hard to defend.
Our consultants suggest moving to the mid-cap index excluding financials. Management hate that because half the index has nothing to do with our end markets. What have others done when a bespoke group shrinks?
0 reactions · 4 replies · 4 views
Accepted answer· by James Okafor
Two things that worked for us. First, write the replacement rules into the plan before you need them: an acquired peer is frozen at the offer price and then tracks the median of the rest, a delisted one drops out from the start. Second, top the group back up to 20 or so with overseas listed peers and measure everything in a common currency. We ended with 21 names, nine of them outside the home market, and the outperformance approach described above rather than ranking. The committee signed it off in one meeting.
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Dana WhitfieldCRP, GRS
Director, Global Compensation, Meridian Health Systems
We had the same problem with a group of 16 that fell to 12. We kept the bespoke group but stopped ranking. Instead we measure against the median company's TSR and pay full vesting at median plus 8% a year, straight line in between. The outcome no longer jumps when one peer moves a place.
Priya RaghunathanGRS, CSI
Head of People Analytics, Calibre Software
James OkaforCRP, CEP
VP, Total Rewards, Halcyon Financial Group
Accepted answer
Two things that worked for us. First, write the replacement rules into the plan before you need them: an acquired peer is frozen at the offer price and then tracks the median of the rest, a delisted one drops out from the start. Second, top the group back up to 20 or so with overseas listed peers and measure everything in a common currency.
We ended with 21 names, nine of them outside the home market, and the outperformance approach described above rather than ranking. The committee signed it off in one meeting.
Nadia HaddadCRP
Director of Rewards, MEA, Qasr Holdings
Thanks all. We are going with a rebuilt group of 20 including six continental peers, written rules for takeovers, and outperformance of the median rather than rank. The index stays in the back pocket as a cross-check that the chair can see each year.
