Priya Raghunathan· Head of People Analytics, Calibre Software
Posted in Executive Compensation ·
Sharing a lesson from a listed specialty chemicals group in Germany, around 9,000 employees. Our 2022 PSU grant vested at 38% and the 2023 grant is tracking at 164%. Same management team, broadly the same operating performance. The difference is almost entirely where the share price happened to sit at the start and end of each window.
What we changed: the start and end prices are now averaged over 90 trading days rather than 30, the payout is capped at 200% of the grant value in euros and not only in share numbers, and half the award now sits on return on capital measured as a three-year average.
I would be interested in whether others cap the value at vesting, and whether participants pushed back.
0 reactions · 4 replies · 2 views
Nadia HaddadCRP
Director of Rewards, MEA, Qasr Holdings
We cap at 250% of grant value and it is standard in our market, so no pushback at board level. Below the board it was harder. The top 60 managers saw it as taking away the only upside in a package that is otherwise modest. We ended up applying the cap to the management board only.
James OkaforCRP, CEP
VP, Total Rewards, Halcyon Financial Group
Ninety days is longer than most. We use 60 and I have never been convinced that going longer helps much. In a year like 2022 the price drifted down for nine months, so a 90 day average and a 30 day average were within 4% of each other. Averaging smooths spikes. It does nothing for a trend.
Dana WhitfieldCRP, GRS
Director, Global Compensation, Meridian Health Systems
The return on capital half is the more important change in my view. A US technology client of ours went the other way, to 100% relative TSR, and had two consecutive cycles pay nothing while the business doubled its operating profit. Retention among vice presidents fell apart and they spent more on one-off awards than the plan would have cost.
Dana WhitfieldCRP, GRS
Director, Global Compensation, Meridian Health Systems
