Dana Whitfield· Director, Global Compensation, Meridian Health Systems
Asked in Executive Compensation ·
US-listed capital goods manufacturer, about $7bn in revenue. Half of our PSU award is on cumulative three-year earnings per share. The business is cyclical and visibility beyond nine months is poor.
The last three cycles have paid 0%, 200% and 0%. The committee has lost confidence in its ability to set the range. Options being discussed are three one-year targets averaged, a wider range from 70% to 130% of target, or replacing EPS with return on invested capital relative to peers.
Which of these has worked for other cyclical businesses?
0 reactions · 2 replies · 6 views
Nadia HaddadCRP
Director of Rewards, MEA, Qasr Holdings
We use three one-year targets, each set at the start of its year, averaged, with a relative TSR modifier of plus or minus 20% over the full three years. Outcomes have been between 60% and 140% for five cycles. The criticism is that it is three annual bonuses paid late. The modifier is our answer to that, and it has been accepted.
Priya RaghunathanGRS, CSI
Head of People Analytics, Calibre Software
I would take relative return on capital over annual targets. Measuring against six or eight direct competitors removes the cycle, since everyone is in the same one. The cost is that results are not known until peers report, so our vesting date moved back by ten weeks. And you need peers with comparable accounting, which took us a year to get comfortable with.
